Private Student Refinancing.

Basically what happens is, a private bank pays off the balances of your current student loans by issuing a new loan package to you. This is referred to as consolidation. One thing to keep in mind is that private banks use your credit history to determine if you are credit worthy before approving such a loan. Not only that, the better your over all credit rating, the better the interest rate you will have on your loan. Another thing to understand is, if you include federal loans in a private lender consolidation, the federal government will no longer be the owners of that debt. One of the good things about refinancing with a private lender, is interest rate competition. These days some interest rates are as low as 2.13% on variable rate loans, and 3.5% on fixed rate loans. Many people that did student borrowing prior to 2008, have interest rates that are above 7%. We believe that fixed rates are always safer, but that must remain up to you. Another positive feature to private loans is that you can lower the length of the loan. With a lower interest rate, and a shorter loan term, you will be paid off faster, and pay less over time than with higher rate, longer term loans. It really is a question of what you prefer, can afford, and ultimately what you individually qualify for. As for draw backs, private loans are not going to be available to those borrowers that have poor credit ratings. It takes a credit score above that of 690 to get the best offers on private loan consolidation programs. If your score is lower, but still fair, they may offer a loan with a co signer. Keep in mind thought that your co signer will be just as responsible for the debt as you are, and will be pursued for payment in the event of late payment or default status occurring. Last but certainly not least, one of the draw backs to refinancing with a private lender is that you will no longer have any of the federal protection that comes with a federal loan. The various payment plan options that federal loans offer will not be available to you. No loan forgiveness features will exist in the new loan, and your loan will be treated the same as any other type of consumer debt. There will be no options to postpone payments, or to have interest free payments during times of trouble. Do your best to weigh all options when making decisions about your new loans in the future, and get some guidance directly from a person at the department of education.