Refinancing your student loans is a big step, and it’s definitely not something that you should take lightly. While it’s true that many people with student loans in the UK have benefited from refinancing, there are a lot of questions you will need to ask yourself before moving forward. Everyone wants the lowest possible rate on their loans, and refinancing could help you achieve that. Not everyone qualifies for refinancing, and you will need to take the following factors into consideration.
The Amount You Owe
The first thing that you need to consider is how much money you owe in student loans. If you owe thousands of pounds in loans, there is a good chance that you can benefit from refinancing. Anyone who is close to paying off their loans in full will want to tough it out, as refinancing probably isn’t the way to go. If you cannot refinance because the balance of your account is too low, start looking for ways to cut back on everyday expenses. You could also get a part-time job to temporarily supplement your income until your debt is paid.
Which Kinds of Loans do you have?
The type of loans you have will be something else to factor in before you decide whether or not to refinance. Most of the people who go this route have loans from private lenders, because refinancing government loans can remove certain protections that allow you to make payments based on your income. You will definitely want to take this into consideration before making a decision, because it is very important. It is just a lot easier to get private loans refinanced, so keep that in mind.
Your Credit Score
Take a look at your credit score before you make any decisions regarding refinancing of any students loans you have. If your credit is still the same or even worse than when you got your loans in the first place, you might not be able to refinance. If you notice that your credit has improved even a little bit, you should probably try to refinance your student loans through another lender. Lenders are usually willing to give people with decent credit scores a break when it comes to the interest rate. If your credit score is still abysmal, make sure that you spend some time working on it before you try to refinance.
While it is a good idea to shop around with different lenders, you will need to be careful about filling out lots of applications in a short period of time. This could actually hurt your credit score, so it’s something you will need to be aware of when going through this process. You should learn as much as you can about some of the different private lenders that are based online before applying so you can narrow down the list a bit. You don’t want to start sending out lots of applications blindly, because your credit will suffer as a result.
When you are looking at different lenders for student loan refinancing, you should find out what kind of policy each one has when it comes to postponements. If you lose your job and become unemployed, you might not be able to keep making payments on your loan for a little while. You should try to find a lender that is flexible and will work with you in this type of situation. A lender will only give you so much time to start making payments again, but some lenders are more flexible than others when it comes to this.
Get the Details
It’s also important that you get the specific details of the loan before agreeing to anything. You should know exactly when you have to start making payments, how much you will need to pay each month, when the loan is due to be paid back in full, and what your interest rate will be. It is important that you not sign the loan until you get all of this information. One of the biggest mistakes that people make when refinancing their student loans is to ignore these crucial details. You will also need to read the fine print in the contract so you know you aren’t getting ripped off or taken advantage of.
Don’t be too Stubborn
If you don’t have a great credit score and you want to refinance your student loans, you will need to be realistic about the kind of deal you can get. You shouldn’t keep holding out for a better interest rate but rather do some research and choose the best option. Since you will only be able to do so well when refinancing, it is crucial that you not be too stubborn about the terms of your loan.
How Much Can You Pay Each Month?
The amount of money that you can afford to pay each month towards your loans will be one of the more important factors to take into consideration. You should only agree to a loan deal with a lender if you are absolutely sure that you will be able to make your payments on a regular basis. If you fail to make your payments, your credit will be negatively impacted in a big way and you will still owe the lender the remainder of the loan. Make sure that you run the numbers before agreeing to a certain monthly payment amount with any lender.
Don’t Rush into a Final Decision
Once you take out a loan with another lender and refinance, you will be obligated to pay back the full amount under the new terms. You shouldn’t rush into making a decision about refinancing either way, because it is a big deal. Some people can benefit from doing this while others do not. Take stock of your financial situation and spend a decent amount of time looking for a lender you can trust. Refinancing your student loans could be the right decision, but it depends on your overall financial situation.