If you’re stuck with high interest rates, a horrible payment plan, and a less than awesome student loan lender, then refinancing your student debt could be a potential answer to your problems.
Even though refinancing can be a great way to save money and change your payment plan, there are a few myths about refinancing student loans that often prevents people from taking action. Here are the three most common ones:
Myth #1: You Are Stuck With Your Same Student Loans
When you refinance your student loans, you are not stuck with the same lender you previously had. For those who have had nothing but problems with their lender, this makes refinancing a great choice.
You have a ton of options when it comes to refinancing your student loans and best of all, you’re in control! You can apply to refinance with the lender of your choosing and use tools like LendKey to look at your options. And this time around you’ll know to find a reputable lender and will be able to check interest rates and payment plans before making the switch.
If you decide to consolidate or refinance your loans, you’ll be rolling all of those small loans into one big loan payable to one lender. Again, you can do your own research and choose the lender that best suits your needs.
Myth #2: Refinancing Costs You Money
A lot of the newer student loan refinancing and consolidation companies have zero origination fees, applications fees or prepayment penalties (this will vary by lender).
If you’re currently paying a high interest rate, refinancing your student loans could potentially save you thousands of dollars – not cost you money.
Right now variable interest rates are low as 1.9% and fixed rates are as low as 3.5%. If you’re being charged more than that, it might be worth it to see if you can qualify for a lower rate.
Myth #3: You Have to Refinance All of Your Loans
Are you waiting to pull the trigger on refinancing because you only have a loan or two that you are considering? Don’t wait! You don’t have to refinance all of your loans.
While consolidating all student loans make sense for some, every situation is unique. For example, maybe you have 1 or 2 Federal student loans that you want to keep Federal due to the repayment plan options, but have 1 or 2 private loans that you want to refinance. You can simply just refinance the private loans.
Refinancing is not an all or nothing type of deal.
What Else You Should Know
While refinancing can save you a lot of money, it’s important to note that your eligibility for certain programs will be based on your degree, credit score, and income. Obviously, the higher your credit score, the lower the interest rate you’re going to get.
Student loan refinancing really can save you a ton of money and it takes only a few minutes to apply online. If you think refinancing or consolidating could help you save, do your research and see what interest rates you qualify for.
A little bit of time spent getting your student loans under control could save you thousands of dollars over the lifetime of your loan.
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