5-year variable-rate loans

Hand is turning a dice and changes the direction of an arrow symbolizing that the interest rates are going down (or vice versa)
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For borrowers eager to pay off their student debt more quickly, rates on five-year variable-rate refinances are down this week and are now just inches from their recent all-time low.

The current average for those loans is 2.53%, according to numbers released Monday by the Credible loan marketplace. That's down from 2.61% in the previous survey week, and far below the year-ago average of 3.16%.

The typical five-year variable rate is now close to the record low of 2.48% reached in mid-October.

The average rate is specifically offered to borrowers with credit scores of at least 720. The lowest interest rates are available for people with exceptional credit, of 780 or higher. Credible's website indicates refi rates as low as 1.74% are currently available.

Meanwhile, people with only so-so scores (between 640 and 679) are being offered higher rates, averaging 4.59%.

Note that a variable rate can change based on market conditions, meaning you could wind up with a higher rate before your loan's five-year term is up.

10-year fixed-rate loans

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For borrowers looking to lock in a good deal on a student loan refi that will extend over a longer repayment period, 10-year fixed-rate refinances are now averaging 3.44%.

That’s up slightly from the average 3.42% during the previous survey week, but it's still pretty close to late September's all-time low of 3.36%. One year ago, the 10-year loans were going for 3.94%, on average.

Again, people with excellent credit qualify for better-than-average rates. But those with unimpressive credit scores must accept stiffer rates, typically 4.77%.

Though fixed-rate loans generally come with higher borrowing costs than the variable-rate variety, the interest rate is guaranteed to hold steady for the duration of the loan.

A 10-year loan also will offer more affordable monthly payments than a five-year, though you may spend a good deal more money on interest by the time your debt is paid off.

How to secure the lowest refi rate you can

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If you have a federal student loan, don't jump into a refinance until you're sure you understand the potential trade-offs.

Switching from a government loan to a refi loan — offered only by banks and other private lenders — would make you ineligible for government relief measures, such as the pandemic's lengthy pause on federal student loan payments, and the loan forgiveness that's been granted to some borrowers.

But if you’re fine with all of that, or if you already have a private loan, refinancing to a cheaper rate could chop your monthly loan expense.

Here are some tips to help you land the best possible refi rate:

  • Polish up your credit score. Lenders will review your credit to determine whether you're a good risk. Today it's easy to check your credit score for free, then take steps to improve it if you need to, so you'll make a better impression on a lender.

  • Set up auto-pay. Often, you can chip a little off your interest rate by agreeing to make automatic payments. That provides some assurance to the lender that you'll be paying on time every month.

  • Consider a co-signer. If your credit score is 200 points south of where it should be, you may need to ask a friend or family member with good credit whether they'd be willing to co-sign your loan, to help you land a better rate. But be careful, because your co-signer will be responsible for making your payments if you ever become unable.

  • Compare your options. Many lenders offer student loan refinances, so you have to shop around to find the best possible deal. Different lenders may weigh your application differently, so get multiple rate quotes and size them up side by side before you click "Apply."

About the Author

Doug Whiteman

Doug Whiteman


Doug Whiteman is the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

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