Getting lower interest rates on student loans could mean paying less total interest over the life of the loan, which could save thousands of dollars. Refinancing could also help you free up a co-signer on your loans if you have applied for help with borrowing. If you want to take advantage of the low interest rates on student loans, here are three ways to do it.
1. Refinance student loans
Refinancing a student loan involves taking out new student loans to pay off your existing loans. In the future, you would pay off your new refinance loan at the rate and terms set by your lender.
Refinancing student loans could benefit you if you are able to get a lower rate and still have several years to pay off your loans. It is also an opportunity to switch from a fixed rate loan to a variable rate loan or vice versa.
Keep in mind that refinancing a student loan means lenders will be looking at your credit history and credit score. Eligibility for the best interest rates may require you to apply for loans with a co-signer if you have a limited credit history or a low credit rating.
Before you apply for a loan refinance, it is helpful to use a student loan refinance calculator to see how much money you could save and what your new monthly payments might be. You can also use an online tool like Credible to compare student loan refinance rates from several lenders without affecting your credit score.
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2. Get a new student loan
Interest rates on private student loans are low, in large part due to the Federal Reserve’s decision to cut interest rates to zero in the first quarter of 2020. This could make it a good time to take out a new one. private student loan if you need money for school.
Again, your ability to qualify for the lowest interest rates largely depends on your credit score and credit history. A co-signer with good credit could help bolster your application, making it easier to approve new loans at good interest rates. Credible can help compare the rates of different lenders, again without impacting the credit score.
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A student loan calculator can help you estimate the costs of different loans before committing to a lender. It’s important to consider how new student loan payments might fit into your budget now if you plan to make payments while in school and what you can afford to pay after graduation.
3. Get a student loan with a variable interest rate
When comparing lenders, consider whether it makes more sense to look for loans with a fixed interest rate or a variable interest rate. Since student loan rates are currently so low, a fixed rate option could be attractive if you are able to lock in a low rate over the long term.
On the other hand, you may prefer a variable interest rate loan. Variable rate loans have interest rates tied to a benchmark rate. When the benchmark rate changes, the interest rate on your loans may follow suit, increasing or decreasing over time.
If you want lower interest rates on student loans, variable rate loans could offer you that if the rates keep going down. The lower the rates, the more you can save. Credible can help you compare variable interest rates and fixed student loan interest rates side by side to see which may be the best option.
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Read the fine print on student loans carefully
Knowing how to manage student loan debt is important to maintaining good financial health. Whether you decide to refinance a student loan or get a brand new loan, know the details of what you are borrowing first.
STUDENT LOAN RATES ARE LOW – HOW TO SAVE MONEY BY REFINANCING
Make sure you understand the reimbursement options available so that you can choose a plan that best fits your budget. Take note of any special discounts offered by the lender, such as a reduction in the interest rate for automatic payments. And finally, be aware of any deferral or forbearance options offered by the lender in case you have difficulty repaying your loans afterwards.