Many borrowers see ads and websites that talk about refinancing their student loans, but they never really understand the reasons to refinance.
What are the benefits of refinancing? Why does it even matter?
These are fair questions–after all, why take the time to refinance your student loans if you’re not getting anything out of it?
But there are some really important reasons to consider student loan refinance. From simplifying your life to saving you money, a simple refinance can mean a lot of things. Refinancing can even keep you from defaulting, and you definitely don’t want to default on your loans. Even if you’re not struggling with your current student loans, why not save some money if you can get a better deal?
Here are 5 reasons to refinance your student loans:
1. Lower your monthly payments
Want to pay less each month? Refinancing can help. By either lowering your interest rate or extending your payment period, you can lower the amount that you spend each month on student loans. This can really help if you are struggling to afford your current monthly payments.
2. Get a better interest rate
Lower interest means money saved. Less interest accrues over your loan’s life, which leads ultimately to less money spent paying off your interest and loan total.
With rates near historic lows, many student loan refinance companies are offering sweet deals. Credible boasts that their lenders offer rates as low as 1.93%.
3. Combine your payments
If nothing else, you can save yourself a bunch of hassle and headache by combining your student loans into a single monthly payment. This means you won’t have to worry about separate due dates and multiple account withdrawals each month. Keep in mind that you may lose some benefits attached to your current loans.
4. Pay off your loans faster
Most student loans are on a 10-year term. But, with refinance, you can likely choose a shorter term to pay off your loans more quickly.
Not only does this mean you’ll be free from the burden of paying them sooner, but it will also save you money on interest over the life of your loan. You end up paying more per month, but you do ultimately save money by paying less interest.
5. Save money on interest
If you refinance your student loans over a shorter term, not only will you be done paying them off sooner, but you’ll also save money over the life of the loan. Like, thousands of dollars in some cases. Think of what you could do with an extra $2,000 or $3,000. You want to save as much money as you can, and ideally pay off your student loans faster. However, lenders offer interest rates based on your credit score and history, and other debts you have. A good financial standing can get you a lower interest rate when you refinance. Though this doesn’t mean you shouldn’t refinance if you have a bad financial standing; you could still end up with a lower interest rate regardless.