Personal loans to refinance student loan debt are becoming increasingly popular among college graduates. These loans often come with a fixed amount of time to pay them back.
This means that if you’re in your twenties and just starting out on your career path, you want to be sure that your monthly loan payments are affordable. You also need to be aware that missing a payment could seriously damage your credit rating. So, doing the math where interest is concerned is incredibly important.
Weighing all the refinancing options available to you can be difficult on your own, which is why working with one of ELFI’s Student Loan Advisors is the best way to go. The appointment of a Student Loan Advisor is a unique feature of ELFI’s services. Your dedicated Student Loan Advisor can advise you on the following:
Your Student Loan Refinancing Term
Loan terms refer to how long the lender requires you to repay your debt. Most lenders offer student loan refinancing terms of five, seven, ten, fifteen, and twenty years. It can be tough to know which term is the right one for your situation, and selecting the most suitable term is important because your choice will determine how much you pay each month, as well as the total cost to you over the life of your loan. What’s more, you will be unable to change your repayment term unless you opt to refinance your loan once more at some point in the future. The bottom line here is that the term you choose is the one you’ll have to live with, so get the best advice before finalizing the deal.
The Impact of a Short-Term Loan on Your Financial Situation
If paying off your loan over five or seven years sounds appealing since you’ll be out of debt faster, you need to understand how picking a short term option could impact your debt in a few important ways.
You might get an awesomely low interest rate, because refinancing providers tend to match up the lowest rates with the shortest terms. While this isn’t guaranteed, your Student Loan Advisors can determine whether you qualify for the best available rate. A lower interest rate equates to a less expensive loan, and the faster you repay your debt, the less time the loan has to accumulate interest.
- Example: You owe $30,000 at a 5.0% rate. If you pay it off over 15 years, you will pay $12,703 in interest. But if you pay it off over just five years, you’d only pay $3,968 in interest. You can crunch the numbers for your own situation by using ELFI’s Student Loan Refinancing Calculator.
However, there is a flip side to this. Paying back your loan faster means you’ll pay less interest, but you will also have higher monthly payments. Let’s return to the above example – your monthly bill on a 15-year term would be $237, but on a five-year term it would be $566. So, you need to be sure that you can cope with a higher monthly payment now and for the foreseeable future.
The Pros and Cons of Long-Term Refinancing
A longer repayment term of ten, fifteen, or twenty years will mean lower monthly payments. This could be a big help if you’re not yet in a high earnings bracket and are on a tight budget. However, you can always make additional or bigger payments to speed up repayment if you start making more money in the future.
A longer term generally comes with a slightly higher interest rate and will cost you more in interest over the years. However, choosing a longer payoff will provide you with some breathing space as you begin to establish yourself in your career. What’s more, the availability of more monthly income means the ability to use that money for other financial purposes, such as investing or building up an emergency fund.
Let Your ELFI Student Loan Advisor Help you Choose
There’s no one-size-fits-all solution for student loan refinancing. You are a unique person with individual circumstances and needs. A student loan refinancing plan could save you thousands of dollars, but it needs to be the right plan for you.
One of our Student Loan Advisors will be dedicated to you from the moment you apply and will work with you each step of the way to ensure your ELFI refinanced loan is the optimal fit for you.* When refinancing student loans with ELFI, your Student Loan Advisor will be your main point of contact at all times, so you won’t be given a random advisor every time you call to discuss. They’ll get to know you, your situation, and work to find a solution that fits you while walking you through the entire process. Our Student Loan Advisors are always available by phone, text, or email and will make sure all documents are submitted in a timely manner. So give us a call and let’s get started!
