Refinancing a loan involves the taking of a new loan to pay off an older one on new terms. This gives you an opportunity to negotiate the terms of repayment of the loan according to your financial position and income strength as well as time length. There are several myths that are associated with the refinancing of student loans. However, these myths should not hold you back from exploring your ways of refinancing your student loan. In this article, we are going to discuss tips and myths about student loan refinancing.
1. Student loan refinancing is a scam myth
This is a myth that has come about due to misinformation and from paperwork processing companies who are trying to scam consumers. Before refinancing a loan, be sure of what you want to achieve out of the whole process i.e. are you looking for a way to save on monthly payments or to pay less interest over the loan lifetime? With this in mind, ensure you look for any hidden costs or fees associated with the refinancing. Be sure to make total calculations to see if the student loan refinancing makes sense to you before penning your signature.
2. Student loan consolidation is the same as refinancing myth
Student loan consolidation and student loan refinancing are two distinct things. The former refers to the situation of combining all your loans into one so as to pay it off while the latter refers to a situation where you take a new loan so as to pay off your old loan. This can be to finance one or several old student loans. With refinancing, you can change the terms of the loan so that it suits your needs and abilities. For example, you can decide on the length of repayment of the new loan as well as the interest rates so that they could work for your pocket.
Below are two crucial questions that will guide you to make a choice on student loan refinancing.
1. Why refinance?
You should be able to give a good reason as to why you want to refinance. Are you after new lower interest rates, simplifying the process of repayment by melding several loans into one or trying to dictate the length of your student loan? If you can answer any of the questions above, then it is advisable to weigh the options of if the refinancing will work out for you now or in the future.
2. What are the strengths of each lender?
Before you settle down for a particular company to refinance your student loan, it is advisable to look into several companies that offer the service. This way you will be able to choose a company that offers you the best deal as per what you require according to your ability.