When you are looking into refinancing a loan, you are looking to obtain another loan to pay off the original loan usually due to the lower interest rate or better terms it has to offer. To refinance government student loans, you can do this through student loan consolidation programs either though the government or through a bank. Refinancing allows the students monthly payments to reduce giving them a more affordable payback on there outstanding loans.
There are several things a student should consider when refinancing their student loans. If you have both private loans and federal loans outstanding, then you will have to consolidate both of these loans differently. Federal loans will usually give you a lower interest rate than a private loan will. Private student loans are loans that look and consider the income level as the student moves on through there education. Thats what makes the refinancing rate a higher level than that of the federal student loans. If you choose to combine both the private loan and the government loan, you would in the end paying for a much higher interest rate on the balance of both the loans you held. It would be a better option if you financed both the loans separately.
Most rates vary a lot by each lender. Making sure you understand your credit score before applying will also be beneficial because most rates are based on your credit history. When you refinance, it is better to have a better credit score but it doesn’t stop you from refinancing if you have a low score. Federal student loans refinancing rates are subject to annual fluctuations since they are subject to change at least once per year.
Qualifying for lenders will vary also. Most lenders though require that all of your loans must not have a status of still funding the student through school. This means you cannot be paying for a student that is still enrolled in their school. Some lenders also require the balance of the loans to meet required minimums before they will refinance your outstanding loans.
Looking for the best payment options can make the life of loans easier on the student. You can reduce your monthly payments by two ways. You can either get an extension on your loan payments for a longer payback period or you can negotiate a lower interest rate. With extending the payback period though you have to understand that you are going to be paying back more interest on you principal. The best option is to get the lower rate so you have less to pay back once you are finished with school.
Refinance government student loans should not be a complicated task. When figuring out how you are going to refinance all your loans, remember that the loan payments cab be reduced by simply asking for a lower rate or extending the payback period of the loan. Once again, with the mentioned options above, getting the lower rate will benefit you more since you will have lower monthly payments.
