As long as you qualify, you can refinance your student loans as many times and as often as you want. However, while refinancing multiple times can be a great way to get better terms, there are situations where it could hurt you more than help you.
Should I refinance my student loans?
Refinancing allows you to replace your existing student loans with a new loan from a private lender, with the main benefit being the possibility of a lower interest rate or monthly payment. You might consider refinancing if:
- You took out a loan when interest rates were high.
- You have a good credit score and a stable income.
- You want to remove a co-signer from your loan.
- You want to extend your repayment period to reduce your monthly payment.
If you have all of the federal student loans and are struggling to make the monthly payments, refinancing shouldn’t be your first fallback option. The federal government offers hardship relief, alternative repayment options, and loan forgiveness that private lenders do not, and any loans you refinance will immediately become private.
However, if you all have private loans and a good credit score, refinancing could be a smart money move, especially if you have trouble keeping up with multiple loans or have a higher interest rate. You can refinance as many times as you want as you improve your credit score and qualify for lower rates.
The disadvantages of refinancing more than once
The biggest risk of refinancing multiple times is that it might slightly lower your credit score. While you can shop around for lenders risk-free using prequalification, most lenders will perform a thorough credit check during the application process to see your detailed credit report and debt payment history. This helps the lender determine if you are considered a reputable borrower. Each firm credit check lowers your credit score by a few points.
The average age of your accounts also has an impact on your credit score. Credit reporting models prefer to see accounts that have been open for several years; if you keep replacing your student loan with a new one, the average age of your accounts will remain low.
That said, refinance credit declines can be easily remedied with responsible use, especially when it comes to a decline caused by a singular hard check. As long as you make payments on your new loan on time, you should recover any lost points quickly.
The advantages of refinancing more than once
You can refinance the same loan multiple times, and if you’ve gone through the process before, you’ll have a good idea of what lenders are looking for and how the process works. Refinancing more than once can help you get a lower interest rate, better terms, or a repayment schedule that suits your financial goals. All of these can make it easier to pay off your loans or make your loan cheaper in the long run.
Additionally, some lenders will offer special promotions or discounts for refinancing with them – if you spot a good deal, it may be worth switching to that company. Changing companies is also a good idea if you have had negative experiences with your current company or want to change loan officers.
What to consider before refinancing your student loans again
There are a few things to consider before applying for another refinance loan, particularly regarding the long-term impact it may have on your finances:
- The new interest rate. Is the new interest rate significantly lower than your current rate? Otherwise, it may not be worth going through the hassle of refinancing.
- Your financial goals. Consider both your short-term and long-term goals when it comes to your balance. Would you like a lower monthly payment, better terms or a rate reduction? Make sure the lender meets your specific goals when it comes to refinancing multiple times.
- Your financial health. If your credit is in good standing and you have a long credit history, applying for a new loan probably won’t have much of an impact on your score. You must also consider your income and determine if you are able to make your new monthly payments.
- Costs. Although many lenders have waived origination fees and application fees, you should always check to see if your new lender charges them; these fees could eat into the savings you realize from refinancing.
Before you jump into refinancing, get prequalified with a few lenders to see what rates are available to you. From there, you can run the numbers through a refinance calculator to see if your new loan will be worth it in the long run. When you’re ready to refinance, you can apply with your lender and get your new loan within weeks.