FHA, 15-year fixed, 10% equity on approved credit

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.

Student Loan Refinancing

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.