Do You Have a Stable Income?
If you have a stable income, and of course good credit, you can refinance your debt for the possibility of getting lower interest rates. The higher your credit score, the better your interest rate is going to be. You can save thousands of dollars in interest and pay off your loan much quicker at the lower rate. Typically, a person looking to refinance their student loan is a few years past graduation, and they are probably starting to make a higher income. This makes a lot of sense as you have more money to put towards your debts as you progress in your career. Because of this, most of the time, it’s advisable to wait a few years before looking at this option.
Do You Know Your Interest Rates?
Do you know what interest rate you are paying presently, and is it higher than you can qualify for through a bank? That’s the most important question to ask yourself, as different banks will have varying credit qualifying standards, and of course, offer different rates based upon different credit scores. It is because of this that you need to know how much you are paying to begin with, and weigh whether or not it’s likely you will save money if you refinance your loan.
With the Federal Reserve recently raising interest rates and looking likely to continue to do so through 2018, and even through parts of 2019, most private loans are going to start charging higher interest rates, as they tend to be variable rates and will charge prime plus a significant markup. When interest rates are low, it makes sense to refinance, but if you are in a fixed rate through the federal program, you may find at this point that refinancing makes no sense.
How Much Do You Owe?
Another question you should ask is how much do you owe in student loans? Some lenders, including banks, will often link the loans which will allow you to pay smaller amounts over time, with an interest rate that won’t force you to pay thousands of dollars more than you borrowed. However, you should keep in mind that that interest rate will be variable most of the time. If for some reason you only have $10,000 or less in debt, it probably doesn’t make sense to go looking at the bank for help.
Taking Out a Personal Loan from Your Bank
Taking out a personal loan from your local bank can be an alternative, but there are a lot of things you need to pay attention to initially. There are origination fees, and of course prepayment penalties that can be part of the package. It is because of this that although banks do consolidation loans that can include student debt, the reality is that you need to be very cautious as to what you are willing to sign on the dotted line for. For most people, these types of loans generally won’t work out in their favor over the longer-term. Beyond that, you lose a lot of flexibility that is built into the federal student loan program. If you need to defer or base your payments upon some type of change in your financial situation, a private lender isn’t going to listen to this problem of yours. It is because of this that most people will find that refinancing may not work. However, there are some specialists out there that offer help and specialize in this industry so take the time to listen to their advice.
Online Solutions Exist for Refinancing Student Debt
Even though lending institutions, such as your local bank, will give you the opportunity to refinance your loan, you should not forget that there are plenty of online solutions out there. There companies, such as Credible, Earnest, and SoFi, that specialize in these financial products, and can offer very attractive rates. As a general rule, if you have a history of making payments on time and have a reasonably decent credit score, you can qualify to refinance your loan at an attractive rate. At this point, it simply comes down to what your interest rate is on the original loan and comparing the two to see which one will allow you to pay off the debt much quicker. With the massive amount of student loans out there still needing to be paid off, one would imagine that online lenders will only grow in numbers over the next few years.