Refinance Your Student Loans

There will be a combination of variable rate and fixed rate loan opportunities available. In almost every circumstance, the fixed rate loans will have a higher interest rate than the variable rate loans.

The reason is that the fixed rate loans never change over the life of the loan – you get to know your payment and know what to expect.

On the other hand, variable rate loans will vary over time-based on market interest rates.

Most loans have caps on how much they can rise and how fast, but a common variation is no more than 0.25% change per month, with a total cap of 8%. As interest rates rise (or fall), your loan interest rate will also change.

This will change your monthly payments – meaning they could rise or even exceed what the fixed rate loan option would charge you.

However, you are starting at a lower interest rate up front. If you plan to pay off the student loan in a relatively short period of time (say, less than 2 years), a variable rate loan can make a lot of sense because you can save in interest.

If you plan on taking the full length of the loan to pay it off, a fixed rate loan might make more sense for you – especially since interest rates will likely rise in the future.

The choice, and risk, is yours. The bank rewards you for taking the risk by giving you a lower interest rate, but that rate could rise.

Different Lengths Of TimeWhen shopping for a student loan, you’ll see a variety of different lengths for the term of the loan.

Typically you’ll see as short as 3 years and as long as 25 years. However, some credit unions offer loans as short as 1 year and as long as 30 years.

To get the best interest rates on a loan, you typically have to get a short term on the loan as well. The longer the term, the higher the interest rate will be.

The combination of the term of the loan (length) and the interest rate is what will make your payment amount.

The longer the loan, the more expensive and more interest you’ll pay, so always be looking to shorten the loan term.

Benefits And PerksMany lenders these days offer a variety of benefits and perks to differentiate themselves. Some of these benefits matter, some don’t.

For example, some of the benefits that could be important include having no prepayment penalty. If you plan on paying back your loan early, you don’t want to be penalized for doing so.

Also, if you are going to need a cosigner for your loans, you’ll probably want to get what’s known as cosigner release. This means that after a certain amount of on-time payments, the cosigner can be dropped from the loan.

The best cosigner release plans are usually 24 months.

Another bonus that you should take advantage of is interest rate reduction opportunities. Many banks offer a reduction in interest rate by signing up for automatic debit payments.

This simple trick can reduce your interest by 0.25% at most lenders. Some banks even offer another 0.25% reduction for having a checking or savings account at the bank.

Those savings can add up significantly over time!

Some perks that don’t really matter for most people include job coaching, connected bank accounts, and free swag. Always keep in mind what’s important to you financially and go back to what we said above:

There are a lot of places to refinance your student loans! From online lenders, to banks and credit unions, the options are many.

But that can make it really hard to shop around for different loans. This list of places to refinance is a great starting point, but don’t forget to check you local bank and credit union as well.

Credit unions can be good places to consider, especially if you have a unique situation that requires special underwriting.

Also, many places offer bonuses to refinance with them.

Never choose a cash bonus over a lower interest rate, but if you have two or three firms with the same rate, see if any of them will throw in a cash bonus to win your business.

You would be surprised how competitive some firms will be to get your student loan refinancing business.

The great thing about shopping around for a student loan is that you can do it in minutes.

And the choices you make could save you thousands. So, take a few hours and compare a bunch of different places – the time spent is well worth it.T

In the perfect world, we would blink and our student loans would disappear.

But in the real world, it’s on us to pay them back – even it takes a decade or longer. Sadly, it usually takes over 20 years for the average consumer to pay off their student loans.

Fortunately, plenty of businesses have stepped in to offer new products that can make paying off your loans easier.

But before you take the plunge, you should perform due diligence to make sure refinancing actually makes sense.

There are a lot of options to consider, but refinancing can save you money if done right. Make sure that student loan refinancing makes sense before you dive in.

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