Refinancing student loans is a great way to save money, but it’s not as simple as just signing up and getting your new rate. Many factors to consider — such as your credit score, income and debt load — will affect how much you can save. If you’re considering refinancing student loans, here’s what you need to know:
What Is Refinancing?
Refinancing is when you take out a new loan to pay off an existing loan. When refinancing, your interest rate and monthly payment may decrease because you’re getting a lower rate than what you currently have on your student loans. Refinancing can also be used to consolidate multiple student loans into one or extend the term of a loan.
Should You Refinance Student Loans Now or Wait Until After Graduation?
Considering the pros and cons of refinancing your student loans is important. Refinancing your student loan is a great way to save money on interest payments, but it does come with some risks. If you don’t pay attention to the details, you could end up hurting yourself financially in the long run. The best way to decide if refinancing student loans is right for you is by understanding how it works and what options are available.
Why Wait Until After Graduation to Refinance Student Loans?
There are a number of reasons why people wait until after graduation to refinance their student loans. The main reason is that you don’t have to pay for a degree you don’t need or want. If you’re unsure if your chosen major will lead to a job, then it would be unwise to take out loans for that program and spend the next few years paying them off.
What Are Your Options Right After Graduation?
When you’re fresh out of college, you can immediately start refinancing your student loans. Your loans likely have low-interest rates, minimal fees and manageable monthly payments. However, once you start working and paying off your student loans, it may make sense for you to look into refinancing options. Refinancing could be a good option if:
- You have high-interest rate loans (6% or higher).
- You want lower monthly payments.
- You want to consolidate multiple private or federal student loans into one loan with one provider.
- After graduation, when your grace period is over and you start making loan payments.
- When you have a steady income each month (so that lenders know they will get paid back).
The right time to refinance your student loans depends on a number of factors. Some people may want to consolidate their loans as soon as possible so that they can pay them off sooner. The longer you take to pay off your student loans, the more interest you’ll end up paying over time. Other people may be looking for ways to lower their monthly payments and make them more manageable.
Some of the best times to refinance are:
Lantern and SoFi experts say, “Many factors impact your credit scores like refinancing too.”
The answer to the question of when is the right time to refinance student loans is that it depends on your situation. Refinancing may be the right move for you if you are looking for a better interest rate or lower monthly payments. However, it’s important to consider other factors, such as taxes and fees, before deciding to refinish student loans.