Refinancing your student loans is an excellent option for people who have high-interest rates on their debt or have a lot of student loan debt.
You can lower your monthly payments and pay off your loans faster after you refinance your private student loans, which can help you improve your credit score and qualify for better interest rates in the future. Take a look at how refinancing works to decide if it’s right for you.
Here Are Four Benefits Of Refinancing Your Student Loans
1. Lower Your Monthly Payment
One of the biggest advantages of refinancing your student loans is that it can lower your monthly payment. This is an excellent option for you to consider if you’re currently paying more than 10% of your income toward student loan payments.
Refinancing can also help with any other debt that you may have, such as credit cards or car loans. For example, if you carry two different credit card balances at an interest rate of 20%, but were able to consolidate them into one loan with an interest rate of 10%, this would result in saving money over time!
As per SoFi experts, “Refinance now, and save $8K for a getaway instead.”
2. Qualify for a Better Interest Rate
You can also potentially qualify for a better interest rate. The interest rates on student loans vary depending on your loan type, but they can be lower than what you are currently paying.
For example, private student loan interest rates are often less than those offered by federal loans. Interest rates also tend to be lower if you have graduated with a master’s or professional degree (i.e., law or medical school).
The higher GPA scores may indicate that your credit risk is lower than someone who has only completed an undergraduate program at this point in their lives.
3. Reduce Your Total Cost of Repayment
The longer you take to repay your loan, the more you pay in interest. The more you pay in interest, the less money you have for other things. Refinancing can reduce the amount of interest you pay so that your monthly payments are lower and so that more money goes toward paying down the principal each month.
This means that even if it takes longer for your balance to get reduced by refinancing (because most lenders require at least a year before refinance), at least some of those extra months will be spent paying less interest each month.
So not only do refinancing companies save student loan borrowers thousands of dollars over the life of their loans, but they also help them get out from under their debt faster!
4. Obtain a Fixed Rate
If you are looking for a way to lock in an interest rate, refinancing your loans is the best way to do it. Fixed-rate loans are more predictable because they have set rates over time periods as long as 10 years. This can be helpful if you want to budget for the future or pay off your student loan debt faster.
Fixed-rate loans are easier to budget for because they don’t fluctuate with the market like variable-rate loans do (and sometimes even increase).
You know exactly what you’ll be paying each month, so there’s no guesswork involved and less risk of getting tangled up in complicated financial situations later on down the line when unexpected things happen that throw off your budgeting plans.
Refinancing your student loans can have several advantages. You might be able to lower your monthly payment or qualify for a better interest rate, so it’s worth looking into!