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Is it advisable to refinance student loans?

I want to pay off my student loans as fast as possible because they are bad credit student loans. Missing payments would only damage my credit further. Therefore, I have been doing a lot of research on how to get rid of student loans since I completed my university education. In my research, I have noticed that a lot of people refinance student loans to save money and enjoy lower interests. However, I am not sure whether or not this would be the best option for me since I do not know so much about debt consolidation. Should I consolidate my student loans or stick to my current repayment plan?

Samantha Barber

in Student Loans

1 answer

1 answer

Chelsea Hayes on January 3, 2018

You are right. A good number of people choose student loan refinancing as an option of paying off their debt. Although there are many advantages of refinancing student loans, there are also some drawbacks in choosing this method. Depending on your situation, this might not be the best option for you.

If you have no idea how to get rid of a student loan and you are considering debt consolidation, there are several things you need to know. These include:

  • Whether or not you have a secure income
    Refinancing a loan is taking out a new loan to repay an existing loan. The lender pays off your student loan so that you are not required to make any payments towards it any more. However, you will still be responsible for paying off the new loan. The advantage of doing this is the fact that you will enjoy a lower interest rate which will enable you to save some money. However, you still need to have enough money to make monthly payments. Therefore, if you do not have a stable income, debt consolidation might not be the best move for you especially considering the fact that the lender might not be lenient if you miss payments.
  • Whether or not you are almost done repaying the loan
    The moment the question, “should I consolidate my student loan?” comes to your mind, you should consider how far off you are in repaying your student loan. If you are almost done repaying the loan, there is no need for you to reconsolidate your loan. This is because refinancing your loan will only add more years to your repayment plan which will make your loan even more expensive. Instead, cut back on some expenses and come up with a plan to consistently make the remaining payments until you are done paying off the loan.
  • Whether it will make your student loans more manageable
    A bad credit student loan is a type of loan you need to work on paying off without missing any payments. This is because failure to pay may end up damaging your credit even more. For this reason, you need to consider whether or not the refinancing option will make it easier for you to manage your loan. If you think you might have a hard time repaying the new loan, you should not refinance. Stick to your repayment plan and be committed to making the payments until you are done.

Caleb Jenkins2 years ago

I agree. Most people refinance student loans and end up regretting it. The best thing about federal student loans is the fact that they have a very flexible repayment option. The monthly payments are normally very low in comparison to other loans. Since the monthly payments are low you can manage to make the payments even without a very well- paying job. Therefore, I would advise you to come up with a loan repayment plan that perfectly fits into your monthly income and does not strain your finances. It might also be a good idea to cut back on some of your expenses to make the repayments. For instance, if you are thinking of moving out of home, it might be a good idea to stay with your parents and use the money to repay your loan. This way, you will have more money to use towards paying off your debt.

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