Student Loan Consolidation vs. Refinancing: Which Is the Right Option for You?
44 million Americans carry student loan debt. Many of those people also deal with consumer debt.
At some point, it becomes too much to keep up with. Then you have to consider whether student loan consolidation vs refinancing is the better option for your situation.
Read on to learn more about each option so you can make the right decision for you.
Consolidation of loans, student or otherwise, means bundling all those various loans into one loan.
Instead of paying the minimum payment on various loans, you have just one monthly payment to make. Basically, this is a way to simplify your student debt.
Consolidation works out best when your student loans originally came from government programs.
When you refinance, you replace a loan (or two or three) with a brand new loan. You apply for a new loan and then use those funds to pay off the student loans.
This new loan usually has some kind of perk. Perhaps it is a lower interest rate or offers 0% interest for the first number of months.
Refinancing may allow you to lower how much you pay towards interest as well as the monthly payment.
Student Loan Consolidation vs Refinancing
Federal student loan consolidation is offered by the government. They roll all your loans into a new loan. They give you a new interest rate that is a weighted average of your old loans’ rates.
This method may or may not save you any money. But it does mean fewer bills to keep track of every month. Visit Debthunch to learn more.
One of the benefits of going this route is that you can switch from variable rates to a fixed rate. If you believe that interest rates are on their way up, you can lock in at a lower rate and save money on interest for the next few years.
Sometimes, by having a longer repayment term, you can pay less each month. But be wary, this will mean you end up paying more interest in total once the loan is repaid.
Student loan consolidation vs refinancing is a good option if your financial situation has changed. If you are in a better position now you could enjoy a new loan at a lower interest rate or with a better lender.
This could lower your monthly payments and reduce your loan term. As a result, you will pay less interest over the life of the loan.
Refinancing also gives you the option of choosing a variable rate if you desire that,
Unlike a federal loan consolidation, student loan refinancing is only available from private lenders.
Make the Right Choice For You
Thanks for reading. Now you know the pros and cons of student loan consolidation vs refinancing. Hopefully, you can now make a decision with confidence.
Be sure to check out our other blog posts for more interesting articles for you to read.