While student loans are in forbearance due to the Coronavirus, this may be the perfect time to consider a student loan refinance. Lowering your student loan debt through refinancing may be able to lower your overall debt if you choose the correct loan.
A good way to save money when refinancing is often to secure a lower interest rate on your new loan since you can’t change the principal without paying it off. However, there are some additional factors that could alter your decision to refinance or not.
How to Refinance Student Loans
Whether your student loans are currently from a federal or private lender, you can refinance your student loans if you are eligible.
- You may be eligible to refinance your student loans if you have a good credit score, steady income, and no missed payments.
If you have a federal student loan, you may need to consider the benefits you would be giving up when you refinance as a private loan. Compare the terms and benefits to ensure you are getting the best deal.
- These federal loan benefits may be more valuable to you than anything a private loan has to offer, depending on your financial situation.
If you are having trouble making payments on your federal student loan, there may be a program already that can help you. You may benefit from looking into these programs before considering refinancing your student loan.
Student Loan Interest Rates
A good credit score will help you to get the best interest rate when you refinance your loan.
- Spending less on interest is one of the best ways to save money when paying back a loan. So, if you don’t have a good credit score, you may want to reconsider refinancing.
If you have a federal student loan, you may not be able to find a lower interest rate.
- According to Federal Student Aid, federal student loan interest rates are “generally” lower than those of a private loan. If you can’t get a lower interest rate, you may not save money when you refinance.
If you already have a private student loan, you may find it easier to refinance with a lower interest rate.
- A high credit score makes it more likely that you will be able to get a lower interest rate on your new student loan, saving you money. You could also save money in the long run by refinancing to a shorter-term loan.
You may need to budget your money with this option because your monthly payment could increase, although for good reason. Since you are taking less time to pay back your loan, you will likely need to pay back more principal each month. However, you will most likely spend less on interest than you would on a longer loan.
If you have other debt, however, the shorter-term loan may not be helpful. The higher monthly payment could take away funds that could help lower any other debt that you have. However, this debt could also be consolidated with the student loan, giving you just one monthly payment to manage.
While ClearOne Advantage cannot include student loan debt on our debt settlement plans, we can help with any unsecured debt that may be hindering your ability to pay off your student loans.
If you are experiencing difficulty keeping up with credit card debt, medical bills, or unsecured loans, contact one of our Certified Debt Specialists at 866-481-1597 to discuss your best debt relief options and get a free savings estimate today .