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The average interest rate on refinanced student loans fell last week. For many borrowers, rates remain low enough to make refinancing a good option.
For borrowers with a credit rating of 720 or higher who were prequalified in the student loan market Credible.com from July 26 to July 30, the average fixed interest rate on a 10-year refinancing loan was 3.52%. According to Credible.com, the interest rate on the five-year variable rate loan was 2.73%.
Connected: Top Lenders to Refinance Student Loans
Loans with a fixed interest rate
The average fixed rate on 10-year refinancing loans last week decreased by 0.08% to 3.52%. A week earlier, the average was 3.60%.
Fixed interest rates remain unchanged throughout the borrower’s loan term. This allows borrowers refinancing now to lock in a rate significantly lower than they would have received this time last year. At this time last year, the average fixed rate on a 10-year refinancing loan was 4.29%, 0.77% higher than today’s rate.
If you were to refinance $ 20,000 student loans at today’s average flat rate, you would pay about $ 198 a month and about $ 3,755 in interest over 10 years, according to the data. Forbes Advisor Student Loan Calculator.
Loans with variable interest rate
Last week, the average rate on a variable five-year student loan fell to 2.73% from 2.96%.
Variable interest rates fluctuate over the term of the loan in accordance with the index to which they are linked and market conditions. Many refinancing lenders recalculate the rates for borrowers with variable rate loans on a monthly basis, but they usually limit how high the rate is – for example, lenders can set a limit of 18%.
Refinancing an existing $ 20,000 loan for a five-year loan at an interest rate of 2.73% would bring in a monthly payment of approximately $ 357. The borrower will pay $ 1,419 in total interest over the term of the loan. But because the rate in this example is variable, it can go up or down from month to month during that time period.
Connected: Should you refinance student loans?
When to Refinance Student Loans
Lenders usually require you to complete your degree before refinancing. While it is possible to find a lender without this requirement, in most cases you will need to wait for refinancing until you complete your training.
Keep in mind that you will need a good or excellent credit rating to get the lowest interest rates.
If you don’t have enough credit or your income isn’t high enough to qualify, you have several options. You can wait for refinancing until you get a loan or until you have sufficient income. Or you can get a co-author… Just make sure the signatory knows that if you are unable to make student loan payments, they will be held liable. The loan will appear on their credit report.
When refinancing, it’s important to make sure you save enough money. While many borrowers with solid credit ratings could benefit from refinancing at today’s interest rates, those with lower credit ratings will not receive the lowest rates available.
Calculate whether refinancing will benefit your situation. Take a closer look at prices and then calculate how much you could save.
Refinancing Student Loans: What Else to Consider
When you refinance federal student loans into a private loan, you lose access to some of the federal loan benefits. You will no longer have access to features such as:
These programs may not be necessary if you have a stable income and plan to quickly repay the loan. But make sure you don’t need these programs if you are thinking of refinancing federal student loans.
If you really want the benefits of these programs, you can refinance only your private loans or only a portion of your federal loans.
Comparison of student loan refinancing rates
Refinancing a student loan at the lowest interest rate possible is one of the best ways to reduce the amount of interest you will be paying over the term of the loan.
Interest rates on floating rate loans may be lower than on fixed rate loans. Of course, because they are volatile, interest rates on them rise. You can limit the risk of an interest rate rise with floating rate loans by paying off the loan as soon as possible. However, if you like the reliability of fixed payments, fixed rate loans may be your best bet.
Whether you choose a fixed or variable rate loan, it is important to compare rates from multiple lenders to make sure you are not missing out on potential savings. Chances are, you may qualify for the interest rate discount by choosing automatic payments or by having an existing relationship with the lender.