Private lenders will refinance student loans to lower the interest rate and loan repayment amount, helping borrowers save money. A borrower in good financial standing can refinance a student loan with a private lender. If you qualify, you can refinance both federal and private student loans.
Do I Qualify for Student Loan Refinancing?
You will qualify for student loan refinancing if your income is acceptable and you have a high credit score. Required incomes vary from lender to lender. Your credit score is probably high if you have a history of making your loan repayments on time.
Some lenders will not refinance student loans, because they do not think it’s profitable to them. If your preferred lender won’t refinance your student loan you could shop around to find one that will.
Benefits of Loan Refinancing
When you refinance your student loan, a lender repays your old loan and gives you a new one. Since you’ve repaid part of your original loan, your new loan will have lower monthly payments.
If you refinance when interest rates are low, your refinanced loan should also have a new, reduced interest rate. This could save you a significant amount of money over your loan’s term. The interest rate you’re offered will depend on your credit rating.
Can I Refinance Multiple Student Loans?
So long as you qualify for refinancing, you can refinance and combine your student loans into just one account with a new, lower interest rate. With a single consolidated loan, you’ll have only a single bill, which is much easier to manage.
Are There Any Fees Associated with Refinancing?
In most cases, refinancing your student loan won’t attract any fees. Leading U.S. lenders do not charge origination fees or prepayment penalties for refinanced loans.
Are There Any Drawbacks to Refinancing My Loan?
In most cases, refinancing your student loan will help you save money. However, beware of extending your payment period. While the lower repayments may seem attractive at first, you’ll pay more interest over the term of your loan.
It’s much better to plan on repaying your refinanced loan when the original loan was due, if not before. You can pay more than the required balance each month to avoid extra interest charges.
If you refinance a federal student loan, you could lose some of the federal loan program benefits. Only private lenders refinance student loans, and their loans typically don’t come with the same perks as federal student loans.
Some common federal student loan benefits include income-based repayment and loan forgiveness. Make sure you understand the terms of your new loan and what benefits you would be giving up before committing to it.
If you have a decent income and a good credit score, refinancing your student loan with a private lender is an attractive option. Checking with your preferred lender is the only way that you can know if it is the right choice in your situation. Speak to a loan officer to see whether refinancing is a good option for you.