Refinancing your student loans provides many benefits and the star is getting a lower interest rate. Ultimately, a lower interest rate is what saves you money and makes refinancing such a great option. Today, we want to focus on an often overlooked benefit of refinancing your student loans: getting out debt faster.
When you refinance your student loans, you get a completely new loan – which means you can choose a new term at the time of refinancing. Our terms and interest rates are designed to get you out of debt faster. Some borrowers automatically select the same term without considering their options. It’s what they are used to and it has made sense in the past. But let’s say you have been out of school and paying down your loans for 3 years. If you refinance to a 5 year term from your original 10 year, you get out of 2 years faster. With your lower interest rate, your monthly payment won’t change much.
One of the best options to getting out of debt faster without making your monthly payments unreasonable is our 8-year term, in partnership with PenFed. It is unique to the student loan refinancing marketplace. It may increase your monthly payment, depending on your current term, but it will be worth it to get out of debt years faster than you would have otherwise.
If you can’t afford the higher monthly payments, or have other priorities, a 10 or 12 year term is your best option. A 12 year term only adds two years to the standard 10 year term and can lower your monthly payment and interest rate. We do offer 15 and 20 year terms in partnership with our lenders, but don’t recommend those terms unless you absolutely need the lower monthly payment because of a high loan balance.
In addition to a lower interest rate, speed in paying off your loans will save you more money because the interest accrues daily on student loans. Even it means not spending as much on other categories, it will be worth it for the freedom of getting out of debt faster. To see exactly what your new monthly payment would be with a shorter term, visit our refinancing calculator to review all your options before applying.