Refinancing is a common financial decision made by those carrying a substantial amount of student loan debt. But just because other people are doing something doesn’t mean you should as well. What’s the purpose of refinancing student loans, and is this something you should consider? Before digging into how to refinance student loans, let’s look at why this is a good idea for many.
At its most basic level, refinancing is about getting better terms on your outstanding debt. It doesn’t matter what kind of loan it is, if you can get a better deal, it makes sense to do so. This generally holds true with student loans—outside of a few specific instances. These are a few of the overarching benefits people receive when they refinance their student loans:
- You can get a lower interest rate: Probably the most appealing (and important) aspect of refinancing student loans is the fact that you can get a better interest rate on your debt. Getting a lower interest rate means you’ll pay less over the course of your loan.
- You don’t have to pay an origination fee: One of the issues that can sometimes stand in the way of refinancing or consolidating other forms of debt—such as a mortgage or credit card accounts—is the fact you have to pay a fee in order to create the new loan. You fortunately don’t have to pay origination fees when refinancing student loans, which means you won’t have to take extra precautions to determine whether that better interest rate will actually be better for you.
- You can simplify repayment: It can be tough to keep track of all your student loan accounts—especially when they’re held by a series of different lenders. Refinancing means you can get multiple loans rolled into a single new one, which will make it easier to keep track of your loans and how much you’re really paying each month.
- It’s highly beneficial to those with good credit: Individuals who have solid credit will likely benefit the most from refinancing student loans. Many lenders will want to work with you if they believe there’s a good likelihood of you paying them back.
Now that you see some of the great benefits that come with refinancing student loans, it’s time to learn how to refinance student loans—and ultimately, find the best student loan refinance rates.
How to Refinance Student Loans
Refinancing your student loans isn’t a complicated process. Many lenders, banks, and credit unions are equipped to do it—possibly even ones you’re working with already. The most important step is to shop around to find the best loan terms. Finding a better interest rate or loan duration is often the primary concern here; but you’ll also want to think about whether switching to a fixed or variable interest rate will work better for your finances.
If you don’t want to spend all your time searching for the best refinancing offer, you might want to work with a company like Juno, which does much of the work for you. Instead of being the lender themselves, Juno takes bids from an array of lending organizations, and only offers the best ones to their members. This is a free service to use, and you’re under no obligation to accept the student loan refinancing offer if you decide it’s not right for you.
Another crucial consideration when looking for student loan refinancing is determining if you’ll need to run a soft or hard inquiry in order to see if you qualify. Hard inquiries can affect your credit score, which can then make it more difficult to do things like refinance loans, while soft inquiries won’t cause any harm. This is just another to keep in mind when thinking about how to refinance student loans.
It doesn’t matter if you’re doing great or just getting by, there’s no reason not to refinance if it will improve your financial position. Knowing how to refinance student loans can help you get to a better place with your debt.