Upon entering the workforce, many college and university graduates who are unhappy with their student loans consider refinancing them. There are many reasons borrowers choose to refinance: some want all their loans under one monthly payment while others aren’t satisfied with their current interest rates. Yet some others may decide they only want to refinance part of their loans.
Upon receiving refinancing offers, it can be tough to decide which option is the best to choose. You’ll want to choose a repayment plan which achieves your objectives of refinancing, so consider these options before making your decision:
Lower interest rate
Those looking to pay less overall should look for a lower rate on their loans when refinancing.
Private loans taken while still in school often have high-interest rates and borrowers should take advantage of the historically low rates offered in the marketplace today.
Lower monthly payment
Many graduates exit their grace period in the least graceful way possible: slammed with monthly payments. Borrowers are increasingly having to devote a large portion of their monthly paychecks to these payments, or they risk ruining their credit score for years to come. Those unable to make their current payments can save their credit by refinancing.
Extending the term of the loan from a 5 or 10 year to a 15 or 20 (or even 25!) year loan can drastically lower the monthly payment, though more time means more interest will accrue. Need more information on short term vs. long term repayment? Credible can help you compare your existing loan with the rates and terms of a new loan.
Fixed vs variable rates
When it comes time to pay up, many borrowers find themselves unhappy with the type of rate they originally chose. Those with high fixed rates from years ago are green with envy when looking at the historically low rates currently on the market.
Those unhappy with variable rates often seek to lock in a more stable rate, in case they start to climb again. Either way, refinancing is an excellent way to change the term of your loans. Want to know more about the benefits and drawbacks of fixed and variable rate loans? We’ve got you covered.
Adding a cosigner
There are many benefits to adding a cosigner onto your student loans. A cosigner adds legitimacy to your loan, increasing your chances of approval and you’re likely to get a lower interest rate than you would on your own.
There are some drawbacks to adding a cosigner as not everyone is willing to take responsibility for someone else’s debt. In this case, it makes the most sense to choose a lender who offers the most competitive cosigner release. For example, Citizens offer to release the co-signer after the borrower makes a specified number of consecutive payments. Be sure to examine what co-signer benefits are available to you.
Benefits offered by switching lenders
Many banks offer progressive repayment programs and other incentives that borrowers can greatly benefit from in many different circumstances. SoFi’s entrepreneur program offers up to 6 months of business development deferment for qualified entrepreneurs pursuing new business ventures.
They also offer excellent development resources for these entrepreneurs including access to SoFi’s mentors, investors, and other entrepreneurs. Citizens offers a product, the TruFit Student Loan, designed to make repayment extremely flexible with many different rates, terms and monthly payment amounts to choose from.