Why financial experts are urging student loan borrowers to refinance
Refinancing your student loans can help you save thousands of dollars in interest and pay them off faster, saving you money for emergencies or other purposes. Interest rates are extremely low at the moment since the Federal Reserve kept the short term interest rates close to zero to try to stimulate the economy amid the coronavirus pandemic.
Credible can reveal the refinancing rates for which you are eligible. You can compare student loan refinancing rates up to 10 lenders without affecting your credit.
Should You Refinance Your Student Loans Now?
People with larger student loans could benefit from refinance them at lower rates, which can help pay off debt sooner. But is now a good time to act – or should you wait? Financial experts are encouraging borrowers to refinance private student loans now, as interest rates are insanely low and are not expected to increase in 2021.
“For borrowers with excellent credit and a stable income, they can potentially save thousands of dollars by refinancing their loans,” said Leslie Tayne, a lawyer from Melville, NY specializing in debt relief.
When you refinance, you are replacing your current loans with a new one. There are some advantages to this move, including:
- Get a lower interest rate
- Lower monthly payments
- Consolidation of several loans
- Cut the life of your loan
1. Get a lower interest rate
If you refinance now – when interest rates are low – you have a better chance of replacing your old loan with a new one attached to a lower interest rate. This way you have the opportunity to save more money over time. Now is the perfect time for those with private student loans to refinance before interest rates rise. (Note: If you refinance Federal Student Loans, you might lose out on some of the perks and perks that come with them, so be sure to do your research before making any final decisions).
You can compare student loan refinance rates from several lenders at the same time via an online tool like Credible without affecting your credit score.
2. Lower monthly payments
For borrowers who are financially stable, earn stable income from their current job, and do not anticipate any need for affordable repayment plans or public student loan cancellations, refinancing federally guaranteed loans may be a consideration. Again, remember that you could lose the protections and benefits of federal loans.
However, if you have private student loans, now is a good time to refinance.
“Refinancing your student loans can open up opportunities to save money with lower monthly payments and lower interest,” said Bruce McClary, spokesperson for the National Foundation for Credit Counseling, a non-profit organization. lucrative based in Washington, DC.
If you have private loans, check to see if the current student loan refinance rate is lower than yours. If so, then use Credible to get real personalized rates based on your credit history.
3. Consolidation of several loans
People with private student loans should consider refinancing because of the low interest rates and the ability to consolidate multiple loans for a single monthly payment, McClary said.
Use an online tool like Credible to view pricing from several lenders at the same time.
4. Cut the life of your loan
Another advantage is to pay off the loan more quickly.
“With a lower rate and a faster repayment program, it ultimately costs you less,” Tayne said.
Since the Coronavirus Aid, Relief, and Economic Security Act (CARES) extended the benefit of automatic forbearance for federally guaranteed student loans, now is probably not the best time for people who have need this protection to refinance their loans. Here is the list of some disadvantages:
- You could lose federal benefits
- There are refinancing fees
- You cannot benefit from low rates
1. You could lose federal benefits
If you refinance your federal loans, you would no longer have access to affordable repayment programs administered by the Department of Education. Borrowers will lose all the benefits they currently enjoy by refinancing, including loss of fixed interest rates, forgiveness of public service loans (PSLF), access to various repayment plans such as income-based repayment plans, deferment and abstention programs.
“You don’t want to lose the benefits of an ongoing program, so be aware of the changes due to refinancing, especially if you’re going from a federal loan to a private loan,” Tayne said.
2. There are refinancing fees
Before you start refinancing your student loans, get a feel for your new monthly payments using aonline student loan refinance calculator to get an idea of what might be.
Determine the amount of the refinancing fee. People with downgraded credit scores or those with less than stellar credit will often find that refinancing can actually raise their interest rates, as low rates are reserved for borrowers with excellent credit scores, a Tayne said.
3. You may not qualify for low rates
“Loan companies often lure applicants by stating their lowest rates reserved for a small group of borrowers, only to find that they are not eligible or that they have to pay points or fees up front. “she said.
Credible can reveal the refinancing rates for which you are eligible. You can compare student loan refinancing rates from up to 10 lenders without affecting your credit. What’s more, it’s 100% free!
How to get the lowest interest rate on student loans
People who wish to obtain the best refinancing offer should first consider ways to increase their credit score.
Having a qualifying credit score is always important when looking for the most competitive refinance terms, so be sure to resolve any overdue accounts or inaccuracies that could hurt your score, McClary said.
“Obtain a free copy of your credit report before approaching the lender so that there are no unpleasant surprises when they respond to your loan application, ”he said. “If you’re having debt issues that prevent affordable credit card and mortgage repayment, contact a nonprofit credit counseling agency and get help before you refinance. “
Tayne also said that a great credit score can lower your interest rate and payments when you refinance.
“There are many opportunities for those with good credit to increase their cash flow when refinancing by reducing interest rates and monthly payments,” she added.
Consumers need to make sure they don’t keep spending and approach the credit limit on their credit cards, as this reduce their credit rating.
“The closer you get to your credit limit, the higher your credit usage,” she said. “High credit utilization could signal to lenders that a person may be having difficulty repaying their balances or that they are relying on credit to get by. “
See if you can get a lower rate by refinancing your student loans today. Fair plug in some of your information (like your current student loan balance and credit score, etc.) to find your rate in minutes.