So Bruce Mesnekoff, how consolidation and refinancing are different in terms?
These two terms are used interchangeably by most people but there is substantial difference between the two. Understanding the difference is critical to know when can each be used and whether it will solve your purpose or not.
Consolidation lets you combine all your student loans into one loan and pay interest at a weighted average. Refinancing is taking a new loan to pay off all your student loans. Refinancing is not available for federal loans but only for private loans.Also only private loan lenders provide the option of refinancing, though a few might provide you with the option of refinancing private and federal loans.
Why Refinancing and Bruce Mesnekoff tells us what are the Advantages of it?
Refinancing has certain benefits if you get good pay.
- You will have to pay lesser interest rate. This helps you save monthly and eventually a bigger bank balance down the years.
- Your credit score is high which will help you gain multiple offers from lenders with lesser interest rate.
- Offers you variable loan interest which come handy if you took loan when interest rates were too high.
- You also have the option of decreasing your loan repayment cycle, This will increase monthly repayment amount but you will be loan free in shorter time and will save on even more interest money.
There is one major disadvantage that comes when you refinance private and federal loans. The benefits offered by federal loans like public loan forgiveness program or income driven repayment will not be transferred to private lenders. So if you are truly confident of your income then you can do away with such options and completely rely on private loans.
So Bruce Mesnekoff , Can you tell us Eligibility Criteria, I think its most important for our students.
The eligibility is determined by your financial stability, your credit score, employment history etc. If you have poor credit, you can always have a co-signer to make the process feasible.
Refinancing is surely a great way to save money, but whether it best fits you or not is completely your decision. Thoroughly analyze all the pros and cons against your goal and then take the first step. Make the best use of the number of lenders available to provide you with the best solution for your areas of concerns. Good Luck! You can also contact Bruce Mesnekoff an author of The ultimate guide to student loans and CEO of Student Loan Help Center Florida.