Sponsored – Navy Federal
A process that involves taking out a new loan to pay off an existing one. The goal is typically to get better loan terms, such as a lower interest rate, to save money.
If you’re a college grad making timely payments on your student loans, refinancing could help you simplify loan repayment, lower your monthly payment and/or reduce the overall interest you pay on your student loans. As you think about your options, here are some important questions to consider.
First, Ask Yourself…
1. What do I hope to accomplish by refinancing? Want to lower your interest rate, repay your debt faster or free up cash? Do you have multiple loans with multiple payments due at different times and want to streamline your budget to have just one payment? If you have a steady, reliable income and have built up your credit since graduating, refinancing your loan or loans could be an attractive option.
Some lenders, like Navy Federal, will allow you to refinance and consolidate federal and private student loans together. If you’re looking into refinancing your federal student loans, be aware that refinancing can impact your ability to pursue federal forgiveness options.
Keep in mind that if you have federal student loans, make sure you review all their benefits (income-based repayment plans, loan forgiveness for public service or certain forbearanceThe lender’s postponement of foreclosure to give the borrower time to catch up on overdue payments. and defermentA period of time when the student isn’t required to make payments on his or her student loan. This often includes the period during which the student is attending school. options), so you can decide if a lower interest rate, lower payment or more time to pay back your debt is worth potentially losing them.
2. What’s my credit scoreA snapshot of an individual’s credit history that represents his or her level of credit risk.? While federal student loanA loan to pay for higher education. Student loans usually have lower interest rates and better repayment terms than conventional unsecured loans. rates are set by federal law and aren’t based on your credit score, private student loans rates are generally determined by your credit score and history. Check your credit score. If it improved since you took out your student loans, you may be eligible for lower interest rates on student loan refinancing.
3. When do I need a co-signerA person other than the borrower who signs a credit agreement and is legally obligated to take responsibility for loan repayment if the borrower doesn’t make payments.? If you’re in the process of building your credit, adding a credit-worthy co-signer may help you qualify and get a lower rate. Some lenders, like Navy Federal Credit Union, will allow you to request a co-signer release after you make a certain number of timely payments.
4. Do I have Servicemembers Civil Relief Act (SCRA) benefits? If you’re an Active Duty servicemember who applied for federal and/or private loansEducation loan programs that aren’t sponsored or guaranteed by the federal or state government. before the start of your service, you may be eligible for an interest rate reduction through SCRA. Before you refinance, check to see if you’ll lose this benefit.
Next, Ask Your Lender…
5. Do you offer a variable or fixed interest rate, and how is the interest rate calculated? Your loan’s interest rate is probably the most important factor to consider when refinancing. Fixed rates are more predictable for budgeting. You’ll have the same payment every month.
But, you might get a lower rate in a variable interest rateAn interest rate on a loan that changes when the market interest rate (also called “prime rate” or “index”) changes. loan. The difference is that a variable rate can change depending on the market interest rate (sometimes called the “prime rate” or “index”) and the terms and conditions of your loan. That means your payment could also change. Ask about how the annual percentage rateThe yearly cost of credit for a loan, including finance charges (interest, fees and other charges). The APR may differ from the interest rate. (APR) is calculated and how much and how often the interest rate could change.
6. What are the repayment terms and conditions? The repayment terms and conditions of your loan are the things you and your lender agree on (like when your monthly payments begin, how much they’ll be and whether there are fees for late payments or safety nets for hardships like the loss of a job). Find out if you can get a reduction in interest for scheduling automatic payments, a benefit offered with Navy Federal’s student loans.
7. What are the terms of my new refinanced loan? The term of the loan is different from the terms and conditions. It’s the length of time you agree to repay the loan (like 5, 10 or 15 years). Longer terms will mean you’ll probably have a lower monthly payment, and shorter terms will mean you’ll probably pay less interest over the life of the loan.
When you’re ready to connect with a lender, see if refinancing with Navy Federal makes sense for you. It just might be the solution you’re looking for.