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A student loan is a loan used to finance your
education. Since most students are young people, it
is obvious to assume that most student loans are given
to young people.
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Because we are young when we get our first
student loan, we often don't now exactly what
job we will get when we graduate, and whether
or not we will be able to repay the student
loan.
Most students graduate, get a job, and are
able to repay their student loans. Unfortunately
for some students their life does not unfold
exactly according to plan. They may not get
the great job they had hoped for, and they may
not have the money to repay their student loan
as quickly as they had hoped.
It may be necessary for those students to try
to consolidate
a student loan by getting a debt consolidation
loan to repay your student loan.
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What does it mean to refinance a student loan?
To refinance a student loan, also called a school
loan consolidation, means one of two
things.
First, it can mean re-negotiating the terms of the
existing student loan with the existing student loan
lender. For example, you may have a loan requiring
you to repay $500 per month for the next three years.
You may be able to refinance your student loan by
re-negotiating the terms of the loan with your lender,
so that you only pay $300 per month, but over a longer
period.
In many cases the lender will agree to this re-negotiation,
because since you will now be paying for a longer
period, they will earn more in interest. Of course
you have to decide if the reduced monthly payment
is worth it for you, because in total you will end
up paying more money.
The second method to refinance a student loan
is to get a brand new debt consolidation loan. In
this case you are not consolidating credit card debts;
you are consolidating or refinancing your student
loan.
Here's an example: Assume you have two student loans,
one for $10,000 and the other for $15,000, and your
are supposed to repay them over the next three years.
You are finding it tough to make the full payments
on these loans. Now that you are finished school,
the student loan lender wants to get repaid as fast
as possible, so your monthly payments are more than
you can afford.
If you have a good job, it might be possible for
you to approach a new lender, such as your bank or
credit union, to refinance your student
loan into a new loan. The new lender may give
you a $25,000 student loan debt consolidation loan
to allow you to repay your two existing student loans.
Notice that your total debt has not decreased. You
still owe $25,000. However, you now have one monthly
payment instead of two, and you may have also reduced
the interest rate you are paying. It may also be possible
to get a five or even ten year term on your new debt
consolidation loan, so your monthly payments are much
lower than what you were paying on your original student
loans.
If your credit is good but not great, a cosigner
or guarantor, such as a parent, may be necessary to
refinance your student loans.
If you have more student loan debt than you can handle,
consider your options to refinance your student
loans through a debt consolidation loan to lower
your interest and lower your monthly payments.
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