Are you thinking of applying for a student loan? If so, a promissory note will need to be signed˳ Basically, this is a contract˳ On the due date, you will have to pay the loan along with the amount of interest based on the terms and conditions˳ Often, students don’t think much before accepting the terms and conditions of the promissory note˳ If you have got a loan but you are finding it hard to pay it back, you can refinance your student loan˳ However, make sure you consider 4 important things before you go ahead and refinance it˳
No financing from the federal government
Remember: it’s the congress that decides on the rate of interest for the federal student loans˳ Moreover, the rates of interest are set based on the law irrespective of how good your credit rating is˳ If you have lower credit score, the interest rate will be higher and vice versa˳
It’s possible to use a private loan to refinance a student loan˳ However, keep in mind that the same can’t be true about refinancing a federal loan into another federal loan˳
Know the difference between refinancing and consolidation
Some borrowers believe that the consolidation of their loans is a good way of reducing the rate of interest just like refinancing˳ This is a common confusion as the options are quite similar˳ You get a new loan accepting new terms to replace a loan you took earlier˳ However, it’s important to keep in mind that you can’t reduce your interest rate by consolidating a federal loan˳
However, you can enjoy some benefits with consolidation˳ For instance, you are free to opt for a service you like˳ Moreover, you can qualify for other forgiveness and repayment options˳
Refinancing and your loan terms
Remember: refinancing will made changes to the terms of your loan˳ For instance, your interest rate may come down based on your cosigner or credit rating˳ The reduction in the rate of interest is the main thing that entices students˳
As said earlier, the new loan will feature new terms and conditions˳ What this means is that the rate of interest may go up˳
If you are finding it hard to repay your loan, the protection that come with federal students loans can help you˳ For instance, you can try repayment plans that reduce the payments˳
Other methods
You can use other ways to cut down on the interest˳ Moreover, if you want to get federal student loans, you can use other options to reduce your interest rate˳ Therefore, it’s a good idea to give them a go˳ Some servicers may choose to reduce the interest rate provided you register in automatic payments˳
You may also choose to pay an additional amount each month˳ As far as prepayment goes, federal student loans have no penalty˳ If you pay back faster, your overall interest will come down˳
So, if you are going to refinance your federal student loan, we suggest that you consider these 4 things˳ They will help you get through the process more easily˳ Hope this will help˳
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