Questions to Ask Before Refinancing Student Loans

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Getting a student loan to finance your education is a brilliant idea. You are guaranteed of completing your studies and making repayments once you have graduated. There has been an increase in the number of private lenders who refinance student loans.

Refinancing student loans

As such, students have a choice of refinancing their loans. However, you need to ask a few questions before you decide to refinance such loans. This post addresses the questions to ask before refinancing student loans. Here are three questions you need to ask yourself before you opt for refinancing your loan with private lenders.

Questions

Will you be able to exchange the federal loan protection with a lower rate?

The good thing about the federal loans is that the interest is fixed and it does not change with the changes in thegbvfdxzwq economy or an increase in interest rate. However, when the economy has low interest rates, the federal rates can be a bit high.

The rates for subsidized undergraduate loans were ranging from 3.4% to 6.8% while the unsubsidized undergraduate loans where between 3.86% and 6.8%. This rate is high compared to the private refinancing that has rates of 1.9%. There is no doubt that you will save a lot of money if you refinance.

Do you qualify?

Given the low interest rates offered by private lenders, you may be tempted to go for refinancing. You need to know whether you meet the eligibility requirements. You should have a credit score of above 620, good income, stable job and low debt to income ratio. As such, you need to have a good credit history too.

In case you are a graduate, you have to ensure that your loan payments are up to date. These payments will play a significant role in improving your credit score. The application process for the loans is done online. The applicant needs to send a proof of their job security such as work contract.

What are the costs?

kkjkjkjkjqwwIn case you have all the eligibility requirements, you can choose from the many lenders available. You can inquire from your bank. You need to carry out research before you settle with a given lender.

Some of the questions you need to ask are regarding origination fee, the loan terms, if the rate is variable or fixed, whether there is a penalty fee for prepayment and the benefits that the lender offers. By knowing all the costs needed, you will be better positioned to make flexible payments.  Therefore, before you decide to refinance your loan have everything at your fingertips.

Basic Facts about Consolidating Student Loans

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Introduction

Even though variable rates may appear lucrative because of their low nature at the beginning, they keep rising with time. Thus, signing up for a low variable rate now puts you at the risk of committing to rising rates that may hurt in the years to come. As someone with many student loans, you might have asked about consolidating your private student loans and how you can go about doing so. Fixed rates may appear high at the start, but the fact that they never change not only makes them predictable but also low in the long run, thus they may be the better option.

Features

Here are some of the features and benefits of loan consolidation.

Multiple repayments consolidated into one payment

As it is, the average student loan user has about seven loans with two or three loan services. Multiple loans with mnmmnnmnmnmvarious loan services can be tough to manage. Consolidating them into one payment provides you with one payment to make, thus making it easier for you to remember, not only the payment deadline but also how much you owe and to whom.

Lower interest rate

Fixed interest rates are always cheaper in the long run. Lower interest rate is a very direct advantage of consolidation. A lower interest rate means you give out less in form of loan repayment and keep more for yourself over the loan repayment period.

Lower monthly payment

Consolidation lowers the amount of money you remit every month as loan repayment. On average, loan repayment terms range from five to twenty years. Extending the payment period reduces the amount of money you are required to pay every month quite significantly. Reduction of money you pay every month gives you much relief, especially if you are on a tight budget. Therefore, you get more room to pursue other financial goals of life.

Anticipation of earning soon

Since repayment terms vary with consolidation plans, there are those that offer incredibly flexible repayment plans. These arrangements consider your current income, your financial commitments as well as future possibilities of a rise in your income. Anticipation of earning soon is particularly useful to fresh graduates earning an entry salary with anticipation of an increase coming through salary reviews or promotions at their places of work.

Possibility of releasing a co-signer

kjkjkjkjkjkjkkkjSince many students lack a steady income and credit history, they need a co-signer to meet eligibility criteria for loans. Although, co-signers may wish to free themselves from keeping their name on your loan records once you get financially established, they help a great deal before you get there. Please note that some banks offer consolidations with co-signer releases. Check with your potential lender for this option.