A refinance calculator is an online tool that’s designed to calculate potential savings on refinanced student loans. It can also help you choose the loan term that’s best suited for you, given your current financial situation.

Online refinance calculators are user-friendly and incredibly easy to use. You simply enter the information that the calculator asks for and it works out the results for you.

Here’s a step-by-step of how to use a refinance calculator:

Part 1: Submit your current loan details

There are several tabs in this section, all pertaining to your current loan. You will need to enter information about the following:

• Total loan balance – Here you’ll need to enter the total loan amount you’d like to refinance. This could include both federal and private student loans.
• Current interest rate – If you have multiple loans with different rates, enter the average interest rates of the loans you’re refinancing.
• Remaining loan term or monthly payment – There are two separate tabs for each of these. You can enter the information on any one and the tool will calculator the other. For the loan term, you enter the number of years and months left to repay the total loan. For the monthly payment, enter the total monthly payments of the loans you wish to refinance.

Part 2: Submit your refinanced loan details

• Total loan balance – This will be auto-filled from the information you entered in the first step.
• Interest rate – Enter the estimated interest rate on your refinanced loan. You can get this when you complete prequalification formalities at various refinance lenders’ websites. Remember, this will not be the final rate you’ll pay. At this stage, it’s just an estimated rate, which is good enough for the calculation.
• New loan term –You can choose how long you’d like to take to pay off the refinanced loan. You can enter your loan term in number of years and months.
• New monthly payment – Here’s where the magic happens. The tool calculates the loan amount, interest rate, and loan term that you’ve entered in the earlier steps. In this section it shows you how much your new monthly payments will be based on the information you’ve provided.

How To Use A Refinance Calculator To Make An Informed Decision

You’ve entered in all the information the tool has asked for and you now know how much you’ll have to repay every month.

If you can afford to pay more than the calculated monthly payments, try shortening the loan term. This will increase the monthly payments. This is a great way to clear your debt faster and also save on the accrued interest.

If the monthly payments are unaffordable given your current financial situation, try extending the loan term. This will lower the monthly payments and make them more affordable. With this option, you’ll pay more in interest. You’ll also take longer to clear your debt. However, it will help you avoid the bigger risk of defaulting on your loan.