The latest statistics show that student debt keeps increasing. The class of 2016 left college with debt that was 6% higher than the previous ones. Considering that these statistics do not even include the loans that parents took to help their children through college, there is no doubt that everyone needs a better way to manage their debts.
According to financial experts, refinancing is one of the best ways through which you can do this. It simply means that you transfer the debt from the initial lender to another one. The following are the main reasons you should refinance your student loans:
Reduced monthly payments
When you refinance your student loan, you lower the monthly payments. This is because you will get a higher interest rate compared to when you stick to the initial lender. With higher interest rates, you will end up saving a lot of money on the life of the loan. This promises a major relief on your financial burden especially if you do not earn a top salary, and have been struggling to repay your loan. An additional advantage is that you will get an opportunity to improve your credit score especially now that your financial status has changed since you last applied for loans.
You can release a cosigner from the loan
If your loan involved a cosigner as is the case when you borrow from private lenders, refinancing it can help you to release them from the loan. This is because you can now be eligible to refinance the loan on your own. This is one of the most important reasons why you should refinance your student loans because cosigners are often close family members, especially parents. By relieving them of this responsibility, you can let them concentrate on their own finances as you concentrate on improving your own financial status.
Flexible payment terms
Refinancing your student loan allows you to choose how long you want it, and if you need fixed or variable interest rates. With variable rates, it is quite risky because they can go up any time. However, it also can make you pay less especially if the rates drop significantly. There also are lenders that will allow you to switch between fixed and variable rates without charging you any extra costs. Your choice should be based on what is most suitable for you. As you will notice, everyone has unique financial capabilities and needs. The rates that are suitable for you may not be the ones that others are looking for.
If you are not sure of where to refinance your student loans, there are lots of private lenders that you can choose from. Any local bank or credit union can help you to do this. However, you need to carry out a little research just to know about the benefits and rates of every option before choosing it. You also may want to look at the number of loans that they have refinanced over the recent years just to know if they are popular among their student loan holders.
One of the best personal finance companies that you can contact is SoFi. It has helped a lot of borrowers in the past, and up to these days, it still continues to widen its network. In fact, SoFI partners with Jet Blue, and with this alone, you can tell that the said company is getting stronger than ever.