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Should I Refinance loan for 5, 7, 10, 15 or 20 Years?
May 9, 2017
10:39 am
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andy
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this may seem like an obvious question but i want to get the input of this community because i've been able to get a great deal of helpful information in the past that has helped me with my student loans.

first i want to give a general outline of my situation:

i want to pay off my balance of 93k in 5 years or less and currently my total loan balance is spread out across two loans (loan A: 20k & loan B: 73K)

my consolidation and refinance application has been approved by commonbond for 7 years at 5.59%, fixed for monthly payments of $1300 (currently i pay about $1000/month and my interest rates are variable at the high end of 4%)

i can afford to pay more than the MAD and wanted to ask if it would be smarter to consolidate and refinance for a longer life period of the loan (say 15 or 20 years) and get a lower fixed interest rate, thus a lower monthly payment. this way i can pay more money above the MAD and have a lower interest rate on my balance.

would this be the most cost effective way to go about about consolidating and refinancing?

thank you!

May 27, 2017
2:45 pm
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Barry Hecht
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Hi Andy, That is a very reasonable question.

First, it caught my attention that you say you are receiving a lower interest rate on the longer term loan. However, typically, a longer term loan will have a higher interest rate than a shorter term loan. Perhaps there is something I am missing in your question, or perhaps you meant to say that the payment will be lower because the loan term is longer.

I am curious why you are considering consolidating to the higher rate of interest? I see that its fixed but wouldn't it be better to remain variable considering your ambitious plans to pay off the loan in 5 years?

I will say, its not obvious, and everyone's situation is different so don't feel bad for asking the question. I would just direct you to a tool that should let you put in all the different unique parts of yoru situation. For example, if you pay off your loan with extra monthly payments, you can do that here...and it totals how much interest and principal you will have paid during the life of your loan. Less interest = good....pretty simple. 🙂 So hopefully this is helpful and will get you to a quicker answer to your questions.
https://iqcalculators.com/calculator/student-loan/

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