When it comes to refinancing student loans many people can not decide if it is a god or bad idea. This guide is designed to help you make up your own mind because the answer is dependant on your own personal circumstances. In order to decide, you need to arm yourself with all the relevant information and then take it forward.

If your situation is that you have many small student loans it can sometimes be better to keep them all separate, rather than consolidating them into a much bigger loan. Many people look at the fact that the monthly payment is lower when you consolidate. Whilst this is often true, they fail to realise that the monthly payment is over a longer term; the life of the new loan period. If you don’t keep an eye on this it could be anything up to 20 years!

Another good reason to keeping each loan separate and NOT consolidating is to keep your overall interest rate lower which means an overall faster payoff period and lower monthly payments. This is achieved by paying off one debt at a time, which in turn, lowers the regular payment significantly. This means that whilst you are paying the debt, the required minimum would continue to drop, so each of the following loans would be paid off over a shorter term.

But what happens if you are unable to make those minimum monthly repayments in the first place? If you cannot afford those larger initial payments then student loan refinancing is your best option. Sure, you pay more in the end but it is the here and now that matters right? Less monthly payments = longer term. You can afford those things you want now and then in the future when you are still paying back the debt you will probably be in a better position to do so anyway.

So, you have chosen to reconsolidate, lets make sure you take the right steps before you choose the right product. Refinancing student loans takes a lot of careful planning to ensure you get organised and don’t put your financial future in jeopardy.

Refinancing Student Loans – Steps to get you started.

• Identify your current loan products

Student loans can come in Federal and Private format. Private student loans are often subject to higher interest rates than Federal student loans. Before doing anything, make sure you calculate the consolidated amount against the separate amounts. Take into account the separate interest rates against the consolidated rate and each loans repayment period against the overall consolidated loan repayment period.

• Try to build your credit score before applying for the new loan

Having a good credit score is important when dealing with any financial establishment. It can determine better rates and overall loan eligibility. Don’t despair if you have a poor credit rating though, there are ways and means to improve it, but it can take time.

• Watch the interest rates

Always read the small print to determine if your interest rates will track the base rate or remain at a set rate. If rates are changing a lot it can be worthwhile to stick to an agreement that is for a set rate. If you believe the rate is only going to go down, then choose an agreement that tracks the base rate. This can be the difference to a good or bad deal.

• Read the small print on eligibility requirements

Each financial institution has varying requirements when it comes to their products. Minimum or maximum loan periods, minimum loan consolidation amounts, employment or out of school status, the list is endless, make sure you check!

• Compare other products for discounts and incentives

Lenders can offer different types of incentives or discounts so that you will choose their product over someone else’s. Don’t be afraid to ask! Things to look out for are discounts for early payments, on time payments and even direct debit or automatic payments.