Millions of people have taken student loans so they could afford higher education. This also means that millions of people have found themselves in ever-growing debt that seems impossible to pay off. Luckily through student loan refinance you don’t have to drown in debt anymore. In this article, I will be focusing on the top three tips for refinancing.
Let’s dive in!
Tip #1: Understand the Pros and Cons of Financing
Refinancing is a great option to alleviate school debt but it’s important to know that it also removes the opportunity for student loan forgiveness. This is important to consider if you work in the education, medical, and legal field. This also is a consideration if you have taken a private student loan as you won’t be able to do the following as well:
- Repayment plans based on income
- Lower payment deferment
- Rate fluctuations due to variable interest rates
For a student loan refinance to be beneficial in the following ways:
- Paying off your debt quicker
- Saving a considerable amount of money
- Simplifying the loan agreements
- Having a cosigner released from their contract
- Sign up with a different loan servicing company
To choose the right refinancing option you can check out helpful sites like this.
#2: Investing Wisely
One of the best ways to take advantage of refinancing is to have a smart way to grow your income as well. Placing your hard-earned cash in a high-interest savings account. These savings accounts similar to a mutual fund or IRA can help you pay off your student loans much quicker.
The main difference between a regular savings account and a high-interest one is of course a higher interest rate on the premium. Typically you can expect a mere one percent at the end of the year. So if you manage to save five thousand dollars and put it in regular savings account you can look forward to an extra fifty dollars. Not that exciting right? With a good high-interest account, you can get as much as 1.5%.
With investments, it is always important to diversify your portfolio so consider investing in groups where you can grow your money passively.
#3: Deferment and Forbearance Options
If you find yourself incapable of making student loan payments don’t just ignore it. Instead, look into whether you qualify for a deferment. This means you are allowed to temporarily halt payments. You can request these through your federal student loans while you are unemployed. This is a great option to help you get back on your feet without stressing about accrued interest.
Keep in mind that while the interest in a federal loan is taking care of during this time for subsidized federal loans unsubsidized and private loans must be paid for by the loan recipient.
If you have taken student loans and feel overwhelmed take a deep breath and take these tips into consideration. You do not have to win the lottery to pay off your student debt. You can take advantage of refinancing options as you grow your wealth through smart investments and a high-interest savings account or other interest yielding fund. Last but not least, look into deferment eligibility. For more information, go here.
Author Bio: Rachael is a content writer at Pearl Lemon who has written on a diversity of topics, from colored diamonds to SEO software. In her spare time, she enjoys singing, sketching, cooking, and video games.