The interest rates for a money-saving student loan refinancing have just fallen to a new low
Borrowers who feared waiting too long and missing out on record-low student loan refinancing rates have a new opportunity to land historical savings.
According to a survey by one of the largest credit marketplaces, interest rates have fallen on both five-year floating rate refinancing and ten-year fixed-rate loans. And 10 year rates have dropped to a brand new low.
Given the size of a typical student loan, even a slightly lower interest rate can make a big difference in the amount of money you lose in interest.
5-year floating rate loan
For those looking to pay off their student loans faster, five-year floating rate loans averaged 2.65% in the week of Sept. 27, according to data released this week by the Credible marketplace.
That’s well below 2.93% the week before, says Credible – and not far from the record low of 2.53% hit a few weeks ago in late August.
The average is specific to borrowers with a credit score of 720 or more. Better interest rates are available for those with excellent credit scores.
Borrowers with scores above 780 average 2.67%. On the other hand, people with mean values (between 640 and 679) averaged 4.59%.
Keep in mind that floating rates fluctuate based on market conditions, which means that borrowers can pay more later.
10 year fixed rate loan
For borrowers looking to get a good deal, 10-year fixed-rate loans averaged 3.36% in the last week of the survey.
That’s a new all-time low for the data and less than the previous average of 3.41%.
Again, those with excellent credit scores qualify for better interest rates averaging around 3.44%. Those with unimpressive stats could suffer rates as high as 4.77% or worse.
Refinancing to a fixed rate loan usually doesn’t save you as much as a floating rate loan, but your interest rate is guaranteed not to rise over the life of the loan.
A 10-year loan also offers significantly more manageable monthly payments than a 5-year loan, although you will spend more money overall once your debts are paid off.
This is how you secure the best refi rate
If you have a government student loan, make sure you know what you’re giving up before you jump into a refi.
When you switch from a federal loan to a private loan, you are not eligible for the type of government support some borrowers enjoyed during the pandemic, including payment freezes, interest waivers, and even loan waivers.
However, if you already have a personal loan or are happy with the compromise, refinancing at a significantly lower interest rate can make a massive difference in your budget. Here are some tips to help you get the best possible price:
Boost your credit score. Lenders check your creditworthiness to see how responsibly you are using money. See your score online for free and see if you can take any action to improve it. A free credit monitoring service can give you a few tips, including ways to get rid of your other debts faster.
Set up automatic payment. Many lenders will offer a small percentage of your interest rate while you are signed up for automatic payment. It ensures they are paid on time every month.
Consider a co-signer. If your credit isn’t good enough to qualify for a better interest rate, you can ask a friend or family member with good credit if they are willing to co-sign your loan. Be careful – whoever signs will be on the hook for your payments if you can’t afford it.
Compare your options. The world of student loans is huge, with dozens and dozen of lenders. The only way to know that you are getting a good deal is to look around. Different lenders will weight the factors differently in your application, so always get multiple quotes before clicking “Apply”.
This article is for information only and is not intended as advice. It is provided without any guarantee.