Do you have federal student loans?
Refinancing your loans privately means you are forgoing current and potentially future help related to COVID-19.
Generally, the more you have to pay on student loans, the more you can save by refinancing.
Refinancing a student loan will save you money if you qualify for a lower interest rate and keep the term the same or get a shorter one. A lower rate can give you lower monthly student loan payments, a shorter repayment period, or both.
Get personalized student loan savings estimates
To estimate savings and decide if you need to refinance, you will need actual rates based on your own financial profile. You are likely to get different rates for each lender you visit because each has their own underwriting standards; these determine who is offered a loan and at what interest rate.
Here’s how to compare offers from multiple lenders:
1. Get rate estimates. Visit the websites of several Best Student Loan Refinance Lenders to get an idea of the interest rate you can expect from each lender. Some lenders offer prequalification, which means they’ll do a soft credit call to estimate the interest rate you will qualify for. Soft credit draws don’t hurt your credit.
For lenders who do not offer prequalification, you will need to request it before you can see the personalized interest rates. Apps trigger a high demand for credit, which is slightly harming your credit. If you apply for multiple refinance loans in a short period of time, the credit bureaus usually treat it as one draw, which preserves your credit score.
2. Compare the APRs offered by various lenders. Once you have several quotes or offers, compare the apple-to-apple rates by looking at the annual percentage rates. APRs represent the actual cost of borrowing, including applicable charges.
3. Also consider the other characteristics of the loan. Getting the lowest rate possible will ensure you save the most money. Also, pay attention to loan repayment options and conditions. Choose your current loan term – or a shorter term – to make sure you save money both monthly and over the long term. See if you can qualify for a student loan refinance premium as well as.
How much could you save?
Student loan refinance lenders advertise that you could save “thousands”, which is not necessarily an empty promise. They usually determine this number by comparing the average amount of interest that a subset of their customers would pay with and without refinancing.
For example, suppose the average customer owes $ 100,000 in student loans with an 8% interest rate. On a 10-year repayment plan, this borrower would pay almost $ 46,000 in interest over the life of the loan. If the same customer gets a 5% interest rate after refinancing and keeps a 10-year loan term, they would save about $ 18,000 by lowering their total interest payments to about $ 27,000.
Of course, you can owe a lot less or a lot more, and the rate you get depends on your credit score, income, and financial health. That’s why you shop: for real numbers.