What is “Savoring” and How Can it Help You Build Wealth?
Student loan refinancing means taking out a new loan at a new interest rate and terms to pay your existing loans. You can usually refinance both federal or private student loans. When you refinance, you are applying for a private loan. If you have private loans, this usually isn’t a big deal, but if you have federal loans you will lose your federal protections.
Whether or not you should refinance your student loans depends entirely on your financial situation and on the type of loans you have. When people refinance their loans with a lower interest rate, they could potentially save thousands of dollars in the long term, especially if they are able to maintain the same length of the loan. Other times people will refinance to make their monthly payments more manageable with their budget.
If you have private student loans at a high interest rate, it may make sense to look into refinancing. You should make sure you are in good financial standing (e.g., credit score, income, debt to income, etc.) and that you are on time with all of your monthly payments. You also want to make sure that when you refinance, you are financially comfortable with your new monthly payments and terms.
If you have federal student loans, the government is currently offering student loan relief to most federal loans including 0% interest and no payments until September 30, 2020. Additionally, you may lose benefits such as eligibility for public service loan forgiveness, income based repayment plans, deferment and forbearance, or loan forgiveness through a repayment program. You should be very cautious of refinancing, as once you lose these benefits and protections, you can’t go back.
It may make sense to refinance, if:
You should compare the interest rates and terms offered by lenders, and choose the best option available. Generally, in order to qualify for the lowest rates available, you should be in good financial standing. Lenders assess borrowers before making a decision based on a number of factors such as credit score, income, debt to income ratio, among others. You can also refinance more than once, so keep checking for better rates.
At Snowball, we make the refinancing process more transparent and ensure you have evaluated the best lenders to get the best rate and terms for you. We also give you the best course of action to tackle your student debt and compare refinancing, optimizing payments, and federal decisions. You can learn more and sign up here.