Millions of Americans have student loans, with estimates showing that around eight million people are overpaying by not taking advantage of deals offering lower interest. While some graduates might not have refinanced their student loans, others don't even know this is an option. Making the most of changing interest rates could provide savings and enable graduates to pay back their loans more easily.
Some graduates can be left reeling by the amount they have to pay back, and monthly repayments can leave little for the future. People may dream of buying their own home, but with high monthly student loan expenses, saving for a down payment might seem impossible.
There are three main refinance options:
- Increasing the term of your loan, such as lengthening the standard ten years to fifteen or twenty years, can make the total cost of the loan more expensive, but can reduce your monthly repayment. This will leave you a little more money in your pocket at the end of each month.
- Shortening the loan term might be an option if you've received a raise. This will increase your monthly costs, but will reduce the lifetime expense of the loan.
- If you can manage to refinance your student loan term at a lower interest rate, your large loan balance will become cheaper. This decreases the costs but can also reduce monthly repayments.
Student loans can often seem an insurmountable challenge, especially for recent graduates just realizing the extent of their debt. By checking out your refinance options, you can manage your personal finances more easily, whether paying your loan off quicker or reducing your monthly repayments.
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