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Should You Refinance Student Loans?
When it makes sense and when it doesn’t
Many millennials as well as other generations have graduated with crushing student loan debt. I’m not a millennial, but I know how hard this can be. When I graduated, I had to have roommates and get a lot of my stuff from Goodwill and Salvation Army to make ends meet, even though, as an engineer, I made a decent salary even as a new graduate.
For a lot of people today, it’s much harder. In addition to student loans, they may have a car loan as well as credit card bills.
So, are there any ways to make serving debt easier? One thing that people often overlook is the real cost of interest. Refinancing to a lower rate of interest can give you more money each month. You could use the extra cash to save up an emergency fund, invest towards long term goals, or buy the things you need that you currently can’t afford.
When does it make sense to refinance?
In order to refinance a loan, you essentially apply to a credit institution for a new loan to pay off the old one. Since there are typically fees involved with this process, it really only makes overall financial sense if this lowers the total cost of the loan.
