When interest rates rise, many students consider refinancing their student loans. However, refinancing may not be the best option for you. Here, we take a closer look at whether refinancing student loans at the moment is a good idea.
Nobody enjoys paying off their student borrowing, yet there are a few ways to ensure that managing student loan repayments are more affordable and simple. Some people find that refinancing their loans makes their life similar through the consolidation of several loans into a single monthly, low-interest payment. When refinancing works at its best it helps you save money while also paying off your loans more quickly. Before you get too excited, though, bear in mind that it doesn’t work this way for everyone.
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Is It The Right Time To Refinance?
Although refinancing your loans can help, it can also cancel out some key programs offered by federal loans. You shouldn’t consider refinancing if:
- You’re keen to qualify for a federal forgiveness program – when you refinance, you’ll be paying off old loans with a brand new one from a private lender instead of the government. You’ll, therefore, lose your federal repayment opportunities.
- You want an income-based repayment plan – if you’re on a low income, you may qualify for extremely low repayments or even deferred payments. However, when you refinance this will no longer be an option.
- You’ve got bad credit – many young adults have no credit or poor credit, so qualifying to refinance your loan may be hard. Finding someone to co-sign the loan could be a possibility, but this is a challenge since it’s a major responsibility to agree to pay a huge amount such as that involved with student loans.
How To Choose A Lender For Refinancing
If you’ve decided to refinance your student loans, you need to know how to make the right decision when it comes to choosing a lender. Here are some top tips to point you in the right direction.
- Get rate estimates – you should visit top refinance lender websites to get an idea of the kind of interest rates you should expect from each one. There are some that offer pre-qualification, so you can get a good idea of whether you’ll qualify without damaging your credit score.
- Compare APRs – after you’ve received a number of offers or estimates you should compare the rates by looking carefully at the APRs of each one. This represents the true cost of borrowing together with any applicable fees.
- Look at loan features – if you can find the lowest rate, you’ll save more money, but there are other features to look out for too. Look at the repayment terms and options and choose a term length that is either the same as your current loans or even shorter. This will ensure you save not only on monthly payments but in the long-term too.
- Look for refinance bonuses – some lenders offer bonus programs that can help you save even more money.
Follow this advice, and you’re sure to find the best refinancing deal available to suit your needs.