While new student loan refinancing programs may look attractive, graduates who have a large number of student loans may first want to make certain they are ready to refinance and that they have found the right program. Student loan rates have increased since the early 2000s, meaning that anyone with a locked-in rate will probably not want to refinance because their interest rate will increase. However, more recent graduates may find that refinancing their loans, especially if they are high interest private loans, may be a good financial move.
Those considering a refinance first need to look at the various loan options to ensure that they are actually getting better terms. For example, some lenders may offer to lower the loan's interest if the borrower makes a specific number of payments on time. This may be a better option than going with an initial lower rate that never changes. Borrowers also need to consider if they want to change from a loan through the government to one through a private lender. Government-backed student loans offer a number of repayment options that private loans do not.
As with any loan, the borrower’s credit score and credit history will pay a major factor in the terms they are offered. Borrowers should pull their most recent credit report and score to see what may affect their chances of securing good loan terms and what, if anything, can be done to eliminate any blemishes on the report.
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