How to Refinance Your Student Loans?
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How to Refinance Your Student Loans?

Monday May 18, 2009

How To Refinance Your Student Loans?
Education is the best investment you can make but not a cheap one, though. Not many prospective students have money to pay even part of the tuition, so majority of them turns to student loans. This is a good way to pay for college but when it is time to graduate it is not a rare case to see many people over their head in debts, without having a clue how to repay them or where to start. Then it is time to think about refinancing their loans, that can save a lot of money.

The main advantage of refinancing your student loan is that it usually lowers the interest rates of student loans written with variable interest rate. But some of the students simply wish to extend the repayment period because the monthly payments are too high. This means that the monthly payments will be lower, thus more manageable but the rates will probably be higher. Sometimes if you have troubles paying your loan, you might want to contact your current lender and ask about securing a hardship deferment instead of refinancing your loan.

Better credits-lower interest rates

Regardless of what option you decide for, the most important thing is to do your research. There are many lenders with various terms and conditions so take your time to compare various to find what best suits your needs. Online lenders are also pretty competitive and they often give best interest rates, but you must be twice as careful when choosing a lender online. Qualification requirements differ from lender to lender, but they usually consider your payment and credit history. The better your credits are the lower the rates and the approval will be much easier. That is why it is best to start planning your refinancing before you have finished college so you will have time to work on your credit score. You can refinance only once in the lifetime of a loan, unless you are adding a new loan, so plan it carefully. 

 

There is one important fact to know when refinancing your student loan - grace period. After graduation, every student has a 6 month long grace period after which they must start the repayment. If you decide to refinance during this period the rates will be up to even 60% lower and they apply to the entire repayment period. 

Federal and private loans don't mix!

Another thing you should know is that you never mix federal and private loan into one.The reason is simple, most of federal student loans have low interest rates, unlike the private ones so combining these two will only end up with higher interest rates than they would be if you have refinanced separately. Also when you merge Perkins loan you lose its benefits such as interest-free deferment.

Also sometimes it is not a good idea to merge various small loans into one big loan. It might create a minimum monthly payment but on the long run it will extend your repayment period. Take your time to look into all of this; after all, it is your money.

 

 



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