Taking out a private student loan is a great way to help pay for a college education. But while loans may serve as a quick fix for beginning your path toward that degree, car, or home that you’ve always dreamed of, it won’t be long before the harsh reality of repayment sets in.
The truth is that student loan payments, while necessary, can be a major burden, especially for graduates who aren’t earning the type of income they expected after earning a degree. This has caused many students and graduates to explore how to change their private student loan repayment term to better match their financial needs.
Refinancing student debt can seem like an arduous process, but it’s actually quite simple and straightforward. All it takes is some commitment, research, and follow-through to create an easier path toward a debt-free life.
How to Pay Off Private Student Loans Faster
It’s often true that borrowing during times of desperation can lead to poor decisions. This may be the case when dealing with private student loans. Sometimes, lenders will offer high interest rates if you don’t have great credit or income.
While you may agree to this initially to fund your education, you may find later on down the line that your current terms are eating away at the little income you earn upon graduation. Many graduates find themselves in this situation, and the answer is student loan refinancing.
Refinancing your private student loan means you renegotiate terms for repayment to fit your new financial situation. By borrowing from a different lender, you’ll wipe the slate clean and start anew. This can mean a new interest rate, or perhaps a different repayment schedule. Refinancing can take many forms, with each carrying its own unique set of benefits.
Benefits of Student Loan Refinancing
There are several benefits you can expect when you commit to private student loan refinancing. For one, refinancing offers the opportunity to consolidate your student loans if you owe different amounts to several different lenders. Owing payments to too many different lenders can become complicated over time, which means you may be more likely to be late on a payment or miss one entirely. Given that these have the power to negatively impact your credit score, it’s important that you work within a payment system that is manageable.
Other benefits of private student loan refinancing include:
Lower Interest Rates
Many borrowers wonder when to refinance student loans. If you’ve come to a point where you are drowning in payments each month with costly interest charges, it may be wise to evaluate your spending and look for ways to save money on your loans.
A lower interest rate on your student debt payments can save you thousands of dollars over the course of your loan. This fact alone makes student loan refinancing a wise choice for many graduates as long as they can qualify for a better rate than they currently have.
Faster Student Debt Repayment
Are you hoping to pay off your loan more quickly? By refinancing your loan, you may be able to choose a shorter repayment plan that your current loan. Whether you are hoping to make a new, large purchase or are hoping to clear yourself of debt entirely, paying off your student debt faster can lead to more financial freedom down the line. Plus, you’ll save even more on total interest by ditching your debt more quickly.
Student loans can be a major burden during times of financial stress and hardship. If your current financial position means you can’t afford as large of a payment as you’ve committed to, then refinancing for a longer repayment term will help relieve some of the pressure on your resources.
You also may be able to enjoy the best of both worlds with a combination of both of these refinance options. A balanced approach to your loans may see you work within an 8 to 12-year time frame, while reaping the rewards of a lower rate.
How to Qualify for Student Loan Refinancing
Once you’ve made the wise financial decision to refinance your private loans, you’ll need to first see if you qualify. Qualifying for private student loan refinancing requires that you fit certain criteria, one of which may be a good credit score. Other factors that will play a role in your qualification status include your employment status and debt-to-income ratio.
If you don’t meet the requirements for refinancing on your own, you have other options. You can employ the help of a cosigner, for instance. With this, your cosigner will share in the commitment to repay your loan. Whether a parent or guardian, a trustworthy cosigner can help you receive the refinancing rate you’ve been searching for.
Finding the Best Refinancing Option
Determining your student loan pay off goal is the first step toward smart refinancing of your student loans. By clarifying your financial goals before you begin shopping for rates and terms, you’ll narrow down your search and make the process much simpler.
Just like when shopping for a car, shopping for the best loan refinancing deal is important. You’ll want to explore your options through different lenders and determine which offers you the best rate and repayment structure.
Keep in mind that there are other factors that will determine how to pay off student loans faster. The current economy, for instance, can dictate whether or not it’s a good time to refinance.
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You can take charge of your finances now by refinancing your student loans to find terms that are right for you.
Purefy’s Compare Rates tool can help you with this process. Our innovative tool gives you clear insight into how different loans will affect you, which is key to making a sound decision about refinancing. Your financial future doesn’t have to depend on decisions you made years ago. If you’ve been considering when to refinance student loans, the time to start weighing your options is now.