One of the most common reasons to refinance student loans is to lower the interest rate. Doing this will allow you to pay off your old loans and get out of debt much faster. Below are some reasons you should refinance student loans with a reputable company like Lantern by SoFi.
1. Lower Your Interest Rates
According to Lantern by SoFi, “Many factors affect your credit scores and the interest rates you may receive.” Obtaining a lower interest rate is a top reason people want to refinance their student loans. This is because, unlike other types of loans, federal student loans do not require the government to underwrite them. This means that every student loan holder receives the same rate regardless of their credit history.
2. Lower Your Monthly Payment
Another common reason to refinance is to lower the monthly payment. This will allow you to pay for living expenses and other financial obligations instead of taking on more debt. There are various ways to lower the monthly payment. One of the most important factors that you should consider when it comes to student loans is the interest rate.
Lowering the monthly payment will allow you to save money each month, and it will also allow you to extend the repayment period. However, this will increase the total interest that you pay, as the longer the loan’s repayment period, the more interest that you will accrue.
3. Simplify Your Repayment Plan
One of the biggest advantages of student loan refinancing is that it allows you to consolidate all of your student loans into a single loan. This eliminates the need to make multiple payments, and it will allow you to save money on interest. Another advantage of student loan refinancing is that it eliminates the need to make separate payments for both private and federal student loans.
4. Change Your Loan Terms
Refinancing allows you to change the terms of your student loans. For instance, if you have a federal student loan, you can keep the same monthly payment even if the interest rate drops. With a variable interest rate, you can choose to have more flexibility with your student loan payments.
5. Change Your Lender
If you are a student loan borrower, then you may not like the service provided by your student loan servicer. This company collects and manages the payments for your lender. Many borrowers prefer having a better experience with their student loan servicer. If you are a student who has multiple loans for school, then a student loan servicer can help you consolidate all of them into a single loan. This eliminates the need to manage multiple payments.
One of the main reasons why student loan refinancing is often considered is to improve your financial situation. It can be done for various reasons, such as reducing the monthly payment, releasing a co-signer or looking to lengthen the loan term. Before you start considering student loan refinancing, make sure that you thoroughly research and compare the various lenders that are available to you.