How to Refinance Student Loans

It is possible to refinance student loans. The benefits of refinancing are numerous. The ultimate goal of this process is to reduce the amount of interest you must pay on these loans. This can also reduce the amount of your monthly payment, the amount you must repay in total and the length of time you must repay it in. However, every person's situation is unique. It is up to you to select the most appropriate method for refinancing student loans. You also must prove you are a good risk to any lender.

Why Refinance Student Loans?

There are numerous reasons to refinance student loans. One of the main reasons to do so is to get a lower interest rate. However, consolidating loans from several companies into one, easy to pay loan, can be much better for many individuals. Having one loan to pay instead of numerous can make a big difference in managing your debt.

What You Should Know about Your Need to Refinance Student Loans

Before you consider the process to refinance student loans, know what to expect from the outcome.

• If you cannot make payment on your loans at all, because you do not have income, for example, refinancing or consolidating the loans is not going to help you. Rather, consider entering a period of deferment with your lenders. This provides a short period of time where you do not have to repay the debt.
• Determine what your goal is in refinancing. Do you need a lower monthly payment? Do you want just to benefit from lower interest rates? If you need a lower monthly payment, extending the term of the loan (repaying it for longer) can reduce payments. If you want to save money, find a low interest loan and pay it off sooner.
• Determine if you qualify for the income-based repayment plan options. This is a new type of program available only for those who have federal student loans. You can opt into this program - you do not have to do so. If you do, it will cap how much you have to repay monthly based on what your current income is. This could increase the length of repayment of the loan, in the long-term.

Know your circumstances, too. If you took out the loan when you were young and had little credit history, your credit score could have been significantly lower than it is now. When you refinance student loan rates now, with a higher score, you could qualify for a significant savings.
There is no reason not to refinance student loans if you are paying more than you should be. If you need relief or just want a lower payment each month, look for lenders who can offer a significant savings to you. Most types of student loans, including federal student loans and private loans, can be refinanced if you have the credit and income to make payments on it. Compare several options to determine the most affordable refinance option available in your situation.