November 14, 2022 – Lending Rates Begin To Rise – Forbes Advisor

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Last week, the average interest rate on refinanced student loans jumped. Despite the rise, rates remain relatively low, giving borrowers the opportunity to refinance at a lower rate.

According to Credible.com, from November 7 to 12, the average fixed interest rate on a 10-year refinance loan was 6.07%. It was 3.16% on a five-year variable rate loan. This is for borrowers with a credit score of 720 or higher who have prequalified in Credible.com’s student loan marketplace.

Related: Best Student Loan Refinance Lenders

Fixed rate loans

Last week, the average fixed rate on a 10-year refinance loan rose 0.36% to 6.07%. The average was 5.71% the previous week.

This time last year, the average fixed rate on a 10-year refinance loan was 3.42%, 2.65% lower than the current rate. This means that borrowers who refinance now have the option of receiving a significantly lower rate than they would have received at the same time last year.

If you were to refinance $20,000 in student loans at today’s average fixed rate, you’d pay about $223 per month and about $6,729 in total interest over 10 years, according to Forbes Advisor’s student loan calculator.

Variable rate loans

The average five-year variable student refinance loan rate rose 0.21% last week. It now stands at 3.16%.

Variable interest rates fluctuate over the term of a loan depending on the index to which they are linked and market conditions. Many refinance lenders recalculate rates monthly for borrowers with variable rate loans, but they usually limit how high the rate is – lenders can set a limit of 18%, for example.

Refinancing an existing $20,000 loan to a five-year loan at 3.16% interest would yield a monthly payment of approximately $361. A borrower would pay $1,648 in total interest over the life of the loan. But since the rate in this example is variable, it can go up or down from month to month during this period.

Related: Should You Refinance Student Loans?

When to Refinance Student Loans

Most lenders require borrowers to graduate before refinancing, but not all, so in most cases, wait to refinance until you graduate. You will also need a good or excellent credit score and a stable income in order to access the lowest interest rates.

If your credit is low or your income is not high enough to qualify, you have several options. You can wait to refinance until you have accumulated credit or have sufficient income. Or, you can get a co-signer. Just make sure the co-signer knows that if you can’t repay your student loan, they will be responsible. The loan will show up on their credit report.

It is important to make sure that you will save enough money when refinancing. While many borrowers with strong credit ratings could benefit from refinancing at today’s interest rates, those with weaker credit will not benefit from the lowest rates available.

Do the math to see if refinancing will benefit your situation. Shop around for rates, then calculate what you could save.

Refinancing of federal loans into private loans

A big problem with refinancing federal student loans to private student loans is that you’ll lose many of the benefits of federal loans, like income-driven repayment plans and generous deferment and forbearance options.

If you’re considering refinancing federal student loans, make sure first that you probably won’t need to use any of these programs. This may be the case if your income is stable and you plan to pay off a refinance loan quickly. You always have the option of refinancing only your private loans or only part of your federal loans. Since fixed interest rates on federal loans are usually quite low, you may also decide that refinancing would not lead to substantial savings.

What to Consider When Comparing Student Loan Refinance Rates

One of the primary goals of student loan refinancing, for many borrowers, is to reduce the amount of interest paid. And that means getting the lowest interest rate possible.

Variable rates usually start low, but could go up in the future, making it a gamble. But one way to limit your exposure to risk is to pay off your new refinance loan as quickly as possible. Keep the loan term as short as possible and pay extra when possible so that you are not subject to possible rate increases in the future.

When considering your options, compare rates from multiple student loan refinance lenders to ensure you don’t miss out on possible savings. Determine if you qualify for additional interest rate reductions, possibly by choosing automatic payments or having an existing financial account with a lender.