Student loan debt is a common problem faced by recent graduates. If you’re graduating with student loan debt, you are likely aware of the fact that it can be very difficult to get ahead financially as an adult. This might be even more challenging if you graduate from college during a recession or after the stock market swoons. Unfortunately, this is exactly what many individuals are facing today.
If you are feeling overwhelmed by student loans, do not panic. You still have options to help alleviate some of the financial stress from student debt. In this article, we will look into why you should consider refinancing with a short-term loan.
What is a short-term loan?
If you have a large amount of student loan debt and are struggling with paying it off, there are a couple of different refinancing options that you might want to look into. One option is a short-term loan. A short-term loan is an instant personal loan that can be obtained from a lending institution, bank, NBFC, or online loan app. The amount of the loan can range from as little as Rs. 1000 to a few lakhs, depending on the lender. The amount borrowed is typically repaid in monthly payments until the loan term expires.
A short-term loan is called such because it has a short loan tenure, ranging from a month to a year. That means it needs to be repaid quickly. The advantage of it is that it is an easy loan to get. It has quick application and approval rates as well as instant cash disbursals. It is often used for emergencies such as paying for unexpected medical expenses. It can also be used to refinance debt such as student loans.
What is refinancing a loan?
Refinancing is the process of taking out another loan to cover the same amount of debt that you had before. For example, you have Rs. 10,000 in student loan debt and have an outstanding amount of Rs. 5,000. Refinancing could mean getting a new loan for Rs. 5,000 and paying off your old one. This can be a smart option if you’re able to get a lower interest rate or better terms than what you had before. In this way, you’re reducing your total amount of debt at no cost to yourself. It can also help you pay your debt more easily by spreading out the monthly payment over a longer period of time.
Why should you refinance with a short-term loan?
1. Help you make timely payments
Missing a loan repayment requires you to pay a late fee and also it reflects poorly on your credit report. If you can’t afford to pay off your debt right away or think you might miss a payment, refinancing is a good option. Short-term loans are a good option if you’re overwhelmed by the cost of your student loan debt and don’t know how you’re going to make it. If you’re looking for an extra cash infusion to help you catch up on your bills while you’re still able to make payments, an easy loan is a way to go.
2. Get a lower interest rate
Short-term loans are low-interest loans to help borrowers who have a lot of debt, including student loan debt, pay off outstanding amounts with a lower interest rate. If your student loan interest rate is high or if it increases during your loan tenure, it makes sense to refinance into an easy loan to help you pay off your debt at a lower rate. By taking out a second loan against your first one, you can reduce the amount of interest you pay over a long time.
3. Easily meet eligibility criteria
Short-term loans are accessible to students as they have lenient eligibility criteria. Easy loans do not require a long history of credit or a high credit score. Online loan apps such as CASHe are particularly committed to extending credit to the underbanked, making it perfect for new graduates and young professionals.
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