Are you thinking about refinancing your student loans? Refinancing can come with many benefits such as reducing your monthly payment, lowering your interest rate, and simplifying your finances. Once you have made the decision to refinance, you may still have some questions about what to do next. Below are some tips for navigating and understanding the process of how to refinance your student loans.
1. Research the Benefits
Refinancing your student loans can come with lots of great benefits. If you have multiple loans with different lenders, you can combine them so that you only have a single monthly payment. Refinancing can also potentially get you a lower interest rate, which can be particularly beneficial if you have a high interest rate on your current loans. Refinancing may allow you to decrease your monthly payment amount, meaning you’ll have more cash available every month for other expenses. Additionally, refinancing can allow you to remove a co-borrower from your loans. When considering your refinancing options, always consider the change in loan term and how that will affect the overall cost of your loan.
2. Understand your Loans
Figure out your loan servicers, how much you owe for each loan, and the monthly payment and interest rate on each loan. If you have both federal and private loans, you’ll need to decide if you want to refinance both. When you refinance your federal loans with a private education refinance loan, you will lose all current and future benefits associated with federal loans such as federal repayment plans, forgiveness programs, and other perks. Make sure you understand both what you are getting and what you are giving up.
3. Decide on a Fixed or Variable Interest Rate
Lenders often offer both fixed and variable interest rate options when refinancing student loans, so you should understand the differences between the two before choosing one. Fixed interest rate refinancing loans have an interest rate and payment amount that remains the same over the term of the loan. Variable interest rate refinancing loans have an interest rate that may change over the term of the loan. The decision of selecting a fixed or variable interest rate will depend on your particular financial situation.
4. Compare Lenders.
There are many lenders offering student loan refinancing, and each has different interest rates and loan terms. Shop around to make sure you are getting the best offer. This does not have to be a time-consuming process, as many lenders will give you an instant rate quote from just a few pieces of personal information. Most of these rate quotes don’t impact your credit score, so you can evaluate many lenders. MEFA offers an education refinancing loan and can give you an instant rate quote without impacting your credit score. Use our Loan Refinancing Calculator to estimate how your monthly payment will change.
5. Prepare your Documents
If you want to refinance, you will need to have certain documents on hand. Begin to gather all your documentation now. Common documents needed to refinance include income statements, housing information, and current loan statements. Check with each lender for their specific requirements.
MEFA is here to help if you have any questions about how to refinance your student loans or need information about any other college financing topic. Call us at (800) 449-6332 or email us at [email protected].
