It’s case let’s dig into this, like this common one, someone comes to me and they’re like, yep. This is stomach who doesn’t listen to podcasts, not simple, passive cashflow. They’re not investing. They’re just investing in their normal retail investments, mutual funds. And they’re like, oh, like, look at I did.
I consolidated all my loans through the company or whatnot. And it’s a lower interest rates. It’s a lower payment. How is that not a, uh, a losing situation? What are the negatives of just going down, just blindly going to these websites, you see them all the time, right? Lowering your interest rate and lowering your monthly payments.
What is the, the side that we’re not seeing here? And one of the first things I look at is if refinance makes sense for you, and if it does, it’s a simple solution. You don’t have to deal with all the federal regulations and programs and paperwork, or hire somebody like me to help with that. You just pay it like a traditional loan because I refinance with a sofa or Laurel road or common bond or whatever those companies they’ll call a student loan.
The product is a student loan, but really personal loan. That’s all it is. And at whatever terms they give you. So you’re going to forfeit all of your federal regulations and protections you’re going to, and the safety net that they provide, you’re going to forfeit the flexibility that federal repayment has.
Once you agree to those terms, unless you are able to refinance it in better terms later. You’re stuck with them as long as it is at that company. I would say a majority of the time, the payment does not lower when you refinance. So even if you lower the interest rate that does not ensure that your payments can be lower.
In fact, the payment usually goes up because typically lenders will tell you, I will give you a 3.0% fixed rate on a seven year term. If you are on a 25 year term before that are an income driven plan, the more typical the student loans, especially after federal consolidation. Your payment’s going to go way up, despite the fact that you get a lower interest rate, the Jan, my understanding.