In an ideal world, you’d graduate from college and be able to get a great job with a high salary right away. But as any recent grad will tell you, life doesn’t always work out that way. Sometimes you need to finance your education using student loans—and sometimes, those loans can be pretty expensive. If this is your situation, here’s what you need to know about refinancing your student debt to save money on interest rates:
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When comparing student loan refinance rates, it’s important to note that private lenders are not required to offer income-driven repayment plans or student loan forgiveness programs. As such, you may want to consider a federal student loan refinance option if you need these benefits. According to Lantern by SoFi experts, “Many factors influence your interest rates and credit scores.”
While you may have a good idea of how much you can afford to pay each month, it’s important to be aware of all the fees associated with refinancing. These include:
- Fees for refinancing. Some fees are associated with refinancing your student loan(s), including application fees and closing costs. The amount varies based on the lender but can often be as high as 3% of your total loan balance or more.
- Fees for paying off your loans early or making payments in advance (e.g., 6 months ahead). This should also be clearly disclosed on any promotional materials you receive from lenders before applying for refinance rates.
Interest rates are the most important factor when refinancing a student loan. The lower your interest rate, the less you’ll pay over time. If you have a variable-rate loan, it means that your rate changes periodically based on market conditions and other factors; if you have fixed-rate loans, your interest rate is locked in for the life of your loan (or at least until its maturity date).
It’s important to note that not all lenders offer both types of loans—some only work with variable rates while others only work with fixed ones—so make sure you know what kind of plan best suits your needs before applying anywhere.
You have three options for paying off your student loan:
- Lump-sum payment. You can pay the entire outstanding balance at any time.
- Monthly payments. If you cannot pay off your loan in one lump sum, you can choose to make monthly payments according to what works best for your budget and cash flow needs (e.g., every month for ten years or every two months for 15 years).
- Interest only or interest plus principal payments (in some cases). When choosing this option, you will not pay off the full amount of principal until after graduation or when the fixed repayment period ends—whichever comes first. At that point, all remaining principal will be added onto any unpaid interest charges accumulated over time into one final payment.
It’s important to know that refinancing your student loan will not affect your credit score. To find the best student loan refinance rates, it’s wise to shop around and compare online lenders. You can also call up lenders and ask for their rates and fees. The borrower benefits each lender offers to differ, so make sure you choose wisely based on what matters most to you: lower interest rate, no origination fee, better customer service, etc.
If you’re a student looking for a loan, the best student loan refinance rates could help you get out of debt sooner.