You have a lot of student loans. You’re paying interest on them. And you’re probably wondering if you should check to refinance student loan options. Refinancing your student loans is a great way to lower your monthly payments and make it easier to pay off the debt. But before you pull the trigger, it’s important to understand how refinancing works and when it makes sense for you as a borrower.
Get the lowest possible rate
If you can get a lower interest rate, your monthly payments will be lower, which means more cash in your pocket. A lower interest rate means that you can pay off the loan quicker and save money on the total cost of borrowing.
The main reason for refinancing is to lower monthly payments and save money on interest by getting a new loan at a lower rate. The savings from refinancing can range from hundreds to thousands of dollars each year depending on how much you owe, how long it takes to pay off the loan and what kind of job market you’re entering after graduation (more about this later).
Get a better term length
If your goal is to save money on interest, consider refinancing with a longer term (which means lower monthly payments). If paying off this debt quickly is important to you, or you don’t have any extra cash lying around after paying for rent and food each month, stick with a shorter term (which means higher monthly payments).
Extend your repayment to lower monthly payments
To extend your loan’s term length, you must make a series of monthly payments. The amount due will be spread over a longer period, and it will lower your monthly payment amount. This is great if you have difficulties paying back the loans when they come due in full every month. In addition, extending the term length will lower total interest costs on the loan since you can make more than one repayment before having to pay off an entire balance (which means paying less interest).
Switch to another borrower
You can switch to another borrower like Lantern by SoFi professionals. For example, you can get a better interest rate, origination fee, or variable interest rate with another lender. And depending on their policies, the new lender may offer more flexible repayment options or payment plans.
Pay off your student loans faster
There are a few benefits to paying off your student loans faster than you would otherwise. For example, if you pay off your loan in half the time, your interest rate will be half as much. You can save thousands of dollars by only paying interest for half the amount of time.
Another benefit is that standing on principle is only sometimes best for your money situation. If refinancing or consolidating your student loans gives you access to better rates or terms (or both), then it makes sense to do so! So it’s important not to let pride cloud the facts about spending and saving money.
There are many reasons why someone might want to refinance their student loans, but the most important thing is to do it for the right reasons. If you need help with your monthly payments, consider refinancing your loans to make them more manageable. You should also consider refinancing if you have a low-interest rate and want to get something better.
