A refinance loan is a new private loan issued to replace existing student loan(s) with new terms and conditions. This may be a single loan or more likely several older loans combined into one. The most immediate benefit is that mutliple payments may now be combined into a single payment. In most cases, borrowers can get a cheaper interest rate when they refinance because they may have established a stronger credit history. Many times borrowers select loan refinancing in order to extend the repayment over a longer period of time in order to lower the monthly payment. However, borrowers should consider this carefully because in many cases the overall cost of the loan will increase.
It is worth noting that is an individual is refinancing Federal loans into a private loan structure, they will lose any Federal loan benefits their previous loans offered.