Student loans are the result of an investment you make in yourself — education. So now that you’re well-educated, you might want to look at how your student loans are affecting your total financial picture. From choosing a job to budgeting to saving for your future, your student loans play a central role in all your major financial decisions. Even if you’re perfectly comfortable with your student loan payment, taking a look at refinancing your student loans may save you a lot of money in the long run.
When you refinance your student loans, you’re agreeing to have another lender buy your loans from your original lender. In return, your new lender usually offers you a lower interest rate. They get money from your interest, and you save money on a lower rate. It’s a win-win! Both private and federal loans are eligible for most refinancing options. These are the top signs that refinancing your student loans could save you hundreds or even thousands of dollars.
Your Credit Score is Solid
Most companies who refinance will only be able to give you a lower interest rate if you’re qualified. Being qualified means having a strong credit score and a stable source of income. For someone with a steady income and an excellent credit score, refinancing will likely get you a much lower interest rate.
However, even if you don’t have the best credit history, you should still check your rates! You can get a refinancing quote from a lender like SoFi without damaging your credit score. They have a more holistic review process so they’ll consider things like your work history in addition to your credit score.
You’re Ready For Other Big Financial Milestones
Refinancing is a great way to save money on interest, but there’s another advantage: better cash flow! With a lower student loan payment, you’ll have more liquidity to save up for things like a down payment on a home or starting your own business.
Especially if you are expecting to need a mortgage in the next year or two, refinancing with a lender who can later give you your mortgage can result in substantial discounts. For example, if you refinance your student loans with SoFi and then later on apply for a mortgage, you’ll get a discount on your mortgage interest rate!
You Want to Knock Out Your Loans Fast
Refinancing is a great way to lower your interest rate, but did you know you can also adjust the timeframes of your loans? In addition to the standard 10-year repayment plan, refinancing with certain lenders can give you access to 5- or 7-year repayment terms. This means you can save on interest and say goodbye to your loans a little sooner. However, to get this kind of flexibility, you’ll want to look for creative lenders like SoFi. Traditional lenders like banks may help with refinancing in general, but they won’t be able to offer you the same variety of repayment timelines.
You Have Private Loans
There’s sometimes advantages to federal (public) student loans — like federal student loan forgiveness programs. But if most of your loans are private, those advantages don’t apply. You can (and should!) look at refinancing options on those loans because the rates you have may not be as competitive as the interest rates in today’s economy. When you refinance, not only will you save money overall, but a larger proportion of your monthly payment will be going toward the principal of the loan.
Your Loans Have High Interest Rates
This may seem like a no-brainer, but the reality is that most people don’t even know the interest rates they’re currently paying. Refinancing is the only way to get a lower interest rate on your loan, and you won’t know how much you can save until you check your rates. Getting a quote from a refinancing lender like SoFi is simple, quick, and doesn’t hurt your credit score. You can easily calculate how much you can save over the life of your loan. Depending on your credit score, job history, and income, you may be able to reduce your interest rate by 2% (or more!).
A Good Decision? Probably
There’s not a lot of situations where you would turn down free money, so why would you turn down an opportunity to refinance? Start by checking out how much you could save. My personal favorite option would be SoFi, but feel free to shop around for the lowest rate. Refinancing could be one of the easiest money-saving decisions of your life!
