How To Refinance Student Loans
The ultimate purpose of the need to refinance student loans is to reduce the monthly loan repayment
. There are a few ways to accomplish this and most financial institutions offer student loan consolidation facilities.
There are several factors to take into account when you decide to refinance student loans. Firstly, there are federal student loans which carry a lower interest rate than private loans, because of the way they are structured. Private loans are personal loans which are offered on the premise that you will one day earn a lot of money because of the education that the loan is paying for.
You can either choose to reduce your monthly payment by opting for a lower interest rate loan, or you can extend the term of the loan. The better option is to opt for the lower interest rate because this will reduce the total amount that you ultimately repay when you refinance student loans.
Extension of the loan period may be an effective choice if the repayment is becoming unmanageable. When you extend the period, it makes the monthly payment lower. However, application for an extended term normally costs more as the applicable interest rates will be higher, so using this option will increase the end value of the loan.
Firstly, do a credit check and if there is a problem with your credit rating, you may want to improve it as the interest rate you get will be based on your credit score. Do thorough research on interest rates currently being offered by several lenders. Loan facilities base interest rate levels on your credit rating, however, there are financial institutions that will offer special rates for student loans.
It is important to check whether the interest rate will be fixed or variable as this will seriously affect your future payments. It is much too unpredictable to go for variable rates as it will affect the amount of the repayment and is often dependent on the current economic situation.
by: Rheza Sulaiman.
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