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Compare Individual Student Loan Refinancing Rates
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Last week, the average interest rate on refinanced student loans remained the same. The rates remain low enough for many borrowers to justify refinancing their student loans.
The average fixed interest rate on the 10-year refinancing loan was 3.65% from July 5-9. This is for borrowers with a credit rating of 720 or higher who are prequalified on Credible.com. student loan market. According to Credible.com, the average interest rate on a five-year variable rate loan was 3.05% among the same population.
CONNECTED WITH: Top Lenders to Refinance Student Loans
Loans with a fixed interest rate
The average fixed rate on 10-year refinancing loans last week was 3.65%, the same as a week earlier.
Fixed interest rates remain unchanged throughout the borrower’s loan term. This allows borrowers refinancing now to lock in the rate much 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 4.32%, 0.67% higher than today’s rate.
According to the data, a borrower refinancing $ 20,000 student loans at today’s average fixed rate will pay about $ 199 per month and about $ 3902 in total over 10 years. Forbes Advisor Student Loan Calculator.
Loans with variable interest rate
The average floating rate on a five-year refinancing loan rose sharply last week. It fell to 3.05% from 3.04% in the previous week.
Unlike fixed rates, variable interest rates fluctuate over the term of the loan in accordance with market conditions and the index to which they are linked. 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, to 18%.
Refinancing an existing US $ 20,000 loan for a five-year loan at an interest rate of 3.05% would generate a monthly payment of approximately US $ 360. The borrower will pay $ 1,589 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 WITH: Should you refinance student loans?
Loans with fixed interest rate and loans with variable interest rate
For most borrowers, the biggest motivation to refinance student loans is to reduce the amount of interest they will be paying. This means that choosing the lowest possible interest rate is a top priority.
You may find that variable rate loans start below the fixed rate loans. But because they are volatile, they can grow in the future.
Fortunately, you can lower your risk by paying off your new refinancing loan quickly or at least as quickly as possible. Start by choosing a short term loan, but with an acceptable payment. Then pay more when you can. This can hedge your risk against potential rate hikes.
When considering your options, compare the rates of several lenders for refinancing student loans to make sure you don’t miss out on savings. Find out if you are eligible for additional interest rate discounts, perhaps by choosing automatic payments or by having an existing financial account with a lender.
When Should You Refinance Student Loans?
Most lenders require borrowers to complete their studies before refinancing – although not all – so in most cases, wait for refinancing until you finish your studies. You will also need a good or excellent credit rating and stable income to access the lowest interest rates.
If you don’t already have enough credit or income to qualify, you can either wait and refinance later, or use a co-author… The partner you have chosen should know that they will be responsible for paying off the student loan if you can no longer, and that the loan will show up on their credit report.
Finally, make sure you can save enough money to justify refinancing. At today’s rates, most borrowers with high credit ratings can benefit from refinancing. But those with low credit standing, who don’t get the lowest fixed or variable interest rates, may not. First, research the rates at which you could pre-qualify through multiple lenders, and then calculate your potential savings.
Other Student Loan Refinancing Opportunities to Consider
There is one big catch when refinancing federal student loans to private student loans: you will lose many of the federal loan benefits, for example income oriented repayment plans and generous postponement and abstinence options…
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.