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Student loan refinancing means that a private lender pays off the student’s loan and creates a new loan with the new terms. To refinance the student loans, a student should have a good credit score and a stable source of income. The students can refinance their federal and private loans.
Benefits of Student loan refinancing
It is alway advised not to refinance the private loans because of government forbearance. But if you have a private student loan then you should go for it as soon as you are eligible. SOme of the benefits of student loan refinancing are:
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Interest is less over the loan term:
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It helps in paying off the student loan faster
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The monthly payments of student loan gets decreased
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Because of the stable income of the student, the cosigner can be released.
When should you Refinance your Student loans
The students should apply for refinancing as soon they are eligible. Refinancing lowers the interest rate which maximizes the student’s potential savings. The students should take following things while considering refinancing the loans:
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Interest Rate: Look for the interest rate provided by different lenders.
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Credit Score: The students should have a good credit score so that they get reduced interest rates.
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Term Duration: This should be considered very carefully, because even if you get a loan with a lower rate and longer term, the monthly payment will decrease but eventually the accrued payments will increase.
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Remaining Debt: If a student has just come out of college, then refinancing is a good step but if you have paid most of the loan amount then refinancing is a bad option.
