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How to Refinance Student Loans – The Easy Way

Many people who go to college end up using student loans to finance at least a portion of their education costs. Although getting a higher education can be expensive, student loans help ease the pain a little bit. These loans are typically given at low interest rates and are generally easy to get regardless of your credit history. Once you have these student loans, you may want to refinance them so that you can take advantage of lower market interest rates. When it comes to refinancing student loans, there are a few things for you to consider before jumping on board with this strategy.

How it Works

The basic idea behind student loan refinancing is that you pay off your existing loan by taking out a new loan. For example, in this scenario, you would borrow money from a new source. You would then take that money and use it to pay off your existing student loans. At that point, you’re left with the new loan at a new interest rate and with a new payment.

Why Refinance?

If you’ve never refinance the loan, you may be wondering what advantage there is in going through this process. The primary reason that people refinance their student loans is so they can get a lower monthly payment. If you have several student loans at higher interest rates and market interest rates are lower, refinancing can provide you with a lower monthly payment to work with. This will make it easier for you to afford your bills and give you more money to use as you wish.

Another reason that some people want to refinance is so that they can pay less money in interest overall. If you refinance your loan at a lower interest rate, you will not be paying as much money in interest each month. If you keep paying the same amount every month, this will make it so that you are paying more money toward the debt and less in the form of interest charges to a lender. This makes it possible to pay off your debt faster. It also can provide you with some peace of mind knowing that you’re not just throwing extra money away every month in the form of extra interest.

How to Refinance

When it comes to refinancing, there are plenty of ways that you could go about it. Sometimes, you could simply talk to your existing student loan lender and see about refinancing your loans into a new loan. If you have multiple loans, you may have the option of consolidating your loans into a single package. In many cases, this can make it so that you get a lower interest rate and a lower payment.

If you have Federal student loans, you can also get to the United States Department of Education’s website and search for loan refinance programs. In many cases, you can also work with your local bank or credit union to facilitate a refinance of your student loans.

When you find a lender to work with, you will need to fill out a loan application. This loan application will typically ask for information about your personal situation such as your name, Social Security number, address and phone number. In addition to providing this basic personal information, you will also have to provide information about your employment situation and your income.

At that point, the lender will evaluate your loan application to determine if you qualify for a new loan. If you qualify for a new loan, you will then be able to refinance your existing student loans and start enjoying the savings.

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Consolidate Private Student Loans – What You Should Know

Refinance private college loans

While some students are fortunate enough to have parents pay for their educations or receive full-tuition scholarships, student loans are a reality for most college students today. Between the rising cost of tuition, room, board, endless fees, books and transportation expenses, most students must take out some student loans in order to afford a college education. While it is easy to sign on the line and receive thousands of dollars, it is much harder to leave school and be able to immediately pay off these loans.

Most student loan payment become due six months after the student has graduated or sooner if the student drops out of school early. Many graduate students do not have a professional salary at this point in time and even if they do, may still struggle to make student loan payments. Consolidating students loans can help borrowers receive reduced payments and more flexibility with loan payments.

Some student loans are backed by the federal government, including Stafford Loans, Perkins Loans and PLUS Loans. These loans can be consolidated into Direct Loans that provide the greatest amount of flexibility. Consolidating federal loans allow borrowers to receive a reduced interest rate and the convenience of one monthly payment. Among the various types of repayment terms for federal loans are income contingent repayment plans and an income-based repayment plan. Extended plans allow the borrower to pay smaller payments over an extended period of the loan. Borrowers can change to different repayment plans as their needs change.

Private consolidation loans are also available. To consolidate private student loans is a great way to simplify your finances and lower your monthly payments for more friendly payment terms. These types of loans are based on the borrower’s credit score and current financial position. Getting all of a borrower’s loans rolled into one larger loan can provide multiple benefits to borrowers. This strategy decreases the number of bills that arrive each month and the likelihood of missing payments or making late payments. Consolidating the loan often entails a resetting of the loan’s term which can decrease the amount of the monthly payment. Borrowers can also save a substantial amount of money by receiving a reduction of an interest rate by one or more percentage points.

When a borrower is looking for consolidation options, it is important for him to thoroughly research the options that are available to him. Various options will be available based on the types of loans that the borrower has. When applying for a private consolidation, it is important for the borrower to improve his credit score as much as possible prior to applying for the loan. If the borrower can increase his credit score by 50 or more points, he will likely be able to receive a consolidation loan with preferable terms. Borrowers can also apply for a home equity loan in order to consolidate their loans. Home equity loans tend to have lower interest rates and fixed interest rates. Many private student loans have a variable rate. Even if the two interest rates are comparable, it is in the borrower’s best interest to apply for a fixed rate interest rate so that the borrower can lock in the lower rate for a longer period of time. Another option for borrowers is to contact the financial institution that currently holds their loans and request that the lender provide them with a consolidation loan with a lower interest rate before they reach out to a new lender.

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Applying for Student Loans Consolidation What You Should Know

Student loans consolidation is type of loan which allows borrower to replace several student loans like Perkins Loans, PLUS Loans or Stafford Loans or some private loans with just one. Under this plan, students can borrow enough money in one loan to repay other student loans. In case of federal student loans, the Federal Direct Student Loan Program lets you to consolidate most federal loans. For the private student loans, you can apply for a loan and use it to repay several private loans, so as to consolidate the sum and combine multiple repayments into one.

Benefits and Drawbacks of Student Loan Consolidation

There are some advantages of getting student consolidation loan, such as follows:

  • Student Debt Consolidation loan may have a lower interest rate than the rates on credit cards, so the loan should reduce student’s interest charges and help him/her eliminate credit card debt, finally.
  • You may have the opportunity to repay your student loans over extended period of time, which is advantageous because decreases your monthly payments.
  • If you take a private student loan, compared to federal loans, it is possible to negotiate more favorable interest rates with bank or other lender.
  • By joining your federal student loans with a for example, bank or other lender, you owe money to the bank instead to the government, which can be beneficial since if you fail to repay your federal loan, government can take hold on tax refunds; the bank cannot do this.
  • In case you have a negative credit rating report due to your previous student loans, a consolidation loan can let you repair your bad credit history.

On the other hand, there are some downsides of getting student loans consolidation as well.

  • Loan repayment extension, often from ten to thirty years means that at the end you will pay back the much higher total amount of the loan than the particular loans were themselves.
  • You may be eligible for interest release on condition that your student loan is guaranteed by the U.S. government. After student loans consolidation the bank will not give you interest relief.
  • In case you have bad credit or job history the interest rate charged on your student loan by the bank may be higher than interest charged under the federal student loans.
  • Consolidation loans are not available to all students; you must meet certain eligibility criteria to qualify for the student loans consolidation.

Eligibility Requirements

To qualify for the private Student Loans Consolidation Plan, you must meet some conditions:

  • You must be working or have some other source of monthly income allowing you to pay off the loan. Bank will estimate your ability to manage your debt based on your income.
  • The bank will also require the copy of your monthly budget statement to decide if you can handle your loan repayments.
  • To satisfy requisites set up by the bank or other lending institution you are dealing with, you may need a co-signor or collateral (such as a house or a car).

How to Apply for the Student Consolidation Loan and Repayment Options

The application process is very simple. You just need to fill the online application (also available in paper form) and Promissory Note and submit it to apply for a Direct Student Consolidation Loan. The application also includes your Borrower’s Rights and Responsibilities. In addition, you will have to complete Repayment Plan form in order to select your repayment plan. You can choose from several repayment option and some of them are: Income-Based Repayment which depends on your income, which means that the repayment amount is going to rise as your income does; Income-contingent and Income-sensitive plans for individuals with fluctuated income.

For self-employed individuals who have their income fluctuated, income-contingent or income-sensitive repayment plan can be most advantageous solution. According to this plans, as the borrower’s income rises and falls, the amount of their loan also does. In fact, income-contingent and income-sensitive plans are very similar to previous IBR and can be considered as it variations.

Before You Apply

There are some important issues to take into account when you are thinking of taking the student loans consolidation plan. Firstly, always do a little research on the loan characteristics, available repayment options, interest rates and other term and conditions. Do not sign any contract before you are sure that you completely understand all the matter you are getting involved with. Read as much articles about student loans and available borrowing options to figure it out which one is the most appropriate for you. To determine if you are eligible for a Student Loan Consolidation plan, contact department of Education, your bank or lending company to obtain all the necessary information.

In the long run, a consolidation loan typically pays more interest over time due to the extended loan term, so be aware of this before you apply for your student loans consolidation.

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