If your credit score is 600 or above, you have a great chance of getting a lower-interest rate if you refinance your student loans. By refinancing, you can save thousands of dollars in interest fees. The key to saving money when you combine your multiple student loans into one private loan is in the interest rate.
Interest rates may have dropped since you first got your student loan, so paying one loan back at a lower interest rate will help you save, opposed to paying multiple loans with higher interest rates on each one.
Aside from saving thousands, here are some key benefits to why refinancing your loan may be the best choice for you:
- You can improve your credit score.
By refinancing your loans, you’ll have less to pay each month, so it’ll be easier not to miss payments. Timely payments make your credit score go up.
- You can remove co-signers from the original loan.
If you initially took out a loan with a co-signer but no longer need or want the cosigner on your agreement, your new refinance loan does not have to include them.
- It’s possible to pay off your loan faster.
With your new lower interest rates, and only having one loan to focus on paying, you may be able to make larger monthly payments and complete the repayment plan quicker.
- There’s no penalty to see if you qualify for a refinancing loan.
Many refinancing loan lenders allow you to apply for a loan, or check to see if you qualify with no penalty. This means your credit score won’t be affected when you do a loan inquiry. So, you have nothing to lose.
To decide whether or not refinancing your student loan is the right repayment plan for you, it’s important to know about grace periods, deferments, and forbearance.