Are you thinking of refinancing your student loans but haven’t got around to doing it?
Like many college grads, the thought of refinancing your student loans must be stressful. All that paperwork, the application process, and the anticipation can be strenuous.
Fortunately, we are here to help you get your ducks in a row. Read on to get started!
Refinancing Student Loans | Get Your Game Plan On
Refinancing your student loans is a great idea if you want to potentially lower your monthly payment, lower the interest rate, or even just organize your payments.
Refinancing student loans can be taxing, but the minutes you spend contemplating could be money thrown out of the window. However, rushing it will not help you either. You’ll need a good game plan or strategy going so you get every penny’s worth.
These strategies on refinancing your student loans could help keep you on the right track.
1. Know how much you owe
Coming face to face with your total loan amount can be depressing, so you’ll likely keep an eye off of it. However, you have to organize your finances and get to the total figure, so the sooner the better.
Having a clear view of your financial status will help you spend within your means which is the best strategy by far.
Log into your student loan accounts to get the necessary information, or take pertinent data from authorized agencies or personnel. Gather all your student loan data and, if possible, make a list or tabulate important information.
List the type of loan, loan balance, and interest of each loan.
2. Know if refinancing is for you
Sadly, refinancing student loans is not for everyone.
Refinancing could potentially save you a good sum of money, so finance agencies may not make it easy. They’ll make sure you qualify for the benefits of refinancing before moving forward.
First of all, you must have an excellent credit history.
It’s important that you have a stable source of income as well as savings to back it up. If you have a significant loan amount with high-interest rates then you could benefit from refinancing.
Finally, always remember that refinancing your student loans with a federal loan is a no-no.
3. Understanding refinancing versus consolidation
Knowing how repayment options work will allow you to compare and decide the path you’d like to follow to financial freedom. Consolidation and refinancing are similar in the sense that they both simplify your finances by combining multiple loans into one.
When it comes to consolidation, there are strict qualifications and the interest can go as high as the original loan amount.
Refinancing student loans, on the other hand, is a repayment option which gives the borrower the prospect of potentially lowering their interest and potentially save thousands of dollars over the lifespan of their loan.
4. Choosing the best repayment term
Picking the best repayment term is not quite as easy as one, two, three.
However, there are three repayment terms you can consider: short, long, or similar repayment term.
A simple self-evaluation could be handy before you decide which one to go for.
Each repayment term will have ups and downs, but you should pick based on your personal circumstances and which term will fit into your future financial plans.
While it may sound nice to choose a shorter repayment term and have your loan paid off more quickly, it might not be feasible for your current situation.
Make sure to take into account your present financial situation while also considering where you expect to be in the next 5-10 years when picking your repayment term.
5. Do the math
Most of us will focus on the interest rate and monthly payment.
If you have a great and steady source of income, it’s recommended to go for the shorter repayment option. Although a bigger monthly payment comes with it, you’ll make fewer payments, enjoy bigger savings and a lower interest rate.
6. Lower your monthly payment
You can consider a longer repayment term if you want to lower your monthly payments.
As you may know, additional payments and a higher total interest rate are the downsides to this option.
You’ll have to weigh the pros and cons when deciding whether or not this is the right choice for you in the long term. You may choose the lower monthly payment out of necessity right now, but make sure you know what that means for your finances in the future.
7. Reduce your total cost of repayment
With a similar repayment option, debtors are able to offset the years attached to the current repayment plan in a new repayment plan.
For example, if you’ve completed three years in your current 10-year repayment plan, you can refinance your loan into a 7-year plan. This will potentially lower your monthly payment and help you save on your total repayment loan amount.
Check out this video to for more on refinancing your student loans:
Student loans are inevitable in post-grad life but having a good financial plan going will let you focus on your life after college!
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Are you more interested in consolidating your student loans? Find out more about consolidation here!
Amy Blatterfein says
Hey John,
You’re right, choosing a repayment plan that works for you is of the utmost importance! It will save you money and stress in the long run.
John Mahoney says
Thank you for talking about the importance of choosing a loan payment rates based on your circumstances. It makes sense that taking the time to assess your situation can help you find the best company to loan from and make sure you can pay it back. I can see how anyone looking into this would want to make sure they take the time to read online reviews and find a lender that has a good reputation with cases like yours.