Not everyone qualifies for student loan refinance. You may have to have a college degree, a good credit and a good and stable income that allows you to afford your expenses and pay your debts without straining your finances. If you meet these conditions, the sooner you refinance your student loan, the better for you. As soon as you have a good credit score and you are enjoying a stable income, student loan refinance may help you get a lower rate, saving you money.
You should primarily consider your student loan refinance in the following situations:
When the saving makes a significant difference
It is never the right time—do not postpone refinancing your student loan until the day you will have the perfect credit score. It will be right to refinance provided that you can qualify for better rates than your current rates. Bonus tip: some lenders provide student loan refinance bonuses that would make you save much more money.
When you have private student loans
You may not have much to lose if you refinance your private student loan as they are not eligible for federal loan programs.
When you student loans have significantly high variable rates
It is hard to predict payments for loans with variable rates. In fact, even low variable rate loans may become much more expensive during repayment. Do not wait until the money rise—consider refinancing such student loans to ensure that you lock in a fixed rate.
When the rate environment is strong
Depending on economic factors, such as the federal reserve hiking and cutting rates, fixed and variable private loan refinance rates can significantly be altered. You should take advantage to refinance your student loans when the rates are pushed down.
When your finances are solid
Refinancing may not make much sense immediately when you graduate from school. However, you should definitely consider refinancing your student loan you’re your finances have significantly improved.
In case you had refinanced previously and you have just cleared some credit card debt or gotten a salary raise, you can now get better rates. You can refinance your student loan as often as you can.
When you will save significant amount of money
You do not have to push yourself to refinance the student loan if you will not be paying less interest.
In contrast, you cannot or should not refinance your student loan if:
You are already serving federal loans
When you have federal loans already, you may end up having a significant drop in your income if you refinance your student loans. If your income is may be affected by other factors such as the coronavirus, do not refinance your student loans. You will not enjoy the federal loan relief options and government programs such as income-driven repayment.
You are pursuing student loan forgiveness.
By refinancing your student loans, you are not eligible for the federal loan programs such as Teacher Loan Forgiveness and Public Service Loan Forgiveness.
You declared bankruptcy recently
It is possible that you can refinance your student loan even when you have declared bankruptcy, but it is hard to do so. Most lenders require between 4 and 10 years to pass after you have declared your bankruptcy
You have defaulted on a student loan recently
Your default history is definitely a red flag for the lenders. The default is cleared from your credit report after 7 years, which allows you again to qualify for refinancing, provided that you meet the requirements, including credit and income
You will take more time to repay your loans
If you refinance to a low monthly payment, you will attract more interest as you will have a longer loan repayment time.
At times, it makes sense to refinance your student loan as soon as you meet the requirements. However, multiple factors can make you reconsider your decision to refinance. When you qualify for student loan refinance, check the benefits that you are likely to enjoy rather than refinancing blindly. For more information about student loan refinance, do not hesitate to contact us. Our team is always willing, ready and happy to assist.