November 1, 2021 — Lending Rate Increase – Forbes Advisor
By Zenaida B. Ernst on	 November 1, 2021 Credit limit
Last week, the average interest rate on refinanced student loans jumped. For many borrowers, rates remain low enough to make refinancing a good option.
For borrowers with a credit score of 720 or higher who prequalified on Credible.com’s student loan market October 25-29, the average fixed interest rate on a 10-year refinance loan was 3. , 44%. On a five-year variable rate loan, the rate was 2.60%, according to Credible.com.
The average fixed rate on 10-year refinance loans last week rose 0.05% to 3.44%. The week before, the average stood at 3.39%.
At the same time last year, the average fixed rate on a 10-year refinance loan was 4.03%, 0.59% higher than the current rate. This means that borrowers who refinance now have the option of locking in a rate that is significantly lower than they would have received at this time last year.
Average variable rates on five-year refinancing loans increased last week from an average of 2.48% to 2.60%.
Refinancing an existing $ 20,000 loan into a five-year loan at an interest rate of 2.60% would result in a monthly payment of approximately $ 356. A borrower would pay $ 1,350 in total interest over the life of the loan. But because the rate in this example is variable, it may go up or down from month to month during this time period.
You may find that variable rate loans are initially inferior to fixed rate loans. But because they are variable, they have the potential to increase in the future.
Fortunately, you can reduce your risk by paying off your new refinance loan quickly, or at least as quickly as possible. Start by choosing a short loan term but with a manageable payment. Then pay extra whenever you can. This can hedge your risk against possible rate increases.
Whether you choose a fixed or variable rate loan, it’s important to compare the rates of multiple lenders to make sure you don’t miss out on any savings. You may be able to benefit from interest rate reductions by opting for automatic payments or having an existing relationship with a lender.
Lenders generally require that you complete your degree before you refinance. While it is possible to find a lender without this requirement, in most cases you will want to wait to refinance until you have graduated.
Keep in mind that you will need a good or a great credit score to get the lowest interest rates.