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When exploring the best refinancing options, it can be confusing to navigate which types of student loans to include. Borrowers with many types of loans hesitate to follow through because they’re unsure of which loans make the most sense to refinance.
Between loan types and lender benefits, it can be tough to make the right decision. We’ve covered tips when considering refinancing and here are some things to keep in mind while deciding which loans to include when refinancing:
Interest rate
Interest rates vary wildly from loan to loan, making it difficult to know exactly which loans to include when refinancing. Refinancing loans with the highest interest rates is a surefire way to stretch your dollar as people who refinance with Credible save around $19,000 on average. With interest rates at a historic low (as of September 2014), private lenders are able to offer rates lower than even some federal loans.
If you have some loans with low-interest rates, it might make sense to leave them out and focus on refinancing the loans with higher interest rates. When deciding which loans to include while refinancing, consulting a financial advisor will likely yield the best results.
Fixed vs. variable rate loans
With interest rates currently at a historic low, many borrowers are looking to refinance their high fixed or variable rates down to an updated, lower rate. Those who seek stability in their loan rates or believe rates will rise should opt out of refinancing and stick with their fixed rate loans.
Check out this article for more details on the benefits and drawbacks of fixed vs variable rate loans.
Minimum/maximum amounts
Many lenders have a minimum and/or maximum loan amount to qualify for a refinance. For example, as of September 2014, Citizens requires a minimum student loan balance of $10,000 and a maximum of $130,000 (for graduate and doctoral degrees) to apply for refinancing.
It’s important to check the minimum and maximum loan amounts with each lender before applying to refinance. Consider leaving out certain loans to meet eligibility requirements.
Benefits offered by lender
One potential downside to refinancing is the disqualification from any benefits offered to you by your prior lender. For example, refinancing federal loans may exclude you from federal repayment programs such as Income-Based Repayment or Pay As You Earn.
Before completely deciding against refinancing, however, check with your existing lender to see what benefits actually apply to you. The government offers loan forgiveness programs to teachers, public servants, and some other professions, but if you don’t fall under those professions, the benefits may not extend to you.
If you like the benefits available to you under certain loans, simply leave those out when refinancing.
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