As the financial markets continue to struggle, lending is the
only way that many traditional banks have to increase revenue. The
investment sector made out like bandits again but many small local
and regional banks still depend on loans for their primary source
of income.
Refinancing student loans can be done at any time, even if you
are still in school or haven't completed your degree. It's a good
idea to keep on the lookout for any opportunity to reduce the
interest rate on any student loans. Many of the new student loans
in 2010 will be offered at a lower rate than before 2008. So if
you have a two year old loan, this might be a good time to
refinance if there are better terms available.
There are other issues to look at besides just the interest
rate when refinancing student loans. The devil is in the details,
like early payment penalties, origination fees, administrative
fees, and length of the loan to name just a few. I know the
documents are long, confusing, and difficult to read. If you don't
understand something mentioned, ask for further information. You
could also ask friends, associates, or other knowledgeable
financial advisors.
There are many places that you can check out that might offer
some good opportunities besides local banks. Credit Unions, many
large companies have an employee financial services (often
specifically for education), relatives, and private investment
firms. Since the interest rates are so low these days, a return of
8%-10% looks great after the 2%-3% offered by many traditional
places to invest money.
You also need to make sure whatever credit history you may have
is reported accurately and need to find out your current credit
scores. If you don't have any credit history, you need to
establish some good references. It doesn't have to be a big dollar
credit reference, you can start small and slowly increase the
amounts and show a pattern of paying on time.
Many local merchants provide financing on smaller purchases
like computers, appliances, or furniture. You can generally pay
down a little and finance a little to start acquiring a credit
history. It may take a few months to build up new credit but you
will see the benefits when you go to refinance students loans
since you will have a track record.
A student loan is normally an unsecured loan, no physical item
is available to act as collateral (unless you own something of
value to use as collateral). Unsecured loans are a little more
difficult to qualify for and may have a higher interest rate than
collateral loans. But with the current low interest rates they
still may be a pretty good deal.
It may also take 6 months to a year to build up some credit
history to get a better interest rate but as mentioned before, you
can look for refinancing student loans options at any time. If it
takes a few months of effort, the opportunity to save on the
better interest rate can save you a good chunk of money over the
period of the loan.
Since most student loans are for 10 years or more. any
reduction of 2%-3% or more can help reduce the cost of
refinancing. And it may even take you up to a year to either
establish new credit or remove any negative items on your credit
report it's still a very good idea. Not only for refinancing
student loans but for any other future credit transactions.
The good news about your credit score is that you can always
turn it around with some dedicated effort and demonstrate to
lenders that you are working on improving your score. If you need
help, check out our free Credit Repair Kit.
Refinancing student loans can save you some money, especially
if you received them during at a higher interest rate than is
available now. It make take a some research and do diligence to
find the best deal but it can save you quite a bit of money over
the long haul.
