If I was a betting man–and I am, given the right bet–I’d say that the odds are pretty good that right now is the time for you to start the process of refinancing your student loans.
How could I possibly know that without knowing anything about your financial situation?
Because there are many objective reasons why now is a good time to look into refinancing–regardless of your specific loan situation.
1. Super low interest rates
As with most interest rates, student loan rates are at nearly all-time lows right now.
Companies like Credible and LendKey advertise some of the lowest rates on the market, and unless your loans happened to be originated within a few certain year windows over the last 20 years, these rates are almost certainly lower than what you’re currently paying.
Even just knocking off 1% interest on your loan balance could save you thousands over the life of your loan–not to mention also lowering your monthly payments in the process.
2. New lenders offering better terms, rates, and more flexible underwriting
A few years ago, your options when it came to refinancing your student loans were extremely limited. Your options were basically limited to one of the big corporate lenders, or possibly find a local bank that was willing to take on your debt. Unfortunately, not everyone would do so and the institutions that were offering student loans were not exactly known as being the best–or easiest–companies in the world to deal with.
These days, as with most industries, technology has allowed a number of new companies to enter the student loan market and really shake things up. Newer companies are offering innovative solutions to simplifying the student loan refinance process, streamlining the steps to reduce overhead (and offer better rates and terms), and even offering innovative credit-checking solutions that differ from traditional credit checks.
All of this equates to better deals available to borrowers from a number of companies in the space.
A few standouts:
- Credible offers borrowers the ability to get rate estimates from multiple lenders in just a few minutes.
- LendKey connects you to local and regional not-for-profit credit unions and community banks that offer student loan refinancing, with available rates and terms in a few minutes as well.
3. You’re not getting any credit for your credit
One of the strangest things about federal student loans is that anyone is eligible–regardless of credit history, income, or other factors that would normally go into a lending decision.
This means that everyone who borrowers money within a certain time period gets the same exact interest rate. They’re set once a year and remain the same over the life of your loan unless you refinance.
So, there’s a pretty good chance that you’re paying an unnecessarily high interest rate, in part because your own credit history isn’t being used as a basis for your rate.
4. Every day you don’t refinance is costing you money
Think about this: If you could lower your interest rate by 1 or 2 percent by refinancing, then every single day that you wait to refinance costs you at least a couple of bucks in lost interest charges–which you’ll never get back.
Although the prospects of refinancing can seem a bit scary or overwhelming, don’t let that hold you back. Even if you could only save a little bit by refinancing, it’s essentially free money for just doing a little work and research. Even if refinancing translates to saving just $5 a day, that’s over $1,800 a year in savings.