How often can you refinance student loans?
As long as you qualify, you can refinance your student loans as often and as often as you like. Although multiple refinancing can be a great way to get better terms, there are situations where it could do you more harm than good.
Should I refinance my student loan?
Refinancing allows you to replace your existing student loan with a new one from a private lender, with the main benefit being the possibility of a lower interest rate or monthly payment. You might consider refinancing if:
- You took out a loan when interest rates were high.
- You have good credit and a steady income.
- You want to remove a co-signer from your loan.
- You want to extend your repayment period to lower your monthly payment.
If you have all of your government student loans and are struggling to make the monthly payments, refinancing shouldn’t be your first relief option. The federal government offers hardship assistance, alternative repayment options, and a loan forgiveness that private lenders don’t offer, and any loans you refinance become private immediately.
However, if you have all the personal loans and a good credit score, refinancing could be a smart move, especially if you’re having trouble keeping up with multiple loans or have a higher interest rate. You can refinance as many times as you like as you improve your credit score and qualify for lower interest rates.
The disadvantages of refinancing more than once
The biggest risk of multiple refinancing is that your credit score could drop slightly. While you can browse lenders risk-free by pre-qualifying, most lenders conduct a tough credit check during the actual application process to see your detailed credit report and debt payment history. This allows the lender to determine if you are a trusted borrower. Each hard credit check lowers your credit score by a few points.
The average age of your accounts also affects your credit score. Credit scoring models prefer to see accounts that have been open for several years; If you keep replacing your student loan with a new one, your average age of accounts stays low.
However, loan defaults from refinancing can easily be remedied through responsible handling, especially when it’s a slump caused by a single tough test. As long as you make payments on your new loan on time, you should recover lost points quickly.
The benefits of refinancing more than once
You can refinance the same loan multiple times, and if you’ve already gone through the process, you’ll have a good idea of what lenders are looking for and how the process works. Refinancing multiple times can help you get a lower interest rate, better terms, or a repayment schedule that meets your financial goals. All of this can make it easier to repay your loans or make your loan cheaper in the long run.
Additionally, some lenders offer specials or discounts for refinancing with them – if you spot a great deal, it may be worth going with that company. Changing companies is also a good idea if you’ve had a bad experience with your current company or want to switch credit service providers.
What you should consider before refinancing your student loan again
Before applying for another refinance loan, there are a few things to consider, especially when it comes to the long-term impact on your finances:
- The new interest rate. Is the new interest rate significantly lower than your current interest rate? If not, it may not be worth bothering with refinancing.
- your financial goals. Consider both your short- and long-term goals when it comes to your balance. Would you like a lower monthly rate, better conditions or a rate reduction? Make sure the lender meets your specific goals when it comes to multiple refinancing.
- your financial health. If your credit is good and you have a long credit history, applying for a new loan is unlikely to have a major impact on your score. You should also consider your income and whether you are able to meet your new monthly payments.
- fees. While many lenders have eliminated origination and application fees, you should still check if your new lender charges them; Those fees could eat up the savings you get from refinancing.
Before you take the plunge to refinance, you should pre-qualify with a few lenders to see what rates you’re being offered. From there, you can run the numbers through a refinance calculator to see if your new loan is worth it in the long run. When you’re ready to refinance, you can apply to your lender – and receive your new loan within weeks.