Many people apply for student loans as a way to help them pay for expensive study fees. Student loans often make it easier for individuals to afford to pay for tertiary education costs, for study materials and even accommodation. The challenge for many people may become paying the loan off, especially when interest rates have spiked.
When this happens, many people may choose to refinance student loans.
Refinancing occurs when a business or person revises a payment schedule for repaying debt. The old loan is paid off and replaced with a new loan offering different terms. It may involve paying a penalty or fee.
The common goal when one wants to refinance is to pay less interest over the life of the loan. Borrowers may also want to change the duration of the loan.
Typically, a refinanced loan will have a lower interest rate.
When you consider refinancing, you’ll want to shorten the term of your loan.
How to refinance student loans
Refinancing student loans can be a great way to reduce your payments and to decrease the total cost of your credit.
It’s important to keep in mind that student loan lenders will focus on your debt-to-income ratio when you apply for refinancing. Your credit score will also be evaluated. Even if you don’t have stellar credit, having a solid income relative to your debt can help you get a good refinance offer.
When you refinance student loans you need to be able to prove that you have sufficient income to make repayments. You could also get help from a qualified co-signer who has a strong credit profile.
If you are approved, the lender pays your student loan off and issues you a new, private loan.
Choosing a shorter loan term will save you the most.