Americans buried in piles of student loan debt have more time to complete economic refinancing.
Although average rates for five- and ten-year refi loans have increased slightly, they are still very close to their recent all-time lows, according to new figures from a large loan market.
Because the typical borrower carries tens of thousands of dollars in student debt, any downgrade can make a big difference in the amount spent on interest.
5-year variable rate loans
For borrowers looking to pay off student debt faster, five-year variable rate loans averaged 2.59% last week, according to new data released Monday by Market Credible.
This is a slight increase from the previous week’s 2.57% average – and not far from the record low of 2.53% reached a few weeks ago in late August.
The average is specifically intended for borrowers with a credit score of at least 720. Better rates are available for people with excellent credit, of 780 or higher.
At the other end of the scale, people with average scores (between 640 and 679) have typical rates of 4.59%.
Keep in mind that variable rates fluctuate based on market conditions, which means that a borrower could end up with a higher rate before the end of the five-year term of the loan.
10-year fixed rate loans
For borrowers who want a longer repayment period and the opportunity to secure a good deal, 10-year fixed rate loans averaged 3.46% in the last week of the survey.
That’s just a slight increase from an average of 3.45% a week earlier, and it’s still pretty close to the all-time late September low of 3.36%.
Again, those with excellent credit are entitled to below average rates. And, those with unimpressive scores might have to accept a rate of 4.77% or more.
Although fixed rate loans come with higher borrowing costs than variable rate ones, your interest rate is guaranteed to stay stable throughout the life of the loan.
A 10-year loan will also offer more affordable monthly payments than a five-year loan, although you will be spending more money overall by the time your debt is paid off.
How to get the best refi rate
If you have a federal student loan, make sure you know what you’re giving up before you jump into a refi.
Switching from a government loan to refinancing with a bank or other private lender will make you ineligible for the kind of government support that some borrowers received during the pandemic, including payment freezes, interest waivers and even loan cancellation.
But if you’re ok with that compromise, or if you already have a private loan, refinancing at a cheaper rate could make a huge difference in your budget.
Here are some tips to help you get the best possible refi rate:
Improve your credit score. Lenders examine your credit to determine if you are a good risk. Today, it’s easy to check your credit score for free and then take steps to improve it so that you look more impressive in the eyes of a lender.
Configure automatic payment. Often, you can lower your interest rate a bit by agreeing to make automatic payments. This gives the lender some assurance that you will pay on time each month.
Consider a co-signer. If your credit score is 200 points south of where it should be, you may need to ask a friend or family member with good credit if they would be willing to co-sign your loan for help you get a better rate. But be careful, because your co-signer will keep the bag for your payments if you ever have to stop making them.
Compare your options. The universe of student loans is vast, made up of dozens and dozens of lenders. The only way to know you’re getting a good deal is to shop around. Different lenders are required to weigh your application differently, so always get multiple quotes and rate them side by side before clicking “Apply”.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.