Knowing how to consolidate and refinance student loans is important if you have borrowed money to finance your college education. Both of these processes can help take the stress out of dealing with your monthly payments and, if done right, refinance can also help lower the cost of your loan considerably. But first, you must make sure that you are eligible.
Eligibility Requirements to Federal Student Loan Consolidation and Refinancing
Eligibility requirements for student loan consolidation: When you consolidate your loans, you are simply combining multiple loans into one loan to make it easier for you to handle the monthly payments. The interest rate of your consolidated loan will be the weighted interest of your individual loans, which means you won’t pay more in accrued interest.
Eligibility requirements for student loan refinancing: When you refinance, you are essentially giving up your old loan and replacing it with a new loan with a completely different rate of interest. This new interest rate could be higher or lower than your existing student loans. Having a strong credit score, being employed, earning a high income, having limited or no debt, and a relatively low debt-to-income ratio can make you eligible for a lower rate of interest on your refinanced loan.
Should You Consolidate or Refinance?
While consolidation and refinancing can help many students manage their loans, or even save money on them, it’s not the right move for everyone. Ideally, you should wait until you have a good credit score, but not so long that you’re nearing the end of your loan’s lifespan. If you’re struggling to make or keep track of payments, want to shorten the life of your loan, or change your loan terms, then this may be right for you.
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