Almost any college graduate will agree on one thing. College education is not cheap. As such, by the time you graduate, you will find yourself with thousands of dollars in student loan debt. Most federal loans and private lenders will allow a six-month grace period before you enter into repayment, however. Many people are skeptical of refinancing.
Advertisements promoting it tend to make it seem like a magical cure-all for debt, and we are naturally distrustful of grand claims; when it sounds too good to be true, it is. However, student loan refinancing is neither too good to be true or a magical cure-all for debt. Instead, it is a tool that borrowers have to make their loans work better for them. From opinion piece on politics and the election, this is expected to get even better. Does it erase your debt? No. But it can give you payments and interest rates that are much easier to work with your budget. Here is what student loan refinancing does.
What student loan refinancing does
Combines All of Your Loans
The first thing to do when refinancing is to combine your loans into a single loan. You can do this even if multiple different lenders hold your loans. The lender you will be working with basically buys the loans from other lenders and creates a new loan equal to the sum of the loans purchased. This makes it easy to manage to pay your bills and also makes it possible to continue with the steps of refinancing.
Allows you to Select a Longer or Shorter Life
The next step is renegotiating how long or short you want the life of your loan to be. If you need affordable payments, you can extend the life of your loan. While you may end up paying more, in the end, this can be helpful for borrowers who make too much money for deferment or forbearance but not enough to pay their current monthly payment while still making ends meet. However, some borrowers want to shorten the life of their loan. This will increase their payments each month but make the loan cheaper overall and get them out of debt faster.
Provides you With Different Interest Rate Options
While you might think that interest rates are simple, there are many different types of interest rates available to you. From fixed-rate to variable-rate and beyond, each type comes with its unique set of advantages and disadvantages. By refinancing student loans, you get to pick the interest rate that works best for your unique situations.
In the past, getting started with student loan refinancing was pretty difficult. However, like many other things, the process has gotten easier thanks to the Internet.