When it comes to student loans, many people think they’re stuck with the payments they took on when they first signed up. But refinancing student loans can help you refinance your loan and get a lower interest rate or find more flexible repayment options.
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Variable Interest Rates
If you’re planning on refinancing your student loans, you may have come across the term “variable rate.” This is one of the most important things to consider when choosing a lender and loan option for student loans. Here’s what you need to know about how interest rates work and why they’re important when refinancing or consolidating student loans.
Fixed Interest Rate vs. Variable Interest Rate.
There are two types of interest rates: fixed or variable. The interest rate on your loan will depend on which type it is – fixed or variable. A fixed interest rate won’t change over time while a variable rate can change depending on economic factors such as inflation and market conditions.
Fixed Interest Rates
Fixed interest rates are also a good option for borrowers who have a long time horizon before they plan to pay off their loan because they provide peace of mind that your monthly payments will stay the same. However, fixed rates can be more expensive than variable and rate-based plans in the long run. In addition, if you plan on refinancing again in a few years, you may end up paying more than necessary because you locked in your interest rate too early.
“To check the terms and rates you may qualify for, Lantern by SoFi and its network lenders conduct a soft credit check.”
What to Look for When Refinancing?
When refinancing, you’ll want to look for the lowest interest rate. Some people are tempted to go with the longest repayment term, but that could actually cost you more than if you took a shorter term.
A longer repayment period can also increase your monthly payments and make it harder for you to pay off your loan within 10 years. When considering what type of lender is right for your needs, it’s helpful to think about whether or not they offer student loan consolidation services: some lenders only offer private loans, while others offer both private and federal loans.
What’s the Difference Between Variable and Fixed Rates?
There are two types of rates: fixed and variable. A fixed rate is the same for the life of the loan, while a variable rate can change over time. Variable rates are usually lower than fixed rates, but they can also be more expensive if interest rates rise. Fixed rates may be riskier if you think interest rates might increase in the future.
However, if something happens to your current job or income level (or worse—you lose your job), then having a lower monthly payment will help you keep up with payments and prevent things from getting even worse by defaulting on them. If this sounds familiar and you’re wondering how to refinance student loans right now, read on!
The decision to invest in a student loan refinance should be weighed carefully, as there are many factors to consider. There is no ‘one size fits all’ when it comes to refinancing loans, but by asking yourself these questions, you will be able to make your own informed decision on whether or not it’s right for you.