To many graduates, refinancing offers a huge benefit in better handling their student loans. It is the process of getting a brand new loan to pay off your original student loans. Working with student loan refinance companies gives graduates the right foundation for starting their life outside of college. Additionally, the new refinance loan usually has more advantageous terms, which enables you to have some breathing room with regards to your monthly budget. Let us look at the top 5 reasons to refinance or consolidate your student loans.
1. Reduce Interest Rates
In most cases, college graduates have very high interest rates on their undergraduate federal loans. The rates could even be higher if you took your loan through a private lender. The disadvantage of these high-interest rates is that they are quite prohibitive and prevent you from making any progress to repay your debt due to the high amount you must pay in interest. Refinancing helps you lower your interest rates from 7% to around 3%, which accelerates how fast you pay off your loans.
2. Reduce Monthly Payments
Refinancing allows you to extend your repayment period from 10 years to between 20 and 25 years. Using this one of the top 5 reasons to refinance or consolidate your student loans, you can significantly cut down your monthly payments. The cost savings can then be transferred to your retirement plan, enabling you to grow your funds quickly by taking advantage of compound interest.
3. Eliminate Cosigners
One of the main steps to getting approved for student loans is to have a cosigner, usually a parent or guardian. By choosing to refinance your student loan, you can get the freedom of eliminating your cosigner’s responsibility.
4. Fixed Interest Rate
Among the top 5 reasons to refinance or consolidate your student loans is to get one fixed interest rate. Using this approach, you can set a better budget of your monthly payments without the worry of constantly changing amounts, as is the norm with variable interest rates.
5. One Convenient Payment
People with multiple private and federal student loans usually find it difficult to manage the different loans. By refinancing, you get one loan and one comfortable amount every month, thus making your life simple.
With these reasons to refinance or consolidate your student loans, you can clearly see that it is going to be a fruitful decision. By managing your student debt effectively, you can have a more secure future.