Refinance timing

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Giro423

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Refinance timing

Post by Giro423 » Tue Aug 11, 2020 12:50 pm

Should I wait until I start work next month to refinance or do so now? 100k debt starting in biglaw, for what it’s worth.

decimalsanddollars

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Re: Refinance timing

Post by decimalsanddollars » Tue Aug 11, 2020 1:57 pm

Idk why you'd refinance now; you're not currently accruing interest, not needing to make payments, interest is not capitalizing, and you're not yet making a biglaw salary.

The traditional TLS wisdom on refinance timing is to wait until a year into biglaw so you can know whether you can sustain the biglaw lifestyle long enough to pay off your refinanced loans. Also gives you time to build savings, make a budget, establish other good credit practices, etc. With your debt level, I may go sooner because you could knock out $100k relatively quickly---or at least pay it down to where you're not reliant on biglaw to make monthly payments.

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Giro423

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Re: Refinance timing

Post by Giro423 » Tue Aug 11, 2020 7:17 pm

decimalsanddollars wrote:
Tue Aug 11, 2020 1:57 pm
Idk why you'd refinance now; you're not currently accruing interest, not needing to make payments, interest is not capitalizing, and you're not yet making a biglaw salary.

The traditional TLS wisdom on refinance timing is to wait until a year into biglaw so you can know whether you can sustain the biglaw lifestyle long enough to pay off your refinanced loans. Also gives you time to build savings, make a budget, establish other good credit practices, etc. With your debt level, I may go sooner because you could knock out $100k relatively quickly---or at least pay it down to where you're not reliant on biglaw to make monthly payments.
Thank you!

decimalsanddollars

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Re: Refinance timing

Post by decimalsanddollars » Thu Aug 13, 2020 10:04 am

No problem!

Wanted to add a quick note on interest capitalization: if you choose not to refinance now-ish, your interest will capitalize (i.e., convert to interest-bearing principal) in November or some similar time depending on your servicer. If you have the means to do so, I'd make an effort to pay down some interest that will capitalize before it does---with priority focus on your highest-interest loans. In the long run, it'll save you a little more than making those same payments after interest capitalizes. Alternatively, if you refinance now, all your loans (including uncapitalized interest) get paid by the refi company, which will then charge you interest on the whole balance.

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