There are a few people who make use of a loan to pay for quality education. With the college entrance fees gradually rising every year, more students are going into debt.
When this happens, getting your financial life back to normal can be a long, difficult and dangerous process because debt will eat into your savings and adversely affect your credit rating.
Refinancing of student loans works like this: substitute your current loans with a new private loan at a different interest rate depending on your credit and job records. Refinancing may also stretch your duration of maturity or reduce your monthly payments. But not all qualify.
What To Ask Yourself Before Refinancing Your Student Loans?
If you are wondering if you should refinance your student loans or not, it is wise to ask yourself a certain set of questions. It will further help you in making your decision.
Do You Have A Steady Source Of Income?
When you have a stable income from full-time jobs, refinancing firms can give you a better rate, which means you are more likely to make on-time payments. Some lenders might also demand graduation certificates from different schools or graduate programs from their refinancers.
How Much Do You Have To Pay?
Private lenders may allow refinancers to have minimal balance of student loans outstanding, typically between $7,500 and $10,000 or more. Next review the criteria of your potential new lender on this point. If your loan amount is too low to apply for refinancing, consider changing your funds to help you pay off your loans more quickly. Pay a bit more than the minimum owed each month, and ask your service to add the extra to the principal so your balance can be lowered. Disposing of your high interest-bearing loans would save you the most money.
Do You Have A Good Credit Score/History?
Your credit score is a crucial aspect of your qualification to refinance. It takes into account, among other things, your payment history on your monthly payments, the kinds of loans and credit cards that you possess and how much you owe. If you get a score more than the 600, you’re more likely to apply for a refinance.
Do You Plan On Using The Public Loan Forgiveness Plan?
If you are ready to refinance, think carefully about whether federal loans will be included. By privatizing your federal loans, you can lose opportunities such as flexible or IDR plans, Public Service Loan Forgiveness and the right to delay interest-free loans temporarily.
Unless you’re sure you don’t need such guarantees, and you’re certain your earnings and credit rating will stay high during your period of repayment, refinancing your federal loans might be beneficial. Alternatively, just refinance private loans and keep making different payments on federal student loans.
Are You Looking Out For More Than One Lender?
When a loan provider checks your credit, the question that appears on your credit report, lowering your credit score temporarily. Only “hard pulls” have this effect, which lenders do to give you your overall interest rate. Lenders also conduct a “soft pull” during the testing stage to provide you an understanding of your new interest rate, but these do not lower your ranking.
It is wise to go shopping for a limited period, say a month, so the credit offices know that you (and your co-signer, if you have one) are comparing deals and not trying to take out several new credit lines.
Which Lender To Choose?
There are a lot of lenders one can choose from but it is wise to compare and review the lenders to get the best-suited deal for you.
Listed below are some of the lenders in the industry
SoFi is the best choice for graduates and those recently graduating from a professional degree. This lender has no official cap on how much (as long as it is more than $5,000) it will refinance, which could make it a good choice if you would like to refinance a big student loan balance. SoFi student loans also have extra benefits that come along with it.
When you refinance a student loan and then experience a life change or difficulty that muddies your repayment, there are some protections in place for Discover to support you. Discover’s deferment will postpone the payments for years at a time to enable a borrower to go back to school, join the military, serve at a public service agency, or complete a residency in health care. Forbearance may delay payments in cases of unemployment, a medical condition, undue student loan burden, or other financial distress for up to 12 months. Discover also provides a reduced payment option at $50 a month extending for a period of 6 months.
You may choose to refinance student loans in some situations to get a monthly fee that suits your spending plan, without extending your repayment too far. Lenders providing more options for loans will help you discover the best match for your plan and return goals.
The refinancing options provided by College Ave include 16 different loan terms, ranging from 5 to 20 years, for loans between $5,000 and $150,000. It offers good prices, too. The variable rates vary from 3.64% to 6.74% APR, and the fixed rates vary from 4.64% to 6.99% APR (after registering for autopay and earning a 0.25% discount).