Low interest rates have made student loan refinancing attractive to many borrowers, but it's important to compare loan rates and terms to find the best offer.
If you're interested in paying off your student loans faster or simplifying the loan repayment process, a student loan refinance may be the solution for you. A loan refinance involves obtaining a new loan from a private lender and using it to pay off one or more existing student loans. It can consolidate multiple debts, lower your monthly loan payments and, potentially, save money — as long as you choose the best student loan terms for refinancing.
With the Federal Reserve setting current interest rates at which banks can borrow at close to 0%, many refinance companies are offering unprecedented loan rates. But you'll need a good credit score and proof of income to qualify. To compare rates and terms with multiple private lenders to make sure you're getting the most favorable loan rate possible, check out Credible.
Credible also has a handy rates table that makes the student loan refinance process easy — you just have to enter your loan amount and estimated credit score to see prequalified rates.
As you compare loan rates, there are a few key questions to keep in mind to make sure you get the best possible terms on your refinance loan.
How do you choose the best student loan refinance offer?
There are three simple things you can do to ensure you choose the best student loan terms for refinancing.
1. Determine what loans to include in your refinance: Generally, you'll want to include only private loans as refinancing federal student loans would require you to give up important benefits, including the flexibility to change your loan repayment options and the possibility of student loan forgiveness.
2. Shop around and compare lenders: Different private lenders have their own qualifying criteria. Rates can vary substantially among them, so get quotes (monitor when rates drop) from several private lenders to see which offers you both the lowest loan payment and lowest total loan costs. Find your rate now.
3. Calculate your potential savings: Credible's student loan refinance calculator can help you get a sense of what your new payment would be with each private lender.
Ultimately, the best way to choose the right student loan refinancing offer is to get quotes from multiple lenders and see which best suits your goals. Look for a lender offering low rates, a loan repayment timeline that's not too long, and a monthly payment that fits easily into your budget. Visit Credible today to shop around for a student loan refinancing offer that's right for you.
HOW TO REFINANCE HIGH-INTEREST RATE STUDENT LOANS
Is it worth refinancing student loans?
As you compare rates, think about what you hope to accomplish by refinancing student loans — and determine if it's worth it. Some of the most common reasons to refinance include:
Lowering your monthly loan payment: You can drop your loan payment by securing a lower interest rate, refinancing to a longer loan repayment term, or both.
Reducing total interest costs: Reducing your interest rate can lower the cost of borrowing. However, you'll want to make sure you don't extend your loan repayment timeline too much as you could raise total costs by doing so since you'd end up paying interest over a longer time.
Simplifying the repayment process: You can take one new refinance loan to pay off several existing loans, thus reducing the number of monthly loan payments.
Paying off loans faster: If you shorten your loan repayment timeline with your refinance loan, you can become debt-free sooner and reduce borrowing costs by paying interest for less time.
The decision you make about which loan is right for you and whether now is the right time to refinance will be shaped by your goals.
WHY YOU'LL LIKELY SAVE MONEY IF YOU REFINANCE STUDENT LOANS NOW
What are the pros and cons?
Pros
You can reduce your monthly loan payment.
You can lower your total costs.
You can simplify the repayment process if you have one loan to manage instead of several.
Credible can walk you through all of these steps and help you understand the full benefits.
Cons
You could end up paying more over time if you lengthen your repayment period (but this is easily avoided by choosing a loan with the same loan term or a shorter one).
Not everyone can qualify for a new refinance loan at a favorable rate. If you find yourself in this situation, a cosigner could help you to get approved.
Refinancing federal loans, on the other hand, has significant downsides including giving up generous deferment or forbearance policies; losing the flexibility to change your repayment plan as needed or opting for income-driven payment plans; and giving up any chance at loan forgiveness. You generally don't want to refinance federal loans unless you're confident you won't need any of the special benefits or protections they provide.