Student Loans Refinance

Brian is a 26 year-old who is finally starting to feel like an adult. While he was going to college, the brochures on his loans fell on deaf ears. Now that he’s more established, he’s looking at his finances with a fresh perspective, aware that he’s been losing money and making too high of monthly payments to sustain his lifestyle. With big expenses like houses and a family looming on the horizon, Brian needs to get his finances in order, and the first step in that is student loan refinance.

Brian’s situation is common among the twenty-somethings of college-educated America. For many, a student loan is the first significant money-experience of their lives. Yet while this process is beginning, it is competing for space with other priorities that seem far more immediate, from educational concerns like studying for major tests to personal issues like renegotiating relationships to account for new distances and trajectories to practical concerns like selecting apartments and setting up new bank accounts. With so many tasks demanding attention and so much being learned for the first time, it is no wonder that such long-term things as student loans get chosen sloppily. Additionally, student loans come sporadically—money is often borrowed several times during college to account for new costs and starkly limited income.

For Brian and the millions like him, student loan refinance is a first step toward maturely handling debt.

What is Student Loan Refinance?

The term refinance comes from the prefix re, to do again, and the verb finance, to handle money. To refinance, then, is to re-handle money, to re-organize loans, to re-negotiate payments. Student loan refinance is refinance applied to the most significant debt for many young adults—that accrued while pursuing an education.

A further term, consolidation, describes the way that student loans get refinanced. Rather than having multiple separately managed loans, consolidation puts all the money into the same place so that it can be paid off steadily and conveniently.

Student loan refinance, and specifically consolidation, is when a debtor works out an arrangement with a creditor whereby all his loans are purchased on his or her behalf.

Who Refinances Students Loans, and Why?

When a business consolidates a loan, they purchase a person’s debts. Then, like any creditor, they set up terms of payment based on the debtor’s ability to pay and the amount of time they wish to pay their debts in.

There are a few institutions that purchase student loans. One of these is the U.S. Department of Education, but they only purchase federal loans. The FAFSA which students are required to complete at most colleges secures these low-interest loans, and some canny students are able to borrow just the amount of money they need.

In many cases, however, not all debts are so gentle. Some borrowers reach their late twenties with thousands of dollars in credit card debt, paying heavily for the convenience of borrowing on-the-fly. Sometimes moderate loans of a few thousand dollars are necessary for cars, surgeries, or underestimations of living expenses. For these and other, non-federal loans, consolidation must be done with crediting companies.

Federal loans can all be refinanced at StaffordLoan.com. If you have credit card debt or other loans, however, there are some other factors to consider.

Where Should I Go For My Private Loans?

Non-federal debts like credit card debt, payments, and private college loans are refinanced through consolidation companies, all of whom are in competition to purchase debts.

These businesses make their money by purchasing long-term investments so that other businesses get their money sooner, and in turn they acquire interest rates which make more money in the long term. The higher the interest rate and the longer the lending period, the more money they make. Moreover, this translates into more money being spent by the debtor.

Many companies refinance loans, but some are better than others. Debt Consolidation Reviews is a consumer site which dedicates itself to tracking these companies, and for the year 2010 they recommend Impact Debt Solutions, Eagle Debt Settlement, and Freedom Debt Relief as their top three. Their priorities are insightful, including attorney backing, customer service, counseling, and availability by location.

Stafford also refinances non student loan debt, but at that moment they stop being a government program and start acting like a business. When debts are mostly federal, Stafford remains a viable option, as debtors can still benefit from making all their payments to a single source.

Naturally, it’s good business to compare what different companies are offering and force them to compete with one another. To do this well, however, a debtor needs to have access to the information which determines what his or her financial needs are.

What Do I Need?

 
Debtors should not contact consolidation companies without first arming themselves with a host of financial information: a list of all their debts, an understanding of current income, and a projection of future financial changes. These three should be organized into three folders or stacks before negotiations are opened.

The debt list can be reorganized into a chart which lists all relevant information: the lender and account number, the initial loan amount and interest rate, current interest rate, the monthly payment amount, and the total amount paid. This information is used to create a debtor’s financial profile so that rates can be offered.

An understanding of current and future income and expenses allows debtors to know what to ask for. How big of a payment can they afford? Will they always be able to afford this payment? Knowing these keeps debtors from blindly agreeing to offers that they will later need to renegotiate.

Student loan refinance is not as hard as it seems. Most debtors can complete the process over the course of a week. Don’t let your debt intimidate you—there are ways to correct it.