Refinance student loan? Should I pay down principle before v after refi?
May 5, 2017 11:45 AM
I will be coming into a lump sum of about $5500 and I'm wondering if I should just:
1) pay down the private loan directly and not refinance (I'm not sure how this will affect my monthly payment or end date),
2)refinance and then pay this amount towards the new loan, or
3)refinance but after paying down the student loan with its currently lender first.
I am thinking of refinancing my Navient student loans with SoFi. Currently have about $24,000 (that is estimated to balloon to $38K total with standard repayment that is estimated to end in 2029). According to SoFi, I can save about $7,800 (30K total loan) if I choose to do a 5 yr. term. This would result in a higher monthly payment, which is fine, but lower interest and total paid over time.
Thanks!
I am thinking of refinancing my Navient student loans with SoFi. Currently have about $24,000 (that is estimated to balloon to $38K total with standard repayment that is estimated to end in 2029). According to SoFi, I can save about $7,800 (30K total loan) if I choose to do a 5 yr. term. This would result in a higher monthly payment, which is fine, but lower interest and total paid over time.
Thanks!
It's odd that you don't mention the comparative interest rates. If SoFi is not offering you a better interest rate, you don't need to refinance to achieve the shorter term. Just make the higher monthly payments to Navient, specifying in writing that the extra is to go to principal, not interest. That way you maintain flexibility in case something happens and you lose income.
Unless SoFi is offering you a lower interest rate for a smaller loan (e.g., the original sum - the $5500) or charges an origination fee based on the size of its loan, it doesn't, I believe, actually make a difference whether you pay the lump sum and then refinance, or refinance and then pay the lump sum. The end result will still be you paying the SoFi interest rate on the original loan size minus the lump sum.
If, for whatever reason, you decide to pay the lump sum directly to Navient, again, you need to specify in writing that the payment goes to principal, not interest, and you need to check for yourself that it has been applied that way.
(Also, if you do refinance with SoFi, be very careful not to refinance any federal loans in (if you have any) with your private loans. You will lose all protections offered to federal loan borrowers on those loans if you do.
(You didn't mention them, but it's such a peril that I felt I had to bring it up.))
posted by praemunire at 11:57 AM on May 5, 2017
Unless SoFi is offering you a lower interest rate for a smaller loan (e.g., the original sum - the $5500) or charges an origination fee based on the size of its loan, it doesn't, I believe, actually make a difference whether you pay the lump sum and then refinance, or refinance and then pay the lump sum. The end result will still be you paying the SoFi interest rate on the original loan size minus the lump sum.
If, for whatever reason, you decide to pay the lump sum directly to Navient, again, you need to specify in writing that the payment goes to principal, not interest, and you need to check for yourself that it has been applied that way.
(Also, if you do refinance with SoFi, be very careful not to refinance any federal loans in (if you have any) with your private loans. You will lose all protections offered to federal loan borrowers on those loans if you do.
(You didn't mention them, but it's such a peril that I felt I had to bring it up.))
posted by praemunire at 11:57 AM on May 5, 2017
Sorry for not including the info. Interest rate with sofi is 5.625, the average of private loans interest is 6.16 (if i pay off one of the loans) or 6.62 as is.
posted by shortstuff13 at 12:03 PM on May 5, 2017
posted by shortstuff13 at 12:03 PM on May 5, 2017
Pay loan right now, then consider refinancing on it's own merits. You might be better off refinancing afterwards, when you are down 5k. Forget the minutia of interest rates -- pay more than the minimum and get those fuckers out of your life.
posted by so fucking future at 8:02 PM on May 5, 2017
posted by so fucking future at 8:02 PM on May 5, 2017
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posted by empath at 11:48 AM on May 5, 2017