How to decide if student loan refinancing is right for you



While refinancing a student loan can help you save money, it might not be the best option for you.

If you are looking to save on student loans – federal and private – refinancing your student loan might be a good option. Getting a new student loan with a lower rate and lower monthly payments can allow you to pay off your student loan debt faster.

This can free up more money for your other financial goals. However, depending on whether you have private student loans or federal student loans, and your unique financial situation, refinancing might be a bad idea.


Before refinancing your student loans, be sure to weigh the pros and cons and make sure you fully understand if this is the right fit for your personal finance situation. If you are interested in refinancing your student loan, visit Credible to compare student loan refinancing rates

When is the best time to refinance student loans?

Here are some scenarios in which refinancing student loans might be a good idea:

1. You can get a lower rate

When a student loan lender reviews your application, they consider factors such as your credit rating, debt-to-income ratio, and income. If you have a good or excellent credit rating (670 or higher) and a decent income, you may qualify for a rating lower than your current one. This can help you reduce the amount of interest you pay over the life of the loan.

2. You can save money

Apart from securing a lower rate, refinancing student loans can be the preferred choice if you can actually save money by refinancing them. For example, if the term of your new student loan does not increase your payments or increase the amount of interest you pay in the long run, this might be a smart move.

If you are interested in refinancing your student loans please visit Possibility to pre-qualify for student loan refinancing

When is it a bad idea to refinance student loans?

Here are some scenarios in which refinancing student loans might be a bad idea:

1. You cannot provide a lower rate or save money.

If you have a fair or bad credit history and a minimum income, it lowers your chances of getting a new loan. And even if you are approved, you are less likely to get the best interest rate. In this case, it is probably a good idea to first find out what affects your credit rating and then wait until it improves over soft credit in order to qualify for a better rate.

Alternatively, you can try refinancing your loans with a co-author with a high credit rating and decent income.

Plus, refinancing student loans can be a bad idea if you’re not actually saving money. This can happen when your new loan has a longer term, increasing the amount of interest you pay for the entire life of the loan.

2. You have federal student loans.

Because federal student loans usually come with borrower protection and loan forgiveness options, refinancing them is generally not recommended.

Federal protections for student loans include income-based repayment options, deferral and deferred options, and borrower protection. An income based loan repayment plan gives you the option to lower your monthly student loan payment if your income drops. Both leniency and deferral give you the option to suspend your student loan payments.


Borrower protection allows some borrowers to be forgiven for some or all of the loans if the school has used inappropriate content or misled them.

Currently, payments on some federal loans are suspended until September, and the interest rate is zero. If your student loans are under this extreme grace period, refinancing right now is not a good idea.

Use the refinancing calculator to estimate your potential savings

The savings you get from refinancing a student loan depends on how well your current student loan rate and conditions compare with the rate and terms of your new student loan. For example, if you refinanced a $ 10,000 student loan with an interest rate of 6.8% for five years with a new loan with an interest rate of 4.25% for the same term, you could save approximately $ 706 in interest payments. …

If you’re wondering how much you can save by refinancing, use online student loan calculator… Credible can also help you determine if now is the right time to refinance your mortgage.

The essence

Before considering options for refinancing a student loan, analyze your financial situation and consider whether it makes sense. If you can get a lower interest rate and save money, this might be a good idea. However, if you cannot secure a lower rate or get federal student loans, this might be a bad idea.

If you are interested in refinancing your undergraduate or postgraduate study loans, visit Credible for more information


Have a financial question but don’t know who to contact? Write to a safe money expert at and your question can be answered by Credible in our Money Expert column.


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