When you refinance your student loan, you essentially reset the clock on your repayment tenure. Do it at the right time, and you will surely save money. Refinance at the wrong moment, and a new set of financial burdens will arrive. So, when should you refinance your loan? That depends on certain factors, such as your credit score, current loan interest rate, current loan tenure, etc.
To get a better understanding, here are some scenarios when refinancing student loansmake sense.
#1 If you have a loan with a high interest rate
If you’re currently paying hefty interest on your education loanEMIs, going for a loan refinancing makes absolute sense. With a loan transfer, you can get a lower interest rate on your new loan. This will automatically reduce your monthly EMI outgo and ease your financial burden considerably.
However, you can compare interest rates from various lenders and choose one offering the lowest rate. For example, with Tata Capital, you can get a student loan at competitive interest rates, starting at just 10.99%.
#2 If your credit score has increased substantially
If your credit score has improved drastically over the years, it makes all the sense to refinance your loan. A good credit score, say 700 or more, can help you get lower interest rates from lenders on your new personal loan, which translates to smaller EMI payments and additional savings.
Additional Read: Impact of the Current Pandemic Situation on Education Loans
#3 If you’re drawing a steady monthly income
Another favourable scenario where refinancing your student loan makes sense is if you earn a stable monthly income; the higher your monthly salary, the better your chances of approval. This is because a steady income implies a lower risk of default, which is a major green signal for lenders as it reassures them of your repayment ability.
In turn, you stand a better chance to get more favourable terms and interest rates than on your original loan.
How to refinance your student loan?
If you’re in any of the situations mentioned above, refinancing might be a good financial move. Here’s how to refinance students’ loans in India:
- Start by submitting a loan foreclosure application to your current lender.
- Zero in on a suitable lender and apply for loan refinancing. Also, arrange the required document proofs.
- Once the new lender approves your loan, it will issue a cheque to your previous lender and pay your outstanding loan amount.
- After the cheque is cleared, your previous lender will foreclose your loan and release your original documents. Now, you can refinance the loan with the new lender.
Additional Read: What Happens If You Don’t Pay Your Student Loans on Time?
Over to You
With the right lender, refinancing your student loan will be worthwhile. That’s why, at Tata Capital, we strive to be the best. Our favourable personal loan interest rates, easy repayment options, and customised solutions help you repay your loan smoothly. If you wish to study abroad, we also offer hassle-free personal loans for travel.
So, why wait? If you need to refinance your student loan, visit our website here and explore our offerings, including our easy-to-use personal loan EMI calculator!