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If you’ve already refinanced your student loans once, you know that doing so can save you money and make it easier to repay your debt. It only makes sense to wonder if you can go through the process multiple times to save even more.
Can refinancing private student loans more than once save you money? The short answer is yes, but you need to take a close look at the details before you refinance your student loan debt again.
Refinancing private student loans again could save you money on interest
If you’ve gone through the process of refinancing student loans, you know it involves taking out a new loan with different terms, often from a new lender. It can also involve the consolidation of multiple debts into one.
Since you refinance with a private student loan company, any federal loans turn into a private one. Refinanced private student loans remain private, but again, they might have entirely new terms.
Not only can refinancing simplify your monthly payments, but it also saves you money if you qualify for a lower interest rate. For example, let’s say you owed $30,000 on a few different loans with an average weighted interest rate of 7.00%.
After refinancing, you still owe $30,000, but you only have to keep track of one monthly payment. Plus, your new interest rate is 5.00%.
If you choose the same 10-year repayment plan, you’ll save $3,615 on interest overall. You might even choose a shorter repayment term to pay less interest and get out of debt faster.
Regardless, your lower interest rate will save you money over the life of your loan. So it stands to reason that refinancing for a second time could save you money if you qualify for an even lower interest rate.
Of course, there’s no guarantee you’ll get a lower rate the next time you apply for refinancing. The rate is based on a few factors, including current market rates, your income, and your credit score.
If you’re making a lot more money than you were when you first applied for refinancing, this could help your case. You might also be a more attractive candidate if you’ve built your credit score into the excellent range.
So if you can submit a stronger application this time around, it might be worth checking your rates again with student loan refinancing lenders. If you can get an even lower rate by refinancing for a second time, you could save money on interest and pay your student loans off even faster.
Be careful about extending the life of your loan
Qualifying for a lower interest rate can save you money, but be careful when it comes time to choose new repayment terms.
Let’s say you chose a five-year repayment term when you refinanced student loans the first time around. You’ve already been paying for a year, so you only have four years left before you’re debt-free.
If you refinance for a second time and choose another five-year term, you’ll actually be adding a year to the life of your loans. You’ll be in debt for longer, so you might pay even more in interest overall, even if you qualify for a lower rate.
In this case, refinancing private student loans for a second time wouldn’t help you save money or get out of debt faster. It could be useful if your goal is to lower your monthly payments by spreading them out over a longer period of time.
But it wouldn’t be a solution if your aim is to save money. So before refinancing private student loans for a second time, make sure you understand your new repayment terms and how they affect your debt.
Make sure extra costs don’t outweigh the benefits
Not only could extending your repayment term cost you more money, but you might also pay more in extra fees. Some lenders charge an origination fee for disbursing a new loan, so that’s an added cost when you refinance.
Of course, not all lenders charge fees for refinancing private student loans. SoFi, Laurel Road, and Earnest, for instance, don’t charge any fees for disbursing the loan or paying it off ahead of schedule.
Again, it’s important to read over the details of an agreement before refinancing again to make sure the costs don’t outweigh the benefits.
Check your rates to see if refinancing again makes financial sense
When it comes to refinancing private student loans, there’s no rule that says you can only refinance once. If interest rates have dropped — or if you’ve improved your creditworthiness since the first time you applied — you could benefit from refinancing again.
And if qualifying for a lower rate is your goal, take steps to build your credit. Make sure to pay all debts and credit card balances in full and on time every month. Try not to close your oldest credit accounts, as part of your score is based on the length of your credit history. And keep your credit-to-debt ratio lower than 30%.
By taking these steps, you’ll be an even stronger candidate when you apply to refinance student loans. Another way to boost your application is to apply with a creditworthy cosigner. Whatever you choose, it’s easy to check your rates with multiple lenders to see if you prequalify for lower rates.
As long as you’ve crunched the numbers with our student loan refinancing calculator — and carefully read over the details of repayment and fees — you could save money by refinancing again.
Kali Hawlk contributed to the reporting for this article.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Rates (APR)||Eligible Degrees|
|Get real rates from up to 4 Lenders at once
Check out the testimonials and our in-depth reviews!
|2.57% – 6.32%||Undergrad & Graduate||Visit Earnest|
|2.80% – 7.02%||Undergrad & Graduate||Visit Laurel Road|
|2.51% – 7.80%||Undergrad & Graduate||Visit SoFi|
|2.68% – 8.79%||Undergrad & Graduate||Visit Lendkey|
|2.57% – 6.65%||Undergrad & Graduate||Visit CommonBond|
|2.75% – 8.69%||Undergrad & Graduate||Visit Citizens|