Consolidation Loans

Refinancing Student Loans

Written by Jessica Alba

Going ahead with the idea of refinancing your student’s loans may seem like a great idea at first, but then when you actually get into it, can really become messy and confusing.  Making you wonder why you even started to begin with and losing sight of what your goal and intent was.  So, when you are considering refinancing your current student loans, there are several important things you should consider.   First, find out what kind of loans you currently have that are outstanding. Student loans come in two forms; private student loans and federal student loans.  If you have both private student and federal loans, you will want to refinance them separate. Separating them will allow you to obtain a much lower interest rate for federal loans because of the way they are structured.  A student loan is similar to a private loan and harder to refinance.  The private loans are given to students with the belief that the more educated the student becomes, the better job they will get to make more money, to pay off the debt.  You will pay a higher interest rate on the combined principal if you combine the two together.  Be sure to keep this in mind, you wouldn’t want to end up with a higher rate in the end than what you had started with.  Then there is no sense in refinancing, as it will defeat the purpose   Also, when looking for a lender to refinance, be aware of what their requirements are as different lenders have different standards and requirements that must be met. Such as being in “out of school status” or have a minimum student loan amount to refinance.  Be sure that you fully understand your right and what your responsibilities are going to be before you sign any papers that will lock you in. You will want to be absolutely sure that you are going to be able to commit yourself to the new responsibilities that are going to come with the refinance or consolidation. Student loan rates vary by the lender and the students credit history.  Several months in advance you are going to want to  make sure you clean up your credit history before applying for a refinance on your student loans.  Obtain a copy of your credit report, fix errors that may be on it. Sometimes there may be things on your credit report that are not yours.  If this is the case, there are ways that you can dispute them to clean them off of your credit report.  Once fixed, and your credit report is in good standing, then go on to compare lenders. Different lenders have different requirements.  Having a solid credit score will not only allow you to qualify for a better rate, but also will reduce fees associated with your monthly payments. When you are looking to lower your student loans there are two different ways you can do this.  You can either look for a lower interest rate, or you can extend the duration of your loan.  However, longer terms usually do mean higher interest rates and additional interest payments, but your payments will be more manageable.  So decide in the long term, what it is you are actually trying to obtain, lower more manageable payment or a faster route to paying the debts off To see what some lenders require, you should go to www.worldsiteindex.com.  You can go to a traditional bank or credit union to refinance your student loans rather then looking online.  However, online lenders have a tendency to be more competitive allowing you more options. According to about.com , the best three online lenders for consolidating your student loans are Loan Approval Direct,  DebtConsolidation.com and Next Student.  Each promising up to 60% in reduction in your monthly student payments. So when searching, watch the interest rates. They typically change around once a year, on or around July 1.  Some loan institutions offer incentive programs as well. So when searching a lender, be sure to keep an eye out for that.  Early payments along with a set up of automatic payment  and on time payments could reduce your rate by one percent.  This can save you the from having to refinance again in the future and can help you in your payoff amount in the future.    All in all, you have a lot of options you may want to think about before you refinance or consolidate your loans.  All of these are very important factors when making such a decision.  It all seems like a lot to consider and can become confusing, but in the end, you are going to get what your intent was and that was to make your payments more manageable and to lower your rates.