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Should I refinance loans?

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  • hypnotiq
    replied
    Thanks for the replies

    Going to refinance first thing tomorrow.

    Leave a comment:


  • The White Coat Investor
    replied
    I'd guess you could save a couple thousand bucks in interest and that it would take you 1-2 hours to do it. That's a pretty good hourly rate.

    Leave a comment:


  • Craigy
    replied










    Most student loan companies phased out credit card payments over the past two years, or imposed massive restrictions on when they can be used, and come with 2-3% surcharges.

     

    I agree with everyone else here, its free money, just refinance.
    Click to expand…


    That’s why I mentioned Plastiq.  You pay them with your credit card and they send Navient a check.  I’ve used it several times for this purpose.  It’s a 1 time 2.5% fee which can easily be partially or fully offset by opening up a new credit card and getting introductory bonus points.  It’s also a lot better than 7%.  You have to do the math to make sure that it’s right for u, but it can be advantageous in certain scenarios.

    My point is that he can pay off a big chunk with credit cards immediately and start aggressively attacking the remaining balance while letting the credit card balances ride for the length of the introductory period.  Once the student loans are gone he can save aggressively and make minimum payments on the credit card until it’s time to pay them off at the end of the intro period.  It can be a nice way to get rid of the high interest rates faster and save up some much needed cash.
    Refinancing is perfectly acceptable as well, but you might not get as good of a rate.  You just have to see what they offer.
    Click to expand…


    This might not necessarily be true.  Assuming paying off $72k at 7% APR over 12 months, it would take 5 months to reach having paid 2.5% in finance charges (assuming it was all on the card).  You’d have to make totally sure that you pay no finance charges on the credit card (i.e. a long enough introductory 0% period), and that the value of the card bonus makes it worth it minus any fees the card may have.

    If he pays it off in 7 or fewer months (for n = 7, pmt = $10,527.11), then cumulative interest would be $1,689.77, or 2.35%.

    Now, if you just refinanced it to a 5-year fixed at 3.35%, and paid $4,607.53/month for 16 months, you’d pay a total of 2.39% of original principal.  If you went 5-year variable for a similar term, you’d pay well less than that.

    Just make sure all your math works with regard to total earned from CC rewards vs total paid in interest/finance charges.
    Click to expand...


    +1

    I'm sure you could line up some credit card intro offer to get some of that 2.5% back that plastiq charges, but I'd be impressed if someone could really transfer any meaningful amount onto a 0% card for a meaningful period of time *and* get cash back/rewards to offset the 2.5%, which is a lot.

    Most of the better CC intro offers are about $500 worth of cash or points, which means you're only offsetting the fee on $20,000 of transfers.  Plus, these cards with the big intro rewards typically don't also give you 0% for any real length of time (or at all), so even if you could transfer a good chunk for free, you're now accruing interest at 12% or 20% or whatever.  I could put my loans on my USAA 2.5% cash back card, but then I'd be paying at the card's rate which is much higher than my loan rate.

    I have looked at converting student loans to 0% credit card debt or other types of debt many times, and the fees always kill the deal.  Usually balance transfer fees or the fees on those checks are in the realm of 3%.  The ones without transfer fees don't give you 0% interest.  Same with refinancing the house or a heloc.  Even if you can line up a good rate, closing costs etc are going to chew through any savings.  No free lunch.

    Leave a comment:


  • saildawg
    replied
    I am always looking for "student loan hacks", the credit card route would be interesting if your loan provider does service credit cards for small % fee.  I do agree it would make sense to refinance with one of the many companies mentioned here on WCI.  It takes less than an hour of work, you would save a good amount of money in interest, and you get a signup bonus.  That is a win-win.  Most of them will accept a contract as proof of income.  I would recomend a variable rate, especially if you are going to pay it off in a year or less, you will get a ower interest rate and do not need the "insurance" of a fixed rate.

    Leave a comment:


  • Rotish
    replied
    Meh. Why go through the hassle of plastiq with 2.5% and a new credit card when you can refinance for essentially the same rate, and eliminate your risk if you have to stretch your payments a little longer?

    Leave a comment:


  • DMFA
    replied







    Most student loan companies phased out credit card payments over the past two years, or imposed massive restrictions on when they can be used, and come with 2-3% surcharges.

     

    I agree with everyone else here, its free money, just refinance.
    Click to expand…


    That’s why I mentioned Plastiq.  You pay them with your credit card and they send Navient a check.  I’ve used it several times for this purpose.  It’s a 1 time 2.5% fee which can easily be partially or fully offset by opening up a new credit card and getting introductory bonus points.  It’s also a lot better than 7%.  You have to do the math to make sure that it’s right for u, but it can be advantageous in certain scenarios.

    My point is that he can pay off a big chunk with credit cards immediately and start aggressively attacking the remaining balance while letting the credit card balances ride for the length of the introductory period.  Once the student loans are gone he can save aggressively and make minimum payments on the credit card until it’s time to pay them off at the end of the intro period.  It can be a nice way to get rid of the high interest rates faster and save up some much needed cash.
    Refinancing is perfectly acceptable as well, but you might not get as good of a rate.  You just have to see what they offer.
    Click to expand...


    This might not necessarily be true.  Assuming paying off $72k at 7% APR over 12 months, it would take 5 months to reach having paid 2.5% in finance charges (assuming it was all on the card).  You'd have to make totally sure that you pay no finance charges on the credit card (i.e. a long enough introductory 0% period), and that the value of the card bonus makes it worth it minus any fees the card may have.

    If he pays it off in 7 or fewer months (for n = 7, pmt = $10,527.11), then cumulative interest would be $1,689.77, or 2.35%.

    Now, if you just refinanced it to a 5-year fixed at 3.35%, and paid $4,607.53/month for 16 months, you'd pay a total of 2.39% of original principal.  If you went 5-year variable for a similar term, you'd pay well less than that.

    Just make sure all your math works with regard to total earned from CC rewards vs total paid in interest/finance charges.

    Leave a comment:


  • hightower
    replied




    Most student loan companies phased out credit card payments over the past two years, or imposed massive restrictions on when they can be used, and come with 2-3% surcharges.

     

    I agree with everyone else here, its free money, just refinance.
    Click to expand...


    That's why I mentioned Plastiq.  You pay them with your credit card and they send Navient a check.  I've used it several times for this purpose.  It's a 1 time 2.5% fee which can easily be partially or fully offset by opening up a new credit card and getting introductory bonus points.  It's also a lot better than 7%.  You have to do the math to make sure that it's right for u, but it can be advantageous in certain scenarios.

    My point is that he can pay off a big chunk with credit cards immediately and start aggressively attacking the remaining balance while letting the credit card balances ride for the length of the introductory period.  Once the student loans are gone he can save aggressively and make minimum payments on the credit card until it's time to pay them off at the end of the intro period.  It can be a nice way to get rid of the high interest rates faster and save up some much needed cash.
    Refinancing is perfectly acceptable as well, but you might not get as good of a rate.  You just have to see what they offer.

    Leave a comment:


  • Rotish
    replied
    Most student loan companies phased out credit card payments over the past two years, or imposed massive restrictions on when they can be used, and come with 2-3% surcharges.

     

    I agree with everyone else here, its free money, just refinance.

    Leave a comment:


  • DMFA
    replied
    It's free to refinance your loans (actually they pay you $300), and it only takes a few minutes online. Any amount saved in interest is probably worth your while. If you can get a good rate on a 5-year variable, do that.

    Leave a comment:


  • hightower
    replied
    Another option is to open a couple of zero interest credit card accounts and pay off big chunks all at once.  Then just pay off the credit cards slowly over the year.  Citi has a card that's 21 months zero interest.  Chase has one that's 15 months zero interest (they will give a bigger credit line).  Plus, you'll earn bonus points with these cards.  Use plastiq to pay the loan off if they don't let you use a credit card (Navient won't). Plastiq charges a one time 2.5% fee.  That's a lot better than 7%.

    Leave a comment:


  • Craigy
    replied
    If you could refi at 3.5% you'd pay half the interest. Assuming you carried the full debt for a year, paid one balloon payment, that'd be about $2,500 of interest vs about $5,000.  Obviously if you pay it off sooner there is less time for interest to accrue, and it becomes more of a wash.

    Some places will refi you now using your 1099 contract, so you could stretch out the benefit by getting a lower rate right now (I am assuming you are finishing residency imminently and starting attending soon). However, there is often some lag between loan approval and actual funding of the loan, so that further makes it a bit more of a wash.  Depending on how quick you are paying, in theory the refi loan could fund after you've paid the original note off.

    FWIW, when we get that first attending check, I intend to refi my refi to a variable rate to save an extra grand or so over the remaining life of the loan.  Even if it's just $800-$900, it's worth pursuing IMO.

    Leave a comment:


  • hypnotiq
    started a topic Should I refinance loans?

    Should I refinance loans?

    I only have 72k left on my loansat 7%. I am planning on aggresively paying them back and should be able to within a year with my attending salary. Is there any benefit to refinancing now? The other little wrinkle is that I will be a 1099 employee so I don't proof of yearly salary, just my hourly rate.

     

     
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