The average student loan debt for a recent graduate in the United States is $21,000. If you area among the millions of young Americans with student loan debts, it is very important to know your options of refinancing them. Student loan refinancing is getting a fresh loan to settle the current loans and combining them into one. However, unlike consolidation, refinancing enables the borrower to attain better repayment terms as well as better interest thereby reducing the monthly payment. Student loan refinancing is recommended when the borrower has high interest rate loans. It will help to lower interest rates thus saving a significant amount of money. Below are the student loan refinancing debt choices.
1. Check your credit score
You can only refinance your loan if you have a good credit score. Financial institutions will only give you a loan with a lower interest if they are convinced that you will be able to pay back the loan. The higher your credit score, the more reliable you will look to a lender. A good credit score will greatly help you refinance your loan at lower interest rate. Therefore, if your credit score is low, do all you can to raise it even if it means waiting for a while before refinancing.
2. Do financial assessment
A financial assessment will help you know how much you can afford, a factor that will help you choose an effective loan refinancing option. Create a balance sheet that outlines all your expenses so that you have an accurate information on how much you usually spend. A comprehensive financial assessment will help you know your current financial position as well as the best option to choose when refinancing your student loan.
3. Visit the US department of education direct loan program online
Unlike private lenders who charge high interest rate on their loans, the federal government is more concerned about the student’s welfare and they will give you a better option to help refinance your student loan. Federal student loan usually attracts an interest rate ranging from 3.4% to 6.8% while private loans can be as high as 15%.
4. Check all your options first
The mistake than most people who are servicing their student’s loans do is making a decision without conducting proper research. Before you make any decision regarding how you will refinance your student loan, it is very important to conduct an extensive research to know the choices that you have. This way you will be able to choose an option that will work best for you.