Is It Time to Consolidate or Refinance Your Student Loans?

Making your student loans more manageable can provide much-needed relief when it comes to your monthly expenses.

See how consolidation or refinancing can reduce your student loan-related stress.

Need Help Paying for School?
Find everything you need to know to get fully funded and get a head start on FAFSA >>

Get Started Now

The decision to refinance or consolidate student loans can appear when financial waters get rough. You may need to reduce your monthly payment to pay all of your bills. Or you may want to shorten your loan’s terms to save on interest in the long-term. Regardless of your goal, keep reading to see if adjusting your loans is a move worth making.

Benefits of Refinancing or Consolidating Your Student Loans

A refinance or consolidation can provide multiple benefits to the borrower. You must define these benefits before you start researching your options. In doing so, you’ll get a clearer picture of whether or not you should change terms or stick with your current agreement.

As stated, you can achieve a lower monthly payment via refinancing, which can make your monthly costs much more manageable. Depending on your situation, you could also save money on interest in the long run. 

It’s not necessarily either-or when it comes to such benefits, though, as some people can refinance into a new loan that offers a lower interest rate and lower monthly payments.

To find this ideal arrangement, you’ll need to do some research, but it is possible. If you cannot achieve a better situation via refinancing or consolidation, avoid it. Refinancing at higher rates or adding a new loan on top of the old ones are likely to complicate things instead of fixing them.

The Ideal Candidate for Refinancing or Consolidation

Sponsored

If you’re struggling with existing debt, here is help to consolidate and lower your monthly payments no matter what sort of debt it is.

Who is a prime candidate for refinancing? Someone who is paying a large sum of their monthly loan payment towards interest. A private student loan borrower often fits this description, making them likely to save the most money via refinancing.

For example, a private loan borrower could be paying 10 percent interest per year on their student loan. Some types of refinancing could result in a 2 percent annual interest rate. When is this substantial reduction in interest most likely to be granted? If your credit has improved since you first started the loan.

What’s the benefit of a lower interest rate? Significant savings on interest every month and year. It could allow you to pay your loan off faster as well.

The Risk of Extending Repayment

You may want to extend the repayment of your loan to lower your monthly payment, especially if you’re having trouble managing your finances. While this can reduce your monthly costs, you could end up paying more interest over the life of the loan if you overextend it.

Refinancing can give you the option to change your loan term length from five to 25 years. If you choose the maximum term of 25 years, the overall cost of your loan will end up higher.

When does it make sense to choose such a long term? When you need breathing room and don’t mind a higher long-term cost. In other words, when the benefit of a lower monthly payment is your primary goal. By achieving it, you can make your payments on time and avoid defaulting on the loan.

DO YOU NEED FINANCIAL ASSISTANCE

Stop! If you need financial assistance such as money to pay bills, a personal loan, or debt relief. See what resources are available to help you today.

DO YOU NEED FINANCIAL ASSISTANCE

Stop! If you need financial assistance such as money to pay bills, a personal loan, or debt relief. See what resources are available to help you today.

The Convenience of Loan Consolidation

Sometimes, consolidation may not result in lower rates or more affordable monthly payments. Still, it can provide the benefit of simplicity. 

Consolidating your loans into one single loan payment can make planning and budgeting easier. Over time, this simplicity can help you pay the loan off faster while providing peace of mind.

Leave a Reply

Your email address will not be published. Required fields are marked *