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One of the simplest ways to cut thousands of dollars off of your student loan repayment is to shop around for, then take advantage of incentive programs offered by student loan refinancing companies. Lenders generally offer very similar base interest rates for their loans – the difference is in the types of incentives each offers.
ScholarPoint has shopped the student loan refinancing market and made a conscious choice to offer higher dollar saving incentives than our competition – but we encourage you to shop around to and learn about various discounts on your own without taking our word for it. Be cautious with your comparisons. Oftentimes the student loan refinancing discounts that appear to be less significant like interest rate reductions pack a much heavier punch than fixed dollar amount reductions.
The power of an interest rate with student loan refinancing can be astounding. Einstein even developed his “rule of 72” theory based on his fascination with how quickly interest rates could work to accrue money. Most people understand how a seemingly insignificant percentage rate can add when they look at their credit card statements.
With student loan refinancing lender incentive programs, you can shave percentage points off of your loan that will impact the entire 10-20 year repayment term. Even the smallest interest rate decrease can make a major impact on the total amount of money you’ll repay over the course of the loan. ScholarPoint offers student loan refinancing incentives that amount to a full 1.5% interest rate reduction.
Not every lender offers student loan refinancing incentives in terms of interest rate reductions. Of those that do, the amount of interest deducted varies greatly. There are two main reasons why interest rate reductions are generally offered by a student loan refinancing lender:
Making automatic payments simply mean setting the preferences on your accounts so that payments come out automatically. Most people are already using this method to pay at least some of their bills. Student loan refinancing lenders that offer this option usually give a .25% discount for making auto payments. ScholarPoint offers double the discount, a .50% interest rate reduction.
Why not be rewarded for paying your bills on time? Some student loan refinancing lenders offer a full percentage point discount after making a certain amount of timely payments. The standard for the on-time payments discount is 1% after 36 months. ScholarPoint offers this 1% discount after only 24 months, a full year earlier.
With a principal reduction, a percentage of the remaining balance is deducted free and clear. The most common type of principal reduction is usually offered by student loan refinancing lenders after making a specific number of on time payments. Normally, student loan refinancing lenders will either offer an interest rate reduction or a principal reduction for on-time payments.
At a glance, principal reduction can seem like a big savings, but be sure to do the math. If the interest rate on the remaining payments stays the same, you’ll probably pay more than if you were to choose a student loan refinancing lender with an interest rate reduction incentive.
With a cash-back program the student loan refinancing lender gives you “cash” back to apply to your remaining balance. The concept is similar to principal reduction. Most often, a 1% cash-back incentive is offered after making 36 consecutive on-time payments.
The terminology seems to represent big savings, but be sure to calculate the savings. If you were to receive a cash-back incentive on a remaining $30,000 loan, you would receive a $300 deduction. On the other hand, had you chosen a student loan refinancing lender with a 1% interest rate reduction on the remaining payments, the savings would have amounted to around $1000.
Use a student loan refinancing calculator to help you understand how the incentive programs offered by various lenders can reduce the total amount you’ll pay on your student loans. If you’ve got questions about interest rates, incentive programs, or the general process of student loan refinancing, contact ScholarPoint by phone at 877-561-8042 or click here to chat with us online.
