If you will qualify for a lower interest rate, it may be better to refinance your loans sooner and not wait to refinance.
Reducing your interest rate will save you money on your student loans. The savings start immediately.
For example, if you are able to refinance a $30,000 student loan from 6% to 3%, you will reduce the monthly loan payment from $333.06 to $289.68 a month, saving $43.38 a month and $5,206 over the term of the loan.
Sometimes a lower interest rate involves a shorter repayment term. Suppose that the 3% loan involves a 7-year repayment term. The shorter repayment term increases the monthly payment to $396.40 a month. The total interest savings, however, also increases, to $6,670 over the life of the loan. That’s almost $1,500 in extra savings.
If interest rates drop again after you refinance, nothing stops you from refinancing again. There are no prepayment penalties on student loans and lenders do not charge fees for refinancing student loans.
Refinancing a student loan could possibly lower your interest, saving you money. Consider the pros and cons of student loan refinance before you decide. Refinancing federal loans into a private loan means a loss of all of the federal loan benefits – income-driven repayment options, potential for loan forgiveness, generous deferment period if you lose your job or have an economic hardship, possibly loans that are subsidized, and potential widespread forgiveness.
Credible allows you to compare rates from 10 lenders without impacting your credit for free. Splash Financial is a student loan refinance marketplace that matches you with a lender with a low interest rate.
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