Student loan refinancing could be a great option if you want to tackle your student loan debt more effectively. Put simply, refinancing involves taking out a new loan to replace one or more existing student loans. This may allow you to reduce your monthly payment, shorten the repayment term of your loans, or both—all while potentially saving thousands in interest charges over the life of your loan.
Keep reading to learn how you could benefit from a student loan refinance:
Alter Your Timeline
Refinancing your student loans could give you the ability to get a new loan term that better aligns with your financial goals.
For instance, you could extend your loan term to increase the repayment period and lower your monthly payments. Or you could shorten your loan term to increase your payments, which in turn could help you save money in interest in the long run.
Secure a Lower Interest Rate
When you refinance your student loans, you could secure a lower interest rate, which means you have the potential to save thousands over the course of your student loan repayment period.
Interest rates vary by lender, so it is important that you shop around for the best rate. A lower interest rate could save you money and allow you to pay off your loan faster because more of your monthly payment would go to the principal balance.
Choose Between a Fixed Interest Rate vs. Variable Interest Rate
Another option when altering the terms of your new loan is switching between fixed and variable interest rates. A fixed interest rate remains constant throughout the life of the loan while a variable interest rate can fluctuate with market conditions. So, if you prefer stable monthly payments, a fixed interest rate may be more suitable for you.
On the other hand, if you expect the market interest rates to go down, you could select a variable interest rate.
Add or Remove a Co-Signer
If you’re having trouble securing better loan terms or interest rates, you could consider adding a co-signer when you refinance your loan. A co-signer with good credit could significantly improve your chances of getting approved and securing better loan terms and interest rates.
Similarly, if you already have a co-signer, but their credit situation has changed or you don’t want them to be liable for your debt anymore, you can remove them from your refinanced loan.
Decrease Your Monthly Payments
Refinancing your student loans could also help you reduce your monthly payments if you extend your loan term or get a lower interest rate.
Lower monthly payments could provide some much-needed relief for your monthly budget and give you more flexibility with your finances. However, it is essential that you weigh the pros and cons of extending your loan term.
Although a reduced monthly payment might be financially helpful in the short term, extending your loan term could increase the interest you pay over the lifetime of your loan.
Make One Monthly Payment
If you have multiple student loans, refinancing allows you to combine them into one loan, simplifying the repayment process and making tracking easier. With a single monthly payment, you could more easily manage your loan, which could result in fewer missed or late payments.
However, keep in mind that if your original loans had better interest rates, refinancing might not be the best option for you. In this case, you might want to consider consolidating your loans instead.
Refinancing Your Student Loan Could Help
Student loan refinancing could be an excellent option if you’re looking to save money, reduce your monthly payments, or streamline your repayment process.
By altering your loan terms, you could take control of your student loan debt and get one step closer to achieving your financial goals. Remember, before refinancing your student loans, it is essential to do your research and compare rates so you can find the best option for your unique financial needs.
