Making the Choice to Refinance Your Private Student Loans

When deciding whether or not you should refinance your student loans, it's important to weigh all of the benefits. One of the primary benefits of refinancing your private student loans is that if you have more than one loan, you can consolidate them into a single loan with one monthly payment. This keeps you from having to worry about keeping track of multiple due dates and writing multiple checks. Another benefit of choosing to refinance your private student loans is that you can take advantage of the many options for reducing your interest rate. Many lenders offer rate reductions for things like setting up automatic bank drafts or signing up for an online account versus receiving paper statements. You can also look forward to a lower interest rate if your credit history has improved since you originally secured your loans. A lower interest rate translates into a savings of thousands of dollars over the life of your loan.

Looking to Refinance After Consolidation

If you have already gone through the consolidation process and are just looking to reduce your monthly payments, it will be more of a challenge than if you have never consolidated before. If you find yourself in this predicament, just talk to your current lender and see what options they may have for you. Typically, they will not do much of anything if your loan payments are past-due or if you have a poor payment history. However, if your loan is in good standing, they may offer to reduce your interest rate by a point or so. If you have strong credit, you can also shop around and see what other lenders may be able to do for you. Maintaining a positive attitude is important because it may get frustrating after hearing no so many times. Many lenders back-off from voluntarily buying student loans that have already been consolidated.

Refinancing Federal and Private Student Loans Together

Many people wonder if it is possible to transfer a private student loan into a federal student loan program. Unfortunately, the answer to this question is No. Private student loans and federal student loans cannot be refinanced or consolidated together. If you have both private and federal loans, they'll need to each be processed separately.

The Process of Securing Your New Loan

To get started, you can do some online research to find lenders that have attractive private student loan consolidation programs. You can check with the financial institution that handles your current banking needs or you can check with the major financial institutions like Chase Bank, Wells Fargo, and Citibank. There are also smaller lenders that are just as reputable and that also provide top notch customer service. Once you find a lender, you can submit an application online (or in person) to initiate the process. You can expect the processing of your application and distribution of your loan to take anywhere from 45-60 days. During this time, the company will contact your current lenders and get the payoff amounts on your loans. They'll need this information to originate your new loan and pay off your existing loans. Once all of that is finalized, you'll be sent paperwork telling you how much your payments will be and when your payments are due. You should also receive a letter from your first lenders stating that your loans were paid in full.

Buyer Beware

It's important to note that you should always deal with a lender that engages in ethical lending practices and that has a strong reputation in the community. The Better Business Bureau is a great resource for verifying whether there are any customer complaints against a particular company.

To learn more about private student loan consolidation or for other great student loan articles, visit the Private Student Loan Consolidations website.