9 Questions to Ask Before Refinancing Your Student Loans
Choosing to refinance your student loans is a big decision. You need to make sure that you are going into the process with all of the information necessary, and that you are making an informed decision.
Refinancing can be beneficial in some cases, but there are many factors at play before refinancing can be recommended. In this blog post, we will cover 10 questions that should be asked before refinancing your student loans!
What is student loan refinancing?
Refinancing is an option that can help you get a lower interest rate on your student loans. In some cases, refinancing may even mean getting rid of your student loans altogether! The best way to understand refinancing is to discuss the terms with a professional loan refinancer.
Do I have a solid understanding of my student loans? Your student loans and your financial situation are unique and can have several different implications when it comes to refinancing.
If you don’t understand your student loans and how they will affect your budget, then refinancing might not be the best option for you. Before refinancing your student loans, you need to understand how they will affect your budget and your debt level.
What are my student loan options?
Many of the student loans that you have outstanding will be offered through the government-sponsored education loan program. Before refinancing, you should contact your loan servicer to see if you qualify for refinancing through the government-sponsored loan program.
This program will allow you to refinance your student loans at a better interest rate and you will also be required to make interest-only payments. Will refinancing save me money? Refinancing your student loans to a lower interest rate can save you money in the long run.
However, it is not always the right decision. If you are contemplating refinancing your student loans, you should take a hard look at your current financial situation and see if you have the ability to repay the loans in the next few years.
What are the benefits of refinancing?
How much student loan debt do I have? What income level will I be moving up to? Can I still keep my current loan repayment plan? What are my future tax obligations and do I have an anticipated tax refund? Do I have a relative or friend that can co-sign on my student loans? What is the rate and APR of my current loan?
Do I have refinancing to pay off my existing student loans faster? What are my student loan interest rates and what changes are there? Is my loan secured or unsecured? What am I getting in return? Can I refinance my student loans? If you answered yes to all of the questions that you were given in step one of this process, you can feel more comfortable refinancing your student loans.
What are the drawbacks?
Make sure that you consider the drawbacks of refinancing, as that is an important consideration to consider. The greatest drawback of refinancing is that your interest rate can increase in the future. Your interest rate can increase as a result of refinancing by up to 3 percentage points over the life of the loan.
You can usually refinance one or two loans at a time, although refinancing more than two at a time can increase your interest rate and potentially make refinancing unattractive.
You should consider refinancing after a certain period of time to ensure that your rates are in line with your current interest rates or to avoid an unintended increase in your interest rate. Do I need more income? Make sure that you have enough income to be able to make the repayments.
How do I compare student loans?
Before refinancing your student loans, you need to understand how your loan compares to others in the same or similar credit category. If you are looking to refinance and you are looking at credit card debt, you need to compare interest rates and APRs.
Student loans typically do not have credit scores, so you are essentially comparing apples to oranges. Your student loan situation could differ from a credit card, but if you want to compare the two, it is best to compare similar loan terms. How long do I have to make payments? If you choose to refinance a student loan, you will most likely have a longer time frame to make your payments.
Should I refinance my private loans?
Private loans are typically private student loans that you took out before you were eligible to borrow federal student loans. Private loans come with an added cost – depending on the type of loan you take out, private loans can have higher interest rates.
Private loans are typically more difficult to consolidate into your federal student loans, as they often require more documentation than federal student loans. Private loans are also typically less easy to discharge in bankruptcy than federal student loans.
For this reason, some borrowers will refinance their private loans with the intention of using the new loan proceeds to consolidate and pay down their federal student loans, and then to repay the old private loan balances.
What are the eligibility requirements for refinancing?
There are several requirements for refinancing your student loans, and each loan type has its own set of requirements. Student Loans: You will need to meet the following criteria in order to be eligible for refinancing: Potentially lower payments Benefits from a lower interest rate What kind of income levels are being used? In order to qualify for refinancing, your income must be below a certain level.
This is determined by one of the two main types of income. The first one is your income for the entire year, and the second one is your actual monthly income for the year. This varies based on what is included in your FAFSA, the income limits of the various loan types, and your private student loans.
What are my options if I have a co-signer?
This is a big one. There are several ways that co-signers are able to help make your payments more manageable. If your co-signer is your parent, you may be able to afford the repayments that your parent needs in order to keep them from defaulting on their student loan.
However, if your co-signer is someone other than your parent, you may not be able to afford your repayments and will be forced to leave your student loan in default.
What are my options if I want to refinance my loans but my co-signer doesn’t want to? There are two ways that you can refinance your student loans, and neither will work with a co-signer who doesn’t want to co-sign. The first way is called co-signer release, and it is for borrowers that have co-signed for the first time.
What is an HECM?
First and foremost, it is important to know what kind of loan refinancing you are looking at! There are two main types of loans: refinance and consolidation. The HECM (Home Equity Conversion Mortgage) is a type of refinancing loan.
It allows you to convert your HECM to a conventional loan. What are the advantages of refinancing? The biggest benefit of refinancing your HECM is that you will no longer be held responsible for paying for the monthly mortgage insurance on your loan. However, you will be giving up the asset of the loan (i.e., your home).
A second benefit is that you will save on interest and tax. You will also have access to a repayment period that is shorter than the current loan terms. What are the disadvantages of refinancing?
Refinancing your student loans can save you a lot of money over the life of the loan, but there are a lot of factors that you should think through before making the decision to refinance.
Having a team of highly skilled financial advisors is key to avoiding common pitfalls and mistakes that can result in unnecessary savings. If you’d like more information on this topic, you can reach out to our team of financial advisors for more info.