Student loans can be a huge burden to bear and it seems like the more you try to pay them off, the more they grow. If you’re looking for some relief from your student debt, then you might want to consider consolidating or refinancing your loans. Consolidation essentially means taking multiple different types of loans and combining them into one easy payment. Refinancing is when you take out a new loan with a lower interest rate in order to pay back what you owe on your existing debts. Keep reading this guide if you’re interested in learning how these options work so that you can make an informed decision about which route is best for your situation!
Whether you should consider refinancing your student loan depends on what type of student loan it is. Government-issued loans generally come with more benefits than private loans, and are difficult to refinance to a better interest rate.
Federal loans are federal government loans, which are issued through the government for students. They come with more benefits than private loans, but can be difficult to refinance or pay off early because of their unique repayment terms and conditions.
Private student loans are usually from a bank, credit union, or other financial institution that is not affiliated with the federal government. Contrary to what you might expect, private student loans are more difficult to qualify for than federal ones. Private student loans often have higher interest rates and stricter repayment terms. This is why some students turn to a refinancing company that can help them find the best available rate, with better conditions attached.
Provincial/territorial loans are specific to Canada. They are offered by provincial and territorial governments to students who attend a post-secondary institution in the specified province or territory, but don't qualify for government loans.
Student loan refinancing works just like any other type of refinancing. It involves taking out a private loan with lower interest rates or more favourable terms to wipe out your current debt. Then, you can begin making repayments on your new loan with a clean slate.
Your ability to get a better deal on your new loan will depend on your creditworthiness and financial history. Private student loans are often difficult for students to qualify for because they have higher interest rates than government ones (federal). That is why some turn to companies that offer refinancing, which helps find the best available rate.