Refinancing student loans is an option for repayment few people pursue, in part due to common misconceptions. Seeking out new lenders and and applying for refinancing does not usually have a major impact on your credit. Most institutions do a “soft pull” on your credit to check if your eligibility to refinance through them. Shopping around, before committing to one can save you interests rates, allow you a better deal over all and give you more options. Once pre-approved, a “hard pull” will be preformed. A hard pull only lowers a credit score by a few points. These few points will not affect your credit score so adversely that it would be better to stay with a sub-par lender.
Consolidation and refinancing federal and private loans are not the same thing. Federal loans can be consolidated, private ones can not. However, refinancing is available for private loans and federal loans alike. Federal loans come with federal backing. Many people think refinancing through a private lender will cause them to lose the benefits and protections the government allows. However there are some private lenders that offer similar protection. In fact, some private lenders even allow for a more flexible repayment plan that fits in with your current financial situations. Unlike fixed options with Federal plans, private plans offer shortening of payment plans, for higher monthly dues or lengthening them for a smaller monthly sum if needed.
Refinancing student loans may or may not be best for you, but it is worth weighing your options. Gather data, use resources like the consumer finance protection bureau, and use caution when choosing the benefits that best fit your situations.
- 1Refinancing does not have a major impact on your credit score.
- 2Consolidating multiple loans can save money.
- 3Research all options and various lenders before making a decision.