Have you started repaying your education loan? Is it getting costlier due to rising interest rates? Here’s the solution. Education loan refinancing is a good option especially when your existing loan gets costlier and the interest rates are rising. Most of the education loans to study abroad come with a floating rate of interest subject to revision every quarter.
So, there are chances that your education loan may get costlier in a rising interest rate environment. In this situation, you can look for education loan refinancing offers by other banks or NBFCs at an affordable rate and suitable repayment structure. In this blog, we have mentioned some of the best lenders offering education loan balance transfers at attractive interest rates.
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How Education Loan Refinancing Works?
Education loan refinancing or balance transfer is when you switch to another lender/bank that provides a loan to close your existing education loan. In this new or refinanced loan, you generally get a better rate of interest and repayment period. For example, you have an ongoing education loan with Bank ABC and you have paid 12 EMIs. After this period the bank revised the interest rates due to which the entire repayment amount increased. Now you started looking for another lender and found Bank XYZ which is offering a lower interest rate. In this case, you will take a loan from Bank XYZ and with that amount, you will foreclose your existing loan. A new EMI amount and date will be scheduled by the new bank as per the terms and conditions.
Also Read: Understanding Credit Score and Its Impact on Education Loan Refinancing
How to Get Best Interest Rates for Education Loan Refinancing
When you apply for education loan refinancing, you must compare the interest rates and other terms and conditions offered by multiple lenders. Also, if your credit score is good and you are paying EMI for an ongoing education loan on time then you can even negotiate for the interest rate with the new bank/lender. Let’s check some of the major factors that need to be considered to get the best interest rates for education loan refinancing:
To get the best interest rates for education loan refinancing, follow these steps:
- Check your credit score: A higher credit score can help you qualify for lower interest rates. Make sure your credit report is accurate and it contains the entire repayment history for your previous or existing loans. A credit score above 7 is considered a good score.
- Compare lenders: Always compare the terms and conditions and interest rates offered by multiple lenders/banks. Many banks, credit unions, and online lenders offer education loan refinancing and they have different interest rates. A comparative study will help you to decide the best-suited offer for you and you will also be able to negotiate properly.
- Choose a variable or fixed rate: Decide whether you want a variable interest rate (which may start lower but can increase over time) or a fixed rate (which remains constant). Fixed rates offer more predictability.
- Choose the right loan term: A shorter loan term often comes with a lower interest rate but higher monthly payments. Longer terms may have slightly higher rates but lower monthly payments. You can decide the best-suited offer for you as per your monthly income.
- Negotiate with the lender: A lot of people are confused thinking whether they can negotiate with the lender over interest rate. The answer is yes. If you have a good credit score you can negotiate with your lender over interest rate and repayment period. Through this, you may be able to secure a better rate.
- Review the terms and fees: Always read and understand the terms and conditions of the loan. Check the processing fee of the loan and any other fees associated with the loan and make sure you understand the terms and conditions before refinancing.
Also Read: Demystifying Education Loan Refinancing for Indian Students
How to Choose Your Bank for Education Loan Refinancing
Choosing the right lender is very important when you are taking an education loan or getting a balance transfer loan. There are a lot of private and government banks offering education loan refinancing at lower interest rates. A lot of them claim that they are providing the best and lowest interest rates.
However, you should always do proper research and comparison between the banks to figure out the best option for you. Usually, the government banks are the most trusted and reputed for these loans. Let’s talk about the factors to be considered while choosing the best bank for education loan refinancing.
Choosing the right bank or lender for education loan refinancing is an important decision. Here’s how to make the choice:
- Research and Compare: Start by researching different banks and lenders that offer education loan refinancing. Look at their interest rates, terms, and eligibility criteria. Also, try to find customer reviews.
- Interest Rates: Compare the interest rates offered by different banks. Lower interest rates can save you money over the life of the loan. Consider whether you want a fixed or variable rate.
- Loan Terms: Understand the loan terms and conditions provided by the bank like the length of the repayment period, rate of interest, EMI amount and date, bounce charges etc.
- Eligibility Requirements: Always check the eligibility criteria mentioned by the bank for education loan refinancing. The banks have their specific criteria for credit scores, income, or types of loans they refinance. Generally, the basic criteria for repayment are that you must be a major (above 18 years of age) and the repayment must have been started. Also, there shall be no pending amount to disburse from the bank side.
- Repayment Options: Find out if the lender offers flexible repayment options, such as deferment, forbearance, or income-driven repayment plans. Negotiate with the lender over the repayment period and ask for an offer best-suited for you.
- Customer Service: Read reviews and check the customer service reputation of the lender. Good customer service is important when dealing with loan-related questions or issues.
- Credit Union or Online Lender: Don’t limit your search to traditional banks. Credit unions and online lenders may offer competitive rates and terms. Also, try seeking a loan from renowned NBFCs if you want to get your loan approved faster.
- Check Pre-Qualified Loan Offers: Consider getting prequalified with multiple lenders to see the rates and terms you may be eligible for without affecting your credit score. Remember that when a bank or NBFC makes an inquiry for your credit score it gets affected and might even reduce.
FAQs
The rate of interest for education loan refinancing ranges between 8% to 14% or even more. It can vary depending on the banks and their terms and conditions. Compare the interest rates offered by different lenders and then pick the best-suited offer for you.
Education loan refinancing is a good option as you can get an easy repayment structure and lesser interest rates subject to terms and conditions.
SBI is the largest public sector bank in India and offers a smooth loan refinancing offer for education loans.
This was all about finding the best education loan refinancing rates and the best-suited lender. Education loan refinancing is a good option in a rising interest rate market. Try finding an education loan refinance at a fixed interest rate.
To know more about education loan refinancing, the best 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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