NEW YORK, September 8, 2020 (Newswire.com) - You might have heard some buzz that right now is a great time to refinance your student loans due to record low interest rates. We think the most important consideration when it comes to refinancing your loans is your personal financial situation, rather than global trends. If you’ve been thinking of refinancing, here are four reasons why now might be a good time for you to refinance — and three reasons why you might decide to wait.
Signs that it’s time to refinance
1. You qualified for a great low interest rate
This is the most common reason to refinance. If you’ve qualified for a great, low interest rate – and the repayment plan appeals to you – there’s a good chance you could save money in both the short and long term through student loan refinancing by locking in a low rate right now.
2. You’re ready to stop having a cloud of debt over your head
If you’ve got a good-paying job and you are ready to tackle your student loan debt aggressively, refinancing and setting up a more aggressive repayment plan can be a great way to avoid the 10 years of debt that often come with the standard federal repayment plan.
3. You’re concerned about your overall total payment
If you’ve been able to meet your monthly payments but you’re keeping your eye on that long-term interest, refinancing could be a great move. Lowering your interest rate not only saves you monthly, it could also reduce your total repayment amount, depending on the length of your loan term.
4. You’ve got good credit and solid employment
Don’t get caught in the trap of waiting for a promotion at work or a perfect credit score to take advantage of refinancing. If you qualify for a great interest rate now, that means you could start saving money now. With rates often fluctuating, waiting to refinance might cost you money in the end should rates rise again.
When to avoid student loan refinancing
1. You don’t qualify for a lower interest rate
If you don’t qualify for a lower interest rate, now may not be the right moment to refinance. You may just need to build up your credit score a little more or find a willing co-signer — but you likely want to wait to qualify for a better rate before refinancing.
2. You’re not sure about the repayment terms
Your repayment terms are an extremely important part of your loan, and if they don’t work for you, that weighs heavily against even the most attractive interest rate. Your monthly payments and overall length of repayment need to work for you, or else refinancing might not be the right call.
3. You’re relying on federal protections
Federal loans come with various federal protections. For example, you might be experiencing a pause in your payments right now due to the federal CARES Act. While many private lenders have also offered forbearance options due to Coronavirus, these don’t have the weight of law behind them the way federal protections do. Additionally, if you’re relying on income-based repayment plans, or feel like you might need to rely on them in the future, you might not want to sacrifice that flexibility and security by refinancing. Other benefits and options may be available too, so check the terms of your current loans when preparing to refinance.
Remember, don’t jump to refinance until you’ve done your research and looked carefully into your financial situation. While refinancing isn’t for everyone, it does provide benefits that can have a lasting impact on your financial health. Now is certainly a good time to explore if this student loan repayment alternative could be right for you.
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Source: Laurel Road