PNC Bank has sent a message to its student clients. In this case, they're offering them the possibility to refinance student loans. That is, a method that involves replacing one or more existing loans with a new one, generally private, with different terms.
This process can bring benefits such as lower interest rates or reduced monthly payments, but it also has its risks. The institution analyzes this option in detail to help you make a responsible decision.
PNC Bank explains what student loan refinancing is
Refinancing consists of taking out a new loan, often with a bank or financial institution, and using it to pay off existing loans. The goal is to obtain more favorable terms: lower interest rate, different terms, or consolidation into a single payment. To access better terms, it's necessary to have a good credit history and a stable income, so you'll be able to access more competitive rates.
Among the pros of doing so, PNC Bank emphasizes the possibility of getting lower interest rates, as well as lower monthly payments. You'll also be able to make a single payment per month and get fixed or variable rate options. In addition, PNC Bank offers up to 0.50% less on the rate if you pay with automatic debit from your account.
PNC Bank clarifies that there are also risks
PNC Bank shares that you lose federal benefits, such as access to special repayment plans, hardship defense programs, and possible debt cancellations. In addition, you may pay more interest if you extend the terms.
On the other hand, there's also the risk of a variable rate and the impact on your credit. Likewise, PNC Bank warns about the possibility of incurring costs and penalties. Although many loans don't charge a fee for early payments, some apply penalties for late payments or for opening the loan.
If you have private loans with high rates, good credit, and stable income, refinancing can be very beneficial according to PNC Bank. However, if you depend on federal programs like PSLF or income-based assistance, it's probably better not to do it. If you prefer a lower payment and don't mind paying more interest in the long term, an extended-term refinancing may work for you.