Is it time to refinance your student loan?
October 10, 2016
Student Loan Refinancing
Low interest rates are one very good reason you should consider refinancing your student loan. Another is: an improvement in your credit profile that has occurred since you graduated.
What does it mean to refinance my student loan?
Essentially, you take out a new education loan with better terms and use it to pay off existing student debt. Maybe it’s time.
The benefits are clear:
- You can lower your monthly payments
- Put the savings associated with lower monthly payments toward your retirement
- Fund a small business
What about using home equity loans?
Home equity loans can be used to refinance your student loan at a lower interest rate—but be careful. When you do this, it could lead to problems down the road:
- Your rate may be lower, but you risk losing your home if you cannot make the payments. How does this work? Well, lenders are willing to offer a lower interest rate because they know they gain a legal claim on your home if you can’t come up with the payments.
- You give up repayment options and forgiveness benefits on federal loans. What does this mean? You lose the benefits of protection that come with a federal student loan.
- There may be an impact on your taxes. If you have a high income and you itemize deductions, the interest you pay on a home equity loan could equate to a greater tax benefit.
It’s important that you have a clear understanding of the risks and benefits to using a home equity loan to pay off your student loans at a lower interest rate. When it comes to student loan financing, Golden Oak Lending is here to consult with you to make the best decision for you.