Your Private Student Loan: Refinance With A Better Rate

To refinance a private student loan requires practical in advance of filing your application. Refinancing your loan can result in significant savings and should be considered if the right conditions exist.

Comparing Interest Rates

To refinance a private student loan and have it make economic sense for you, the new interest rate on your refinanced loan should be lower than the current interest rate you are paying.

When you refinance a student loan, you are merely paying off an existing loan with a new loan. With a lower interest rate, you reduce the amount you pay each month, and you reduce your total interest expense.

Finding the Right Lender

Why would your lender be interested in offering you a new loan at a lower interest rate? If interest rates have dropped since you took out your original loan, lenders will be competing for your business. If you have been a good customer, your current lender would rather refinance your private student loan at a lower rate than lose it completely.

When you refinance your private student loan, it is a great opportunity to compare the services of other lenders and possibly establish a new relationship.

Words of Warning

Be sure that you understand when you refinance a private student loan you are not reducing the amount of the loan. You still owe the full amount you borrowed. You are reducing the amount of interest you will pay.

Also, make the best use of the savings each month from a reduced monthly payment. You might use the proceeds to prepay the loan, if that is allowed; to reduce other debt; or to invest for the future.

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