Over 40 million Americans carry student loan debt. For some, paying off that student loan debt may become difficult at times. If you can’t afford your student loan payment, there are options to consider, such as refinancing with a home equity loan.*
Using home equity to refinance or pay off educational loans is one way you can refinance student debt so that it is easier to pay off.
However, before you run out and apply for a home equity loan to refinance or pay off your educational loans, consider the following:
1. Understand your interest rate options. If your credit has improved since you were a student, you may be able to secure a lower interest rate using a home equity loan. While rates vary by lender, Discover Home Equity Loans has rates starting at 4.99%*, which is competitive with Government offered solutions and many times better than private student loan lenders.
*Your APR will be between 4.99% and 8.99% for a loan in first lien position and 4.99% and 11.99% for a loan in second lien position. The APR is based on loan amount and a review of creditworthiness, including income and property information, at the time of application. The lowest APR is available to consumers with the best credit and other factors, including the loan term. Loan amounts available from $35,000 to $150,000.
2. Evaluate the risk of securing debt with your home. Most educational loans are unsecured debt.
On the other hand, a home equity loan is a debt secured by your home. That means failure to pay your home equity loan could put your house at risk. Always know how much you can afford before you borrow.
3. Understand your student loan repayment options. Some educational loans allow borrowers to elect income-based repayment options, which can help ease the burden of hefty monthly payments. If your loan servicer does not offer a program of that nature, you may want to consider using a home equity loan to lower your monthly payments.
4. Consider the costs of refinancing. One thing to always consider is the cost of refinancing. Do these upfront costs warrant the lower rate? Luckily, with Discover Home Equity Loans, there is no cash required at closing.
When it comes to paying off student debt, there is no one-size-fits-all approach. For some, using a home equity loan to pay off educational loans can be an excellent way to lower monthly payments and save on interest. For others, seeking different payment options from your student loan provider may be a better choice. Talk with a Discover Personal Banker to learn more at 1-855-361-3435.