I consolidated! Let me say that again: I CONSOLIDATED! I was actually approved for a private student loan consolidation :) I cannot explain to you the joy and relief the words, “you were approved” brought to my soul; I cried a happy tear or two at my desk then texted my mom and a few close friends about the news. It took 6 years to get this. Although I have a decent stretch of road to travel in front of me, I am hoping that the ride on the latter half of this journey is a bit smoother.
The facts: I decided to go with Charter One/Citizens Bank. The reason being: interest rates. The only other real option in my mind was Wells Fargo; however, Charter One’s interest rates were approximately one point lower on both the fixed and variable options. Also of note, I have been denied consolidation from Wells Fargo on more than one occasion so I figured I would try Charter One first to take advantage of the lower rates and if denied, try my luck over at Wells Fargo again. Thankfully, Charter One gave me an approval.
The only way I would accept a refinance would be a). approval with no co-signer b). a low interest rate and c). no early re-payment penalty. Based on my debt-to-income ratio (which is finally no longer inverted) I was approved to refinance without a co-signer. Based on my credit score, which they reported was 809 (they source EQUIFAX), I was offered their lowest interest rate. The only thing left for me to decide was the term length as well as a fixed or variable interest rate. This was a tough decision because as I stated in the previous entry, I was torn as to whether or not to embark on this refinance journey if I was only going to be reducing my interest rate by a point or two. Before I tell you which option I picked, allow me to lay out the options I was given to choose from:
Term, Type of Interest Rate, Interest Rate, Monthly Payment, Total Amount to be Paid:
20 Years, Fixed, 5.44%, $299, $71,919.13
15 Years, Fixed, 5.19%, $349, $62,831.51
10 Years, Fixed, 5.04%, $460, $55,314.88
5 Years, Fixed, 4.99%, $813, $48,835.84
20 Years, Variable, 2.82%, $239, $57,438.50
15 Years, Variable, 2.67%, $294, $53,004.60
10 Years, Variable, 2.62%, $411, $49,375.23
5 Years, Variable, 2.57%, $766, $46,019.30
I went with the 20 year/variable term for merely monthly payment/total amount to be paid reasons. Although the cap is astronomical, there is a cap on the variable interest, but it is so huge (like upwards of 25(ish)%) that should it ever get that high, I am in some deep water. All of my previous Sallie Mae/Navient loans had variable interest rates, and they never changed. I know that Dave Ramsey states to not choose a variable interest rate when a fixed is offered. However, I did not know why he stated that as it seemed pretty clear to me that if I stuck to repaying the amount as fast as I could, I would save myself money in the long run. Literally the day after I signed everything, I ran across one of his broadcasts on YouTube (I am the nerd that listens to these on my lunch breaks) where he stated his reasoning for always choosing fixed is to eliminate any and all risk associated with your finances. Risk basically equals stupidity. In my case, I was too late to back out and choose a fixed rate - here's to hoping I stay crazy committed to paying this baby off. I may look back on this paragraph 2 years from now and hate myself for it, but for right now, in this moment, I feel okay about my decision.
What this means for me: To begin, I did indeed get the remaining 6K paid off from the original 14K I talked about in my last entry; this put me right where I imagined, financing approximately 43K through Charter One. This does significantly reduce the amount of interest I will be paying each month, but in no way is this a cop-out in regards to my repayment responsibility. I will still follow Dave’s advice to the best of my ability and get this debt gone as fast as I possibly can. I have sacrificed my money, time and freedom for far too long and am more than fed up with this burden; I believe my annoyance and sacrifices in combination with the fear of a rising interest rate will continue to fuel my inner crazy to keep putting every extra penny I come across towards this loan.