Home youth program budget August 17, 2022 – Lending Rate Slide – Forbes Advisor

August 17, 2022 – Lending Rate Slide – Forbes Advisor

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Refinanced student loan rates fell last week. Despite the rise, if you want to refinance your student loans, you can still get a relatively low rate.

According to Credible.com, from August 8-13, the average fixed interest rate on a 10-year refinance loan was 5.46%. It was 3.99% on a five-year variable rate loan. This is for borrowers with a credit score of 720 or higher who have prequalified in Credible.com’s student loan marketplace.

Related: Best student loan refinance lenders

Fixed rate loans

Last week, the average fixed rate on 10-year refinance loans fell from 0.29% to 5.46%. The previous week, the average was 5.75%.

Fixed interest rates will not fluctuate over the term of a borrower’s loan. This allows borrowers refinancing now to lock in a significantly lower rate than they would have received this time last year. At this time last year, the average fixed rate on a 10-year refinance loan was 3.46%, or 2.00% lower than the current rate.

Let’s say you refinanced $20,000 in student loans at today’s average fixed rate. You’d pay about $217 a month and about $5,999 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.

Variable rate loans

Last week, five-year variable refinance student loan rates rose to 3.99% from 2.79% the previous week.

Unlike fixed rates, variable interest rates fluctuate over the life of a loan depending on market conditions and the index to which they are linked. Many refinance lenders recalculate rates monthly for borrowers with variable rate loans, but they usually limit the rate height, to 18%, for example.

Refinancing an existing $20,000 loan to a five-year loan at an interest rate of 3.99% would yield a monthly payment of approximately $368. A borrower would pay $2,094 in total interest over the life of the loan. But the rate in this example is variable and it can go up or down each month.

Related: Should You Refinance Student Loans?

Student Loan Refinance Rate Comparison

Refinancing a student loan at the lowest possible interest rate is one of the best ways to reduce the amount of interest you’ll pay over the life of the loan.

You may find that variable rate loans start out cheaper than fixed rate loans. But because they are variable, they have the potential to increase in the future.

Fortunately, you can reduce your risk by paying off your new refinance loan quickly, or at least as quickly as possible. Start by choosing a short loan term but with a manageable payment. Then pay extra whenever you can. This can hedge your risk against possible rate hikes.

When considering your options, compare rates from multiple student loan refinance lenders to ensure you don’t miss out on possible savings. Determine if you qualify for additional interest rate reductions, possibly by choosing automatic payments or having an existing financial account with a lender.

When should you refinance student loans?

Lenders generally require you to graduate before refinancing. While it’s possible to find a lender without this requirement, in most cases you’ll want to wait to refinance after you graduate.

Keep in mind that you’ll need a good or excellent credit score to get the lowest interest rates.

Using a co-signer is an option for those who do not have sufficient credit or income to qualify for a refinance loan. Alternatively, you can wait until your credit and income are stronger. If you decide to use a co-signer, make sure they know they will be responsible for payments if you can’t for some reason. The loan will also show up on their credit report.

It is important to make sure that you will save enough money when refinancing. While many borrowers with strong credit ratings could benefit from refinancing at today’s interest rates, those with weaker credit will not benefit from the lowest rates available.

Do the math to see if refinancing will benefit your situation. Shop around for rates, then calculate what you could save.

Refinancing Student Loans: What Else to Consider

When you refinance federal student loans to private student loans, keep in mind that you will lose many federal loan benefits, such as income-oriented repayment plans and generous deferment and forbearance options.

You may not need these programs if you have a stable income and plan to pay off your loan quickly. But make sure you won’t need these programs if you plan to refinance federal student loans.

If you need the benefits of these programs, you can refinance only your private loans or only a portion of your federal loans.