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Student loan refinancing…should you consider it?
Once in a while, you have heard the term being mentioned over and over again.
But anyway, what is student loan refinancing? Does it have any benefit? What’s the difference compared to the usual debt consolidation process?
Simply, student loan refinancing is the process by which one combines multiple student loans into a single big loan. This comes with a new lender meaning that you have broken ties with the old lenders.
As a student, you should use it wisely. You have to understand what does it mean and how it’s gonna impact on your current and future financial balance.
We’ve prepared a summary of the most important advantages and disadvantages of student loan refinancing:
Advantages Of Student Loan Refinancing
There are a couple of advantages for refinancing. However -you should make sure you refinance you loan just in case you really need it:
This is one of the numerous reasons why you should consider refinancing.
You can lower your monthly payment and at the same time, you could be extending your payments for a period of up to 30 years. However, still, this will depend on the type of loan you wish to consolidate (See the best ways to consolidate debt).
Before refinancing, you could be dealing with numerous small loans all of which are a headache to you. However, reducing them into one big loan guarantees you of simplicity.
Keep in mind:
80% of most people who opt to refinance do it because of simplicity. We are all human and man is to error. Sometimes due to the number of the loans, you may forget to pay up.
More than 30% or 1 in every five people will forget to pay up some numerous loans. However, with refinancing, things become much easier.
Lower Your Rates
With the refinancing plan, you can significantly slash your rate with over 60% of what could have been the rate of two loans.
That is the benefit of the student loan consolidation. This could help you lock your rate low while in school. This guarantees of a stress-free condition while still in school.
Lower Your Payments
This is another advantage of the student loan refinancing program. With either the low-interest rates, or the longer repayment period, this could lower your payments.
However, this could only be possible if the interest rates and the terms of the current loans.
Release A Cosigner From The Loan
This is an added advantage from a refinancing of the loans.
This is a product of refinancing your loans which make you eligible for refinancing your loans. You could drop a cosigner from a close family member, say your parent.
Often, this a great deal that comes with a huge risk. When a cosigner is released from your loans, you could get a higher score and even have access to new lines of credit.
Some of the student’s loans available could offer up to 50% lower monthly plans. The rats vary depending on the borrower’s financial situation.
In inclusion to that, the borrower’s credit score (See how to achieve a great credit score). In most cases, the monthly plans may also take into account student loan situation.
Disadvantages Of Student Loan Refinancing
This will depend on your loan. Certain loans do have some certain borrowers benefits. For example, if your rate was 4% this could be cut down to 3.5% as a rate bonus.
Still, there are loan forgiveness benefits. This is with the aim of meeting certain benefits.
Losing A Grace Profit
What happens is that many of the student loans delay payments while you are still at school.
If you had a student loan with a grace period, you should wait until the period is over to start a recoup of refinancing.
More expensive To Repay The Loan
. In a few cases is that paying through refinancing option may end up becoming more expensive. Comparison with the ordinary payment option, you could end up paying more.
Variability Of The Rates
This is another disadvantage with the student loan refinance. This happens when you are refinancing the private loans with a private lender.
They may choose to offer you with a variable interest rate as opposed to a fixed rate.