Refinancing your student loans provides many benefits, and the star is getting a lower interest rate. Ultimately, a lower interest rate is what saves you money and makes refinancing such a great option. Today, we want to focus on an often-overlooked benefit of refinancing your student loans: getting out debt faster.
When you refinance your student loans, you get a completely new loan – this means you can choose a new term at the time of refinancing. PenFed’s terms and interest rates are designed to get you out of debt faster. Some borrowers automatically select the same term without considering their options. It’s what they are used to, and it has made sense in the past. But let’s say you have been out of school and paying down your loans for 3 years. If you refinance to a 5-year term from your original 10 year term, you will get out of debt 2 years faster. With your lower interest rate, your monthly payment may not even change much.
One of the best options for getting out of debt faster without making your monthly payments unreasonable is the 8-year term† from PenFed. It may increase your monthly payment a little bit, depending on your current term, but it may be worth it to get out of debt years faster than you would have otherwise.
If you can’t afford the higher monthly payments, or have other priorities, a 12-year term may be your best option. A 12-year term† only adds two years to the standard 10-year term and can lower your monthly payment and interest rate.
In addition to a lower interest rate, the speed at which you pay off your loans can save you more money because the interest accrues daily on student loans. Simply put, the faster you pay off your loan, the less time there is for interest to accumulate. Even if it means not spending as much on other debt or expenses you have, the freedom you obtain by getting out of debt faster may be worth it. To see exactly what your new monthly payment would be with a shorter term, visit our refinancing calculator to review all your options before applying.