The easiest way to keep more money in your bank account is to lower your bills. Just because it’s obvious doesn’t make it easy. Sure, trimming your cell phone bill is as simple as downgrading data plans. But reducing more massive bills, like loan payments, might only seem possible for your federal student loans. Private student loan lenders are unlikely to mirror the U.S. Department of Education’s action of suspending federal student loan payments and setting interest rates to 0% through December 31, 2020. Many private lenders offer another way to permanently reduce your monthly payments and save money long-term: refinancing.
When you refinance your private student loans, you use a new loan to pay off your current loans with a lower interest rate, extend the repayment terms or both. Here are four reasons to refinance your private student loans today!
Reason #1: Interest rates have reached record lows.
With rates expected to stay low to help boost economic recovery, now is the time to shop for a better deal for your private student loans. Refinancing your current fixed or variable interest rate loans into one new loan could keep more money in your budget. It’s possible to reduce your interest rate to less than 3% APR.
Reason #2: Economic uncertainty is likely to continue into 2021.
If you’re struggling to make your private student loan payment, refinancing with extended terms might be the best option. A longer-term should lower your monthly payments, even with a modest dip in interest rates. Couple low single-digit rates with a maximum repayment term to decrease expenses as much as possible.
No one knows precisely when the economy will rebound. Some experts predict a recovery in 2021, but does that mean January 2021 or December 2021? Even if your job hasn’t been affected by the pandemic, there are no guarantees. Prepare your finances for the worst, and you’ll be in a better position either way.
Reason #3: Your financial health may have improved since you graduated from college.
Your loan approval is based on several factors, including credit history and income. If it’s been at least a year since college graduation and you’ve made on-time payments on your private student loans and other debts, you might be in for a welcome surprise. An improved credit score could help you secure the lowest rates available.
The lender may also review your income and other lending criteria. If you have more income or less debt than when you first qualified for the loan, you might be eligible to refinance your private student loans.
An improved credit score with no change in income might still open the doors to lower payments.
Reason #4: You have a cosigner who wants to be released from your loans.
Some college students are unable to access private student loan funds without a creditworthy cosigner. The cosigner helps the student qualify for the loan based on the lender’s income and credit requirements. One of the most common questions cosigners ask is, “Do I have to stay attached to the loan until it’s paid in full?” Fortunately, the answer is “No.”
A cosigner may be released from repayment responsibilities if the primary borrower qualifies for a refinance on their own. If your financial health has improved, it’s possible to secure a lower interest rate and release your cosigner of any further financial obligations.
The decision to refinance your private student loans should be based on your specific financial situation and goals. While qualifying for refinancing isn’t guaranteed, finding out if you could save money is risk-free. Provide LendKey with a few details to quickly check your rate without affecting your credit score.