If you’ve managed to build a solid credit score, refinancing your existing student loans may be an excellent way to reduce your overall debt. Lenders often offer loans with lower interest rates to borrowers with excellent credit. However, the one major drawback to refinancing your student loans is that you will lose out on the protections that those loans offer. This may or may not matter to you depending on your long term plans.
Before you take the decision to refinance your student loans and lose out on the potential benefits they offer, you must explore all other options available to you. Asking your current loan provider these 8 questions will help you make a more informed decision:
8 Questions to Ask Your Lender Before You Refinance Your Student Loans:
- What types of loans do I currently have and what are the interest rates on each of these loans?
- What protections do each of these loans offer me?
- What happens if I miss a payment?
- What are my options if I lose my job?
- Which repayment plans are available if I want to lower my monthly payments?
- How do income-based repayment plans work?
- How will my monthly payments be calculated if I choose an income based repayment plan?
- If I choose an income based repayment plan, how much extra will I end up paying over the life of my loan?
The only way to decide whether or not you should go ahead and refinance your student loans is by finding out what your other options are and comparing the pros and cons of those options against refinancing.