Should I Use a Home Equity Loan to Refinance My Student Loans?
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 Loans has rates starting at 3.99%*, which is competitive with Government offered solutions and many times better than private student loan lenders.
*Your APR will be between 3.99% and 8.99% for a loan in first lien position and 3.99% 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 $200,000.
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.