Refinancing presents a practical route to release your cosigner. It involves taking out a new loan to settle your old ones, transforming multiple debts into a single loan with fresh terms and possibly a lower interest rate.
Imagine being in a stronger financial position than when you first took out your loan. Through refinancing, you can secure a new loan without a cosigner and potentially benefit from a lower interest rate. This could mean significant savings over the lifetime of your loan.
Take, for example, a loan of $15,000 with a fixed interest rate of 7.54% over ten years. You’d pay approximately $6,403 in interest. But what if you refinance to a more favorable rate, like 4.99%? Suddenly, your total interest drops to around $4,083 — a whopping saving of over $2,100.
Another perk of refinancing is flexibility. You can adjust the length of your term and the type of loan. Extend your term for lower monthly payments, but remember, this means more interest over the loan’s life. Conversely, a shorter term could mean less interest and a quicker payoff.
Lastly, refinancing gives you a choice between fixed and variable-rate loans. Variable-rate loans usually start lower but may fluctuate. Fixed-rate loans, on the other hand, remain consistent, unaffected by market trends or interest rate shifts. The only way to alter a fixed rate? You guessed it — student loan refinance.