Yes!!! Refinance or consolidate your student loans is confusing, Finding the right bank.
A student loan refinance is when you apply for a loan under new terms and use that loan to pay one or more existing student loans. The refinanced loan has a lower interest rate based on your credit score and other relevant financial information.
If your financial circumstances change, the student loan refinance could take you through consolidation, extension of their period of payment or reducing your monthly rate. Here’s how to refinance a student loan and get a better rate.
-Make sure your credit is in good condition. This is essential to achieve more favorable conditions.
– Get a copy of your free credit report. This can be accomplished online through one or all of the three major agencies. Check and be sure to solve any problems.
– Consolidate your federal loans and private loans separately. Compare the rates of different lenders. Shop around, check the Internet, your bank, and your original lender.
– Work with your lenders to refinance their loans. Expand your amortization period, lessen your interest amount or consolidate your payments into one monthly bill according to your needs.
– Research your possibilities. You can consolidate private loans and federal loans together, but this usually have less favorable conditions.
What are some of the benefits of the student loan refinance?
Fewer bills because you will have one monthly payment instead of several payments, which makes it easier to keep track of every month.
You could have the ability to switch from a variable rate to a fixed rate. It could protect you from having to pay higher rates in the future when interest rates rise.
Lower monthly payments (which gives you up to 30 years to repay the loans). But beware –In case you rise the length of your repayment period, this means that you will actually make more payments and pay more interest over the life of the loan.
If you want to reduce the amount of your monthly payment, but is concerned about the impact of consolidation loan, it can also be considered as deferment or forbearance options for payment assistance needs in the short term.
Similar to the federal consolidation, a private consolidation allows the student loan borrower to combine several loans into one and can offer potential benefits listed above. However, the interest rate received will not be a weighted average of the rates on existing loans.
Instead, a private lender will usually use your credit notch and other relevant financial information to give you a new interest rate of your consolidation loan,and then use the loan to pay off other loans.
Sadly, during these difficult economic times, few borrowers get to start your career in high wages and a strong credit history, factors taken into consideration when refinancing their loans.
Therefore, refinancing your student credits at a time when your debt to income ratio is unfavorable, and your credit score is not the best, it can not be a smart move.
If you are in financial difficulties and can not pay your monthly payments, then a refinance loan is not the best solution for you.