Student loan debt consolidation.<\/strong> Debt consolidation is when you combine multiple loans into one loan. The new loan offers the convenience of a single monthly payment plus a reduced interest rate or more favourable terms.<\/li><\/ul>It\u2019s worth pointing out that if you have federal and provincial student loans, depending on where you live, those loans may automatically consolidate into a single loan payment once you graduate. This is the case if you live in New Brunswick, Newfoundland and Labrador, Ontario or Saskatchewan.<\/p>
But if you live in Alberta, British Columbia, Manitoba, Nova Scotia or Prince Edward Island, your federal and provincial loans will not automatically consolidate when you graduate. Additionally, if you live in Nunavut, the Northwest Territories, Quebec or Yukon, you only have one government-issued loan to repay.<\/p><\/div>
When should I refinance student loans?<\/h3>
Whether or not you should refinance student loans depends on a number of factors. You might like to consider refinancing in the following scenarios.<\/p>
It\u2019s a good idea to consider student loan refinancing if:<\/h4>- You have good credit.<\/strong> You can usually get lower interest rates on private loans if your credit score is over 660. Apply for a credit report from credit bureaus like Equifax and TransUnion.<\/li>
- You have a low debt-to-income ratio.<\/strong> You\u2019ll typically get better rates if you have a low debt-to-income ratio (below 40%), which shows that you have enough income to make repayments.<\/li>
- You don\u2019t have government-issued student loans.<\/strong> If you funded your post-secondary education through private loans rather than government loans, it\u2019s often easier to negotiate better rates.<\/li>
- You have a job and a steady source of income.<\/strong> You\u2019re more likely to be approved for better terms if you can show that you have a steady stream of money coming in to make loan payments.<\/li><\/ul>
It might not be worth refinancing if:<\/h4>- You have bad credit.<\/strong> If your credit score falls below 660, you might have trouble securing a loan with better rates and terms. It might make more sense for you to continue paying off your current loan until your credit score improves.<\/li>
- Your debt-to-income ratio is high.<\/strong> If you\u2019re carrying a high debt load (i.e. your monthly debt payments are over 40% of your gross monthly income), most lenders will charge higher interest rates on your loan to make up for the risk assumed by financing you.<\/li>
- You have government-issued loans.<\/strong> Government-issued loans often come with the best rates and terms on the market. You might struggle to find a private lender that can offer better terms.<\/li>
- You\u2019re unemployed or new to the workforce.<\/strong> Most providers are unlikely to negotiate better terms or give you low interest rates on a new loan if you can\u2019t show proof of having a steady, long-term income.<\/li><\/ul>
How to refinance student loans<\/h3>
If you\u2019re thinking about refinancing your student loans, consider the following options.<\/p>
Repayment Assistance Plan<\/h4>
If you have a federal government student loan and you\u2019re struggling to make payments, you might qualify for the federal government\u2019s Repayment Assistance Plan (RAP). While it\u2019s technically not a refinancing option, it can help you pay off your student debt. Depending on how much income you receive, you may qualify for reduced loan payments or no payments at all.<\/p>
If you qualify, the government will:<\/p>
- Pay any interest you owe on your federal loan that is not covered by your reduced payment amount, and<\/li>
- Start paying down the loan principal and remaining interest after you\u2019ve completed 60 months of RAP or 10 years after you finish studying.<\/li><\/ul>
You\u2019ll need to reapply for RAP every six months to ensure that you are still eligible for assistance.<\/p>
Personal loan<\/h4>
You can refinance your student loan debt with a personal loan. Some of the best personal loans are unsecured, which means you don\u2019t need to put up any kind of collateral. Lenders rely on your credit score to see if you\u2019re eligible, so it\u2019s important to have a good credit score and financial history.<\/p>
Alternatively, if you own an asset such as a car, you might be able to take out a secured loan. These loans often offer lower rates and better terms, but they also come with the risk of losing your asset if you can\u2019t make your repayments on time.<\/p>
There are also some lenders that offer bad credit personal loans. However, these loans typically come with higher interest rates, so be careful about taking them out to refinance your student loans.<\/p>\n \n\n