Refinancing usually does not involve any initial fees or other costs, and student loans are not subject to upfront payments. If you find a lower interest rate, you can save money. Can you refinance student loans more than once?
Benefits of refinancing
Refinancing means combining student loans into a new private loan with a lower interest rate. A lower rate will save you money over time by reducing the amount you pay with interest. If you refinance at an even lower interest rate, you can save more.
For example, suppose you end up with an existing $ 40,000 debt at an interest rate of 7%. You will make payments of USD 464 every month for 10 years, and until the loan is repaid you will pay USD 15,732 interest.
Can you refinance at a lower rate?
To refinance student loans – be it the first or the third time – you need to meet certain requirements to get the best interest rate.
Lenders want to see that you have:
- A significant and reliable source of income
- A history of consistent repayments in the past
- Low debt to income ratio as well as
- Good credit rating.
How to refinance student loans
To refinance student loans, you must have a creditworthiness of 600s or higher and a solid income, or sign with this profile. If you have low credit or other financial difficulties, refinancing is not the best solution. Instead, talk to your lender or service provider about other ways to lower your payment or interest rate.
Down the road, when your credit improves, you can re-examine your refinancing.
You can choose to refinance both private and federal loans. If you refinance federal loans, you will lose the opportunity to redeem the loan and the income-dependent repayment options.
When is it worth refinancing more than once?
You will most likely benefit from refinancing student loans if you have a lot of student debt and high interest rates.
If you have previously refinanced and obtained a very competitive interest rate, you probably won’t save much by re-financing. But if your finances and creditworthiness have improved significantly since your last refinancing – and if interest rates have fallen – there may be a chance for savings.
Also, if you’ve already consolidated student loans, refinancing may still be a good option.
Multiple refinancing is fine – if you get a good offer
If you have already refinanced student loans and are wondering whether to do it again, it can be a profitable strategy depending on your situation. There are many good reasons to refinance a loan many times and it can be more common practice than you think.
Before refinancing, review the available options. Compare qualification requirements, interest rates, fees and benefits before making a decision.