Education loan is one of the best ways to achieve your aspirations and dreams. However, you need to plan the entire repayment of the education loan while applying for it. In India, the banks mostly offer education loans on a floating rate of interest which is subject to revision every quarter. In this case, if the inflation rates become high your interest rate will also get high, making your loan more costly than earlier. This is where student loan refinancing comes into play making your education loan cheaper. In this blog, we will explore the benefits of student loan refinancing and why it can be a valuable financial strategy for those with education loans.
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Importance of Student Loan Refinancing
Student loan refinancing is when you foreclose your ongoing loan with the bank and choose another lender offering a lower interest rate. The new lender pays the due amount to the existing lender and in this way, your loan gets cheaper and you also get flexible repayment options. In a rising interest rate environment it becomes difficult to keep paying the increased EMIs as your repayment plan gets impacted. Due to this reason, loan refinancing becomes very important as it makes the loan cheaper and offers you an easy EMI structure and a long repayment period.
Also Read: Credit Score and their Impact on Education Loan Refinancing
Major Benefits of Student Loan Refinancing
Student loan refinancing not only makes your loan cheaper but also positively improves your credit score. After getting a loan refinance your EMI will be lesser and you will be able to pay all the EMIs on time. There are several other benefits of student loan refinancing discussed below:
Lower Interest Rates
One of the primary and most important benefits of student loan refinancing is lower interest rates. When you refinance your student loans, you will get a lower rate of interest rate offered by other banks and financial institutions because that will be the primary objective on both ends.
You can even negotiate the rate of interest on education loans especially if your financial situation has improved since you first took out the loans. There is a higher chance of this as you will get a job after finishing your course most probably. Lower interest rates will ultimately lead to substantial savings over the life of your loans, reducing the total amount you need to repay.
Simplified Repayment
Repaying your EMIs on time is essential as it directly impacts your credit score. A single delay in your EMI may attract additional interest and penalties as well and your credit score will also decrease. If you face any unprecedented situation like losing your job then you will be ready with the backup plan for paying EMIs.
Student loan refinancing allows you to combine multiple student loans into a single, more manageable loan. This simplifies your monthly payments and makes it easier to keep track of your finances. Also, you will have to pay less amount of EMI which will be comfortable for you in any situation.
Also Read: Role of Central Banks in Forex Market
Flexible Repayment Terms
Student loan refinancing provides flexibility in choosing your repayment terms. You can opt for a shorter term to pay off your loans faster or select a longer term to lower your monthly payments. This flexibility enables you to customise your repayment plan to better align with your financial goals and budget. With the new bank/lender, you can negotiate over the repayment terms and the amount of EMI. If you think you can close your education loan faster then ask your lender for a shorter repayment period.
Improved Credit Score
Student Loan Refinancing can also positively impact your credit score. When you consolidate your loans into a single account and make consistent, on-time payments, it reflects well on your credit report. A high credit score can open doors to better interest rates on future loans, like mortgages or car loans, and improve your overall financial health. When you get an education loan refinance there are chances that the new EMI date and amount will be as per your convenience. Due to this, you will be more likely to pay all the EMIs on time thus improving your credit score.
Access to Better Loan Servicers
Education loan refinancing allows you to choose a new lender/bank or NBFC, which can lead to better customer service and an improved overall experience. When you are planning to select a bank for refinancing then always check the public review for products and customer service. Compare some of the reputed and popular banks or NBFCs and then decide from where you want to take the education loan refinance.
FAQs
When you choose a new lender for your ongoing education loan or student loan you negotiate with them for a better rate of interest. The chances of getting the same are high as now you have completed your education and doing a job. This bank will analyse your income and offer you a suitable repayment structure and low rate of interest.
Education loan refinancing makes your loan cheaper by offering a low rate of interest. It also helps you to customise your loan repayment period subject to the terms and conditions of the bank/lender.
If you think that your current banker is providing you with another loan having a better interest rate you can choose it. The bank will foreclose the ongoing loan and EMI will be decided based on the new rate of interest and the repayment period.
Student loan refinancing is a good option for students who have just completed their course. Securing lower interest rates, simplifying repayment, and offering flexible terms, can make student loan repayment more manageable and less financially stressful.
To know more about education loan refinancing, the best international bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
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