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Laurel Road: Four Signs It's Time to Refinance Student Loans

NEW YORK - September 8, 2020 - (Newswire.com)

​​​There’s some buzz that right now is a great time to refinance student loans due to record low interest rates. However, the most important consideration when it comes to refinancing loans is the student loan borrower’s personal financial situation, rather than global trends. Here are four reasons why now might be a good time to refinance — and three reasons why it might be good to wait.

Signs that it’s time for a borrower to refinance

1. They qualified for a great low interest rate

This is the most common reason to refinance. If the borrower qualifies for a great, low interest rate — and the repayment plan is appealing – there’s a good chance they could save money in both the short and long term through student loan refinancing by locking in a low rate now.

2. They’re ready to stop having a cloud of debt over their head

If they have a good-paying job and are ready to tackle student loan debt aggressively, refinancing and setting up a more aggressive repayment plan can be a great way to avoid the 10 years of debt that often come with the standard federal repayment plan. As expert financial advisor Kat Tretina explains, “If you want to pay off your loans sooner, you might be able to qualify for a lower rate — that means more of your payment goes toward the [principal] balance rather than the interest.”

3. They’re concerned about their total repayment amount

Refinancing could be a great move if monthly payments are able to be met. Lowering interest rates not only saves them monthly, it could also reduce their total repayment amount, depending on the length of their loan term.

4. They have good credit and solid employment

Borrowers shouldn’t get caught in the trap of waiting for a promotion at work or a perfect credit score to take advantage of refinancing. If they qualify for a great interest rate, that means they could start saving money now. “The number one piece of advice I give to students is not to let themselves be paralyzed by fear,” says Tretina. With rates fluctuating often, waiting to refinance might cost money in the end should rates rise again.

When to avoid student loan refinancing

1. The borrower is relying on federal protections, including coronavirus student debt relief

Federal loans come with various federal protections. For example, they might be experiencing a pause in their payments right now due to the federal CARES Act. While many private lenders have also offered forbearance options due to coronavirus, these don’t have the weight of law behind them the way federal protections do. Additionally, if a borrower is relying on income-based repayment plans, or may need to rely on them in the future, they might not want to sacrifice that flexibility and security by refinancing. Other benefits and options may be available, so it’s important to check the terms of current loans when preparing to refinance.

2. They don’t qualify for a lower interest rate

If they don’t qualify for a lower interest rate, now may not be the right time to refinance. It might be necessary to build up their credit score or find a willing co-signer — but it’s likely they’ll want to wait to qualify for a better rate before refinancing.

3. They’re unsure of the repayment terms

Repayment terms are an extremely important part of loans, and if they don’t work for the borrower, it weighs heavily against even the most attractive interest rate. Both monthly payments and overall length of repayment need to work for each individual’s needs, or else refinancing might not be the right call at this time.

Remember, refinancing requires proper research and looking carefully into how it will work with a borrower’s overall financial situation. While refinancing isn’t for everyone, it does provide benefits that can have a positive, lasting impact on financial health. Now is certainly a good time for a borrower to explore whether this student loan repayment alternative could be a good fit.

In providing this information, neither Laurel Road or KeyBank nor its affiliates are acting as your agent or is offering any tax, financial, accounting, or legal advice. Any third-party linked content is provided for informational purposes and should not be viewed as an endorsement by Laurel Road or KeyBank of any third-party product or service mentioned.




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Original Source: Laurel Road: Four Signs It's Time to Refinance Student Loans
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