Student loans are a very convenient way to study and get qualifications. However, throughout your study, you may have to take out multiple loans. Refinancing or consolidating your loans is an excellent way to keep track of all of them.
However, refinancing your loans isn’t a decision you should make lightly. This is especially true because the process is irreversible. While some individuals will benefit from the process, others are better off without it. In this post, we’ll discuss some points you should consider before deciding to refinance your loans with organizations like Elfi.
Benefits of Consolidating Your Student Loans
Consolidation makes your loans easier to manage.
One of the biggest benefits of consolidating your loans is that it makes them easier to pay. If you have multiple loans, refinancing can lump them all into one place and give you better oversight. Furthermore, if your loans sum up to a large amount (more than $10,000), consolidating them may also be a good idea.
Consolidation gives you more time to pay your loans.
If your loans are from multiple lending agencies, they are bound to have different tenures. It’s not uncommon to have a loan close to its due date and have another with a very long term. Consolidating your loans can release you from the stress of impending due dates. When you refinance your loans, you can extend the deadline.
Some private agencies even have flexible loan terms, depending on how much you owe. This can give you enough time to figure things out, get extra income, and comfortably repay the loans.
Consolidating your loans can get you to lower monthly rates.
Another benefit of consolidating your loans is that you get to pay less each month. If you extend the term of your loan, you can have more time to pay it off. Since the loan’s all in one place, it also means you’ll only have to worry about a single monthly payment.
The Cons of Refinancing Your Student Loans
As we discussed earlier, refinancing your loans has its advantages and disadvantages. In this section, we’ll review the downsides of refinancing your loans. You need to consider both sides very carefully before deciding.
Consolidating your loans means higher interest rates.
Since you'll be extending the term of your loan, you can expect higher interest rates. The longer it takes you to pay your loan, the more you'll pay at the end of the day. On the one hand, you get easy and often flexible payment terms. On the other hand, you’ll pay more in the long run. These terms are better suited for people who expect a constant or increasing income in the future.
You’ll forfeit federal loan benefits if you privately consolidate your loans.
Federal student loans are very accommodating in terms of their repayment plans. They have deferment and forbearance options you can use. These are suited for situations where you suddenly experience some financial hardship like losing your job, for example.
Consolidating your loans with a private firm means letting go of these benefits. Once you switch to a private entity, you'll be subject to their terms. As accommodating as they may be, they may not give you the leeway that federal loans give.