Multiple strategies exist to help pay down your student loans faster without obtaining any additional type of financing. For most of these strategies to work, however, the ability to restructure your budget is required. This is not always possible for all students, whether they are still in school or graduated.
The best student refinance programs offer a way out from under financial obligations which feel too heavy to carry forward. Continue reading to learn vital information about student loan refinance options and how to find the best lenders today.
It is possible to refinance both private and federal student loans for lower interest rates and shorter loan terms. What is a loan refinance? Essentially, a loan refinance allows you to combine multiple debts into one loan program.
A loan refinance might also be available to simply lower the APR or alter the term length on your current student loan. Qualifying for a refinance loan program involves different criteria than qualifying for your original student loan program or financial aid. Multiple reasons contribute to this factor. For one, most refinance loans are funded by private lenders on the open market. Policies also vary greatly between lenders, especially those pertaining to unsecured loan programs.
A secured loan is a loan obtained by collateral. Collateral refers to an item or asset, which is temporarily turned over to the lender until your loan balance is paid off in full. For example, home mortgage and vehicle loans are secured loans.
Your house or vehicle title serve as collateral for those types of loans respectively. If you default on a secured loan your lender has the right to take permanent possession of your collateral.
An unsecured loan is funded without the benefit of collateral. Personal loans to pay for dental work or vacation funds are examples of unsecured loans. The annual percentage rate (APR) you are charged for your loan is partially dependent on if your loan is secured or unsecured. Secured loan programs tend to offer lower APRs because lenders have a means to recuperate their money when borrowers default. Unsecured loan programs typically offer higher APRs because the lenders take more risk when funding these loans to borrowers.
When you refinance your student loans you are commonly applying for an unsecured loan. This is not always the case, however, if you own a home with equity in it when applying for your refinance loan. Some people have more than one student loan from multiple lenders. Others have high-dollar student loans with unaffordable payments. When you wrap multiple loans with a collectively high APR into one loan program with a single lower APR, you might save thousands in interest charges overall. Even if you currently only possess one student loan, a refinance program might still save you money. For example, five years after graduation you have hypothetically received a promotion and salary increase. For the prior five years you have also established solid credit (high FICO score). In this case, a student loan refinance might be available to lower the APR on your current loan and help you pay it off faster.
