You may be able to save money if you refinance student loans, but you need to make sure doing so is the best choice. Considering these factors can help you decide. For many borrowers with student debt, now is a great time to refinance student loans. Refinancing involves paying off existing loans with a new loan. Since interest rates are currently near record lows, many borrowers could qualify for a competitive refinance loan and potentially lower interest rate. WANT TO REFINANCE GRADUATE STUDENT LOANS? THIS IS HOW TO DO IT But refinancing isn't the right choice for everyone. There are certainly pros and cons to refinancing student loans, and this guide will explain four key factors to consider to help you decide. You may also want to use an online tool like Credible to compare student loan refinancing rates from multiple lenders at once to see if you can qualify for a new loan at a lower rate. What is your current interest rate? Whether you want to refinance undergraduate loans or refinance graduate school loans, you need to make sure that doing so makes financial sense. If you can't save on the cost of interest, refinancing could make your loan more expensive and moving forward likely wouldn't be the best move. HOW CAN I GET HELP PAYING BACK STUDENT LOANS? Comparing your current interest rate to the rate you could qualify for on a student loan refinance loan is the best way to decide whether to move forward. The good news is, Credible data shows that refinance rates for well-qualified borrowers have repeatedly hit record lows this year. In fact, during the week of May 3, 2021, borrowers with credit scores of 720 or higher who selected a lender using the Credible marketplace saw an average interest rate of 3.60% on a 10-year fixed rate refinance loan, while borrowers choosing a five-year loan saw average rates of 3.19%. These low rates mean most borrowers can save considerably on private loans by refinancing. You can use an online tool like Credible to view a rates table that compares rates from multiple lenders at once to see if that's the case for you. How stable are your finances? If you have federal student loans, you have to consider your financial situation to assess the likelihood you'll need to take advantage of the unique borrower benefits federal loans provide. CAN'T AFFORD STUDENT LOAN PAYMENTS? TRY THESE 4 THINGS You have more repayment options if you're facing unaffordable student loan payments with federal loans, including flexible policies for deferment and forbearance as well as income-driven payment options. You may also be able to qualify for a student loan forgiveness program. You have to give up all of these perks if you refinance. By making certain you understand student loan definitions and are aware of these benefits, you can decide if your financial situation might ever lead you to take advantage of them. If your income is too high to benefit from income-driven plans and you're confident you won't ever need the other benefits, you may decide to refinance if you can reduce your rate. For most people, though, refinancing federal loans isn't the best move. If you have private student loans, there's less to consider. You won't be giving up borrower benefits – you'll simply be trading one private loan for another. What is the reason for the refinance? It's important to outline your goals for refinancing before you move forward with applying for a student loan refinance loan. That way, you can make sure the new loan accomplishes your objectives. For many borrowers, the goal is to reduce total costs as much as possible when paying off your loan. If that's your aim, lowering your interest rate can help accomplish it. Some borrowers are also focused on lowering their monthly payment. A longer repayment term can make that happen. STUDENT LOAN DEFINITIONS: 14 TERMS TO KNOW BEFORE REPAYING DEBT Of course, if you stretch out the time to pay your loan, each monthly payment is lower but total costs go up because you pay more interest over time. That's why it pays to find the right loan term that makes the most personal finance sense for you. You can use an online student loan refinance calculator to get a sense of what your new monthly payments could be and decide what refinance loan is best for you. What does my credit profile look like? Refinance lenders consider your credit score, income, other outstanding debt and other financial credentials to assess the likelihood you'll be able to pay back your loan. The stronger your credentials, the more likely it is you can refinance at a competitive rate. On the other hand, if your income or credit score are low, you may not be able to refinance without a cosigner. If you have solid credit, a good reason to refinance, and can lower your rate, it may be worth it to consider refinancing in order to make student loan repayment easier. When you are ready to refinance, use an online tool like Credible to get pre-qualified student loan refinancing rates and find the loan that's right for you. Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column. Source: Read Full Article