Home Money 4 Student Loan Refinancing Myths Debunked

4 Student Loan Refinancing Myths Debunked

198
0
student loans

Are
you planning to refinance your student loans? Worried about the hidden cost
involved?

A
student loan refinancing is done to lower the interest rate on the monthly
payments. Most students have to take up loans with a high-interest rate as they
do not have a credit history at the time of applying for the loan. If you are
in this situation, the best way out is to simply refinance the student loan.

student loans

Here are the 4 student loan
refinancing myths that might stop your form getting a new low-interest loan.

1. Refinancing will lower your
credit score

Refinancing doesn’t lower your credit score if you follow the fundamental rules of refinancing and debt consolidation. There is a reason why some people see a major drop in their credit score immediately after refinancing. They submit full applications to lenders without considering the implications of it.

Lowering
of credit score after a student loan refinancing is one of the biggest myths
which stops so many students from doing it. No one deserves to pay high interest
on their student loans.

2. Once you refinance, you are
stuck with the same interest rate

This
is not true. You can refinance as many times you want and get a better interest
rate each time you do it. The only issue here is, you have to go through the
paperwork and documentation process all over again as you are now taking a
whole new loan.

Another
reason why this subheading might be seen as a myth because when you refinance a
student loan, you are subscribing to the new terms set by the lender or the
credit union. People don’t want to go through the headache of reading all the
terms and conditions again.

3. Refinancing is expensive

Lenders
do not charge a single penny from borrowers who want to refinance their student
loans. In fact, for them, it does not make any sense to charge you. They want
borrowers who are responsible and are willing to repay the loan on time.

By
refinancing a student loan, you can save a lot of money as you pay back at an
interest much lower than the previous one. Lastly, do not entertain lenders who
charge any joining fee. You should expect a sign-up bonus from them.

4. A co-signer is accountable
until the loan is cleared

Lenders
have a co-signer release policy that lets your parent breathe free as they are
no longer held accountable for your student loan. A co-signer is needed at the
time of loan application as a student does not have any credit history and the
only other person they could rely on is their parent or a close relative. This
gives lenders assurance that there is someone other than the student who can
pay-off the debt if the student fails to finish his/her education or to secure
a job later.

Summary

Refinancing
is a win-win strategy for both the borrower and the new lender. Also, the old
lender makes a decent profit. Obviously, not as much the new lender but there
is nothing to lose. So, don’t be under an assumption that you are taking a
financial risk by refinancing your student loan. 

Amey Author
Sorry! The Author has not filled his profile.

LEAVE A REPLY

Please enter your comment!
Please enter your name here