3 Ways Refinancing Your Student Loan Sets You Up for Financial Stability
Like most college graduates, you probably left school with two things: a diploma and a lot of debt.
Of course, that probably came as no surprise.
Still, that’s no reason to accept the original terms for the next 10 or more years.
Instead, you should really think about refinancing your loan as soon as possible.
3 Reasons You Should Refinance Your Student Loan Right Away
The main reason you should refinance your student loan is probably obvious enough: it means a much better rate and/or longer to pay it off. Either way, the amount you owe every month is going to drop considerably.
That alone should be reason enough to refinance your student loan right away.
However, it’s also important to think about how doing so right now will set you up for financial stability.
1. Starting Your Emergency Fund
There’s no financial stability without an emergency fund. No matter how well you think you’re doing financially, it only takes one accident to put you in trouble.
Ideally, this fund should be enough to cover six months of your living expenses.
That’s already a challenge for most recent graduates, but if you also have to pay hundreds every month to cover your student loans, it’s impossible.
If something unexpected happen, you could be without a paycheck and enough savings to cover you for six months, but those loan payments will still require your attention (remember, you can’t even discharge them via bankruptcy).
2. Building Good Credit
Now is also a great time to build credit, something you may have started to do in college. However, as someone who now has a regular paycheck, you can start using a credit card with more confidence.
As long as you act responsibly, you’ll begin enjoying the benefits of good credit at a young age. This will be a massive advantage when it comes time to buy a car, get a loan for your first home, or even obtain funding for your own business.
Of course, it will also be incredibly helpful if you ever find yourself without a paycheck and need a little breathing room until you get another job.
Unfortunately, credit cards and large amounts of debt are often a problem waiting to happen, so until you refinance, you should keep your use to a minimum.
3. Investing in Your Future
The earlier you begin saving for retirement, the better. It may seem as though that obligation is too far away to care about, but if you wait too long, you’ll soon find that setting money aside every month begins to compete with mortgage payments or even the money you need to spend on childcare.
Right now is the perfect time to begin investing in your eventual retirement, but that’s going to be nearly impossible as long as you have student debt to pay off.
Don’t Let Student Loan Debt Keep You from Financial Stability
Refinancing any loan is almost always a great idea, but this is especially true when it comes to student loan debt.
Until you do, it will be impossible to enjoy the three benefits outlined above. In fact, your entire 20s cold go by before you finally do.
