How Often Can You Refinance Your Student Loans?

by Raptor Staff on March 3 2022

There are no limits as to how often you can refinance your student loans. You can refinance your loans as many times as you want as long as you meet the lender’s minimum eligibility criteria. That acts as the only barrier to refinancing. There are no fees involved in the process, so you don’t need to worry about losing money either. However, you should be prepared to spend some time researching lenders and terms, so you get the best deal on your new loan.

While refinancing multiple times has its benefits, it may not be the right decision for everyone. Understanding the benefits and downsides will help you decide whether this is the best approach for you.

Benefits Of Refinancing Student Loans the First Time

Refinancing involves exchanging your existing student loans for a new loan with different terms. When you refinance your student loans, your new lender pays off your current lender and issues you a new loan. The new loan will have a new interest rate and new terms and conditions.

Borrowers generally choose to refinance their student loans to benefit from lower interest rates or because they want to change their monthly payments. When you apply for refinancing, lenders will offer you quotes based on your credit score and debt-to-income ratio. If your credit score has improved since you took the original loan, you’ll qualify for a lower interest rate. Paying even a marginally lower rate than your current rate can save you a considerable amount in accrued interest over the life of the loan. The potential savings make refinancing a very attractive option for borrowers paying off high-cost loans.

Another benefit of refinancing is the ability to change the monthly payments as well as the life of the loan. Borrowers who are struggling financially and can’t afford the monthly loan repayments, refinance to lower their monthly payments. This makes the loan repayments more affordable. Lowering the monthly payments does extend the life of the loan, which ultimately increases the amount of interest that accrues. While this does increase the cost of the loan, it is a far better option than defaulting on the loan, which has far more serious consequences.

Borrowers who are financially well-off and have cash to spare every month choose refinancing as a way to increase their monthly payment amounts. This has significant benefits as it reduces the life of the loan, which means less interest accrual. It also means they’ll be debt-free faster, which can be a huge relief.

Why Refinance Student Loans Multiple Times?

Every individual’s finances change with time. Refinancing a second or third time allows you to change the terms of your existing loan to better suit your current circumstances. And if your credit score has improved in the interim, you’ll get a lower interest rate too, which is a win-win.

Maybe you refinanced the first time to lower your monthly payments because finances were tight at that time. Over a year or two, if your finances improve, it makes sense to refinance again to increase your monthly payments. Not only will this help to reduce the total interest that accrues, but it will also help to reduce the loan term so you clear the loan faster. And if your credit score has improved during the elapsed time, you’ll qualify for a lower interest rate too, racking up those savings.

Another compelling reason to refinance student loans multiple times is to benefit from the progressively lower interest rates. Making all loan payments on time and keeping your credit utilization low adds points to your credit score. Over time your improved credit score will qualify you for an even interest rate. Refinancing for the sole purpose of getting a lower interest rate is worth it even if you don’t want to change your monthly payments or the loan term.

Is Refinancing Student Loans Multiple Times the Right Option for You?

Despite its many benefits, refinancing multiple times is not necessarily the best option for everyone. You should consider refinancing, whether for the first, second, or third time, only under these circumstances:

  • Your finances have improved – Whether you’ve got a higher-paying new job or a raise at your old job, it makes financial sense to refinance to increase your monthly payments. This will help you clear your debt faster and reduce the interest that accrues on your loan.
  • Your credit score has improved – The higher your credit score, the lower the interest you’ll qualify for. If your score has improved significantly, it’s a good idea to use a rate comparison tool to check what personalized rate you may qualify for with reputed refinance lenders.
  • Interest rates have gone down – Right now interest rates are the lowest they’ve been in years. It’s definitely worth refinancing at this time to lock in these low rates regardless of all other factors.
  • You need to free up cash urgently – When you need money for a medical or other emergency, refinancing to lower your monthly payments can free up much-needed cash. It may work out to be cheaper than taking a personal loan. There are no limits on the number of times you can refinance. This means you can always consider refinancing to increase the monthly payments after your finances improve.

How To Go About Refinancing Student Loans Multiple Times

So you’ve decided that refinancing is right for you. The first things to do are to check your credit score and research lenders to determine what interest rate you qualify for. Then, identify the lender offering you the lowest rate and best terms. Use a student loan refinance calculator to figure out what monthly payments and loan term would work best for you. All that’s left to do then is to fill in the refinancing agreement and submit it to the lender along with whatever documents necessary.

It can take anywhere from a week to a couple of weeks for the loan to be processed. It’s important to keep making payments on the old loan till you receive notification that the process is complete. If you stop payments on your current loan prematurely, you will be charged a late fee and interest on the late payments.

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We hoped you enjoyed this article! Remember, you can and potentially lower your monthly student loan payments and save money.