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Student Loan Refinancing

The rationale for refinancing a student loan is similar to that for refinancing many other types of loans: the person may be hoping perhaps to get a better interest rate or maybe lengthen the repayment time. Succeeding at either of these endeavors is likely to lower the monthly payments and make the loans easier to handle.

Refinancing to make the monthly cash flow easier is especially crucial for graduating students in a time of recession. At such a time, the chances of the student finding a good job, whether or not it’s in their field of expertise, is much reduced. A recession is when companies are scaling back their workforces to cut costs, and not many of them will be hiring graduating students in great numbers. Yet this is the time when those students could begin facing the start of their loan repayments. And those payments could be hefty.

Refinancing may be particularly beneficial if the student has more than one school-related loan. These could be from different lenders, but even with several loans from the same lender, each one is likely to have a different interest rate, having been taking out at different times. Having more than one loan, with separate interest rates, could make keeping track of everything quite difficult and confusing. It’s better, if possible, to pay all of them off with a new loan that gives the borrower just one set of numbers to worry about.

Unfortunately, the same conditions that make it hard for the student to get a good job also make lending institutions less inclined to give out loans to individuals. The recession is part of the problem, but some of what precipitated the recession was giving loans to people who really didn’t qualify for them. This means that many of these institutions are very reluctant now to approve loans for individuals, especially if they’re students without a stable, well paying job. Banks and other lenders take a lot of convincing, if they can be moved at all.

Graduates should do what they can to try to alleviate this potential impasse. Having a full-time job, for example, even if it’s not yet the well paying one they hope eventually to get, can be a testament to their stability and reliability. They may also help themselves by getting a copy of their credit report and checking whether anything on it could be an obstacle. Whatever can be fixed, or even simply improved upon, is bound to make them look better to a lending institution.

The student also might expand their options by looking into online lenders as well as at traditional banks or credit unions. An online lender would need to be carefully researched to make sure they themselves were reputable and reliable. But good online lenders may provide loans more quickly, yet not have any higher charges than regular banks.

In the current climate, it might not be easy for a graduated student to refinance a student loan. But the chances of doing so are certainly worth exploring. Getting their finances and credit standing as clear and straightforward as possible at this stage of their life can only benefit them as they move forward into their future.

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