NEW YORK, November 23, 2021 (Newswire.com) - iQuanti: Student loans are among the most burdensome and lingering debts for many Americans, especially as people move into their 30s and 40s. Those who are dealing with a ton of loan debt may be ready to jump on any opportunity to save money and get out of debt faster. Refinancing student loans is a way to do just that. So if you're on the fence, here are 5 good reasons to refinance your student loans.
What Does it Mean to Refinance Student Loans?
The process of refinancing student loans simply means a lender will repay your existing loan and in the process you will owe them a new loan, hopefully at a lower interest rate and/or more appealing repayment terms.
While the process of refinancing may not save you money immediately, the long-term goal is to refinance into more favorable loan terms, which means less money out of your pocket over the life of the loan. Here are 5 reasons to consider refinancing.
1. You're Trying to Save Money
The most obvious and perhaps most popular reason for refinancing student loans is to save money. And when you lock in a lower interest rate, you'll need to pay less in interest over the life of the loans. However, for the most savings, you'll need a credit score that's above average. So if you're working to improve your score, it may make sense to wait.
2. You Want to Remove a Co-Signer
If your parents co-signed student loans when you were younger, it might now be causing a strain on their financial picture. If the loans are for a large amount, they may be limiting your co-signers' ability to get access to new debt, and any financial pressure can impact your relationship as well. Through refinancing, you can release their obligation as a co-signer.
3. Your Credit Score is Better
If your credit score has dramatically improved since you first took out your loans, refinancing is a way to lock in a better rate from lenders. Typically, lenders like to see a credit score in the good or excellent range (above 650) to dish out the most favorable rates. So if you're new to a higher credit score, applying for a refinance can save a significant amount of money over the life of the loan.
4. You Want a Longer Repayment Term
If you're going through a period of low income, you may refinance to extend your loan term and lower monthly payments to a reasonable amount. For example, extending your loan from 5 to 10 years could knock down payments by almost half. However if you currently have Federal student loans, rather than private student loans, you may have better options such as changing to an income-driven repayment plan.
5. You're Ready to Work Towards Other Goals
When you're fresh out of college, other long-term financial goals beyond paying off debt may be the farthest thing from your mind. But it's never too soon to clear up student loan debt to enable you to make other financial choices. For example, the money you save through a refinance could be used to make investments or take out a whole life insurance policy to protect your future financial security.
The Bottom Line
There are many reasons to refinance student loans, but the underlying reason is always to improve your financial picture. So whether you're just looking to save a buck, your credit score has improved, you're releasing a co-signer, you want a longer loan term, or you're ready to begin looking to the future, refinancing might be something to consider. Be sure to do your research and track down reputable lenders that you trust. They'll be the most qualified people to help you get the best deal.
Source: iQuanti, Inc.