If you’re having a tough time with your student loans, you’re not alone. With the average borrower’s balance running just shy of $40,000, any help paying down this debt is welcome to most consumers. Refinancing student loans is an option that can greatly reduce the burden of debt. These are a few tips for refinancing student loans.
Learn What It Really Means to Refinance Student Loans
The first step in doing just about everything in life is to gather as much information as you need in order to make an educated decision. Most financial professionals will agree that a student loan refinance can effectively be used to improve your financial outcomes. But just because people tell you something is a good idea doesn’t automatically mean you should do it.
So, for those who don’t have a firm understanding, what is refinancing? This is a tool you can use with many kinds of debt, but has a few nuances, which we’ll explore later, when done with student loans. The most basic definition of refinancing student loans is originating a new loan that will pay off and replace your current one.
To some, this might seem like a counterproductive move. Why would you just take out more debt in order to pay what you owe. On its face, this might seem like a risky financial move.
The reality, however, is actually the total opposite. Refinancing student loans allows you to mitigate risk associated with your debt by making your loans more affordable. When you refinance, you’re able to do things like lower your interest rate or change the repayment term on your loan. Accomplishing these feats can put you on drastically better fiscal footing.
Once you know the general idea behind refinancing student loans, it’s time to find the best lending options for your specific needs. Fortunately, there are ways for borrowers to do this.
Find the Best Deal on a Student Loan Refinance
In the past, borrowers had to put in some legwork in order to find the best deal on a student loan refinance. This has all changed thanks to advances in how borrowers can be matched with the optimal lender for their refinance.
There are a few companies that are facilitating a more frictionless relationship between borrowers and lenders when it comes to student loans. Juno is one of the organizations at the forefront of this effort.
Instead of being a lender themselves, Juno simply helps consumers find the best possible student loan deals out there. They do this by taking bids from a massive pool of potential lending partners. Then, the most attractive deals from this bunch are selected.
Only these top offers are eventually presented to Juno members, who will then have access to the best student loan refinancing deals out there. Juno is so confident they’ve built an effective process, they’ll actually match any loan you can find that beats their partners’ offerings. Investigating this option can save you a ton of time—and money—when refinancing student loans.
Do You Know if Refinancing Makes Sense for You?
Before you go ahead with refinancing your student loans, you need to determine that this is actually a wise financial decision on your part. Of course, you already know some of the benefits of refinancing. But there are some more intricate considerations that need to be addressed before making a final decision.
The most critical issue has to do with the fact that you can only refinance to a private loan. If you have federal student loans, you might want to pump the brakes before going ahead with this. Federal student loans come with some unique perks, such as income-driven repayment plans and the potential for loan forbearance and forgiveness. Individuals who think they’ll need to take advantage of these at some point should think long and hard before refinancing, as those benefits will go away.
Furthermore, since refinancing must be done through a private lender, you’ll need to prove you have decent credit and a consistent income. Those who are unable to do this will need to apply for a refinance with a co-signer. While this is manageable for some, it changes the viability of refinancing for others.