Not all of us are lucky to be given favorable loan terms the first time around, and for some of us, our current level of income might not make taking that ideal loan a possibility.
That means there are thousands of student loans out there that could be refinanced to alleviate the financial burden placed on the debtor. Refinancing is just a fancy word for changing the specifics of your loan, like what the minimum payments are and what the interest rates might be. You might be thinking about refinancing one of your existing student loans. That’s great because financial freedom is all about structuring your assets and liabilities properly. But then, before you pull the trigger, there are a few things you should go over first:
What are my goals?
To avoid switching one bad loan to another, know exactly what benefits you’re looking for when refinancing student loans. Does a lower interest rate matter more, or a lower monthly payment? Maybe there’s a particular deadline by which you’d like to have the loan totally paid off and need terms more amenable to that scenario. Whatever the case, know exactly what you’re looking for as there might be a negotiation period involved when refinancing.
How easy will these people be to work with?
Many times, you can have your loan refinanced by a group that’s very far removed from your initial creditor. This group will have an entirely different system of customer service and overall management. Choose carefully. If you pick a small financial institution, they might not have the resources you’re used to with a larger institution, and some other creditors might not be very well-versed in loan refinancing. Carefully consider how easy this new creditor is to work with and how modern their systems are. You wouldn’t want to miss a payment because their system is too convoluted, would you?
What’s my credit like?
How favorable your new loans terms are will be directly related to how high (or low) your credit score is. If your credit score has taken a large tumble since the initial loan, there’s a good chance you won’t even be able to get your current terms again, let alone better ones. But then, if your credit has improved by leaps and bounds, there’s a good chance you could secure a loan with much lower interest rates, so you end up paying less overall.
Will I require federal assistance?
Many people have loans for school taken from the federal government. If you refinance one of these loans, you lose all of your rights to take advantage of alternative federal payment plans or any student loan forgiveness programs. When the loan is refinanced, your debt is essentially bought by the refinancing company from the original lender (the government), making it a new loan entirely.
It seems that student debt is a normal part of life for those who want secondary education, but the burden caused by student loan debt doesn’t have to be normal. Take a sober look at your finances and current position in life. If your degree has enabled you to earn much more money per month, chances are you can shave months, if not years, off of your total loan repayment time.