Everything You Need To Know About Student Loan Refinancing

Student loan refinancing is obtaining a new or personal loan to pay off one or more student loans. This is important if you are not satisfied with your current terms or if you can find better terms. Once you qualify for a new loan, you need to pay off your existing loans.

You may be able to consolidate and refinance your debt by securing a new loan. This will provide you with one monthly payment as opposed to multiple payments. In most cases, you should refinance as soon as possible.

When you refinance, your student loans are paid off by the new lender with a lower interest rate. This means your monthly payments will be less. Whether or not refinancing is a good idea is dependent on finding a much better rate.

When Should You Refinance?

According to Nerd Wallet, you should not refinance unless you have an income enabling you to comfortably pay for your expenses and have good credit and a college degree.

There are a lot of reasons why refinancing is a good idea. Your monthly payments may be making it difficult to pay for your other obligations such as your mortgage or auto payments.

If your student loan has an interest rate of eight percent with a duration of ten years, your monthly payment will be $364. Student loan refinancing for ten years with five percent interest will decrease your monthly payment by $46 every month.

This will save you $5,494 in interest. You may qualify for a lower rate from a private lender if there has been a significant improvement in your finances since you attended college. This will be revealed by your credit score.

A lower interest rate can save you even more if you owe a lot of money for student loans. Paying back the money over a longer period of time will decrease your monthly payments even more.

This will make it easier to save money and pay all of your bills. If you are doing well financially, you can go in the opposite direction by shortening the term of your new loan. This will enable you to pay back what you owe faster. If your current loan is for thirty years, you can decrease the term to fifteen.

The Best Options for Student Loan Refinancing

If your current student loan has a variable interest rate, you may be able to secure a fixed interest rate. This will prevent your rate from increasing in the future. You should always check the rate of more than one lender.

Window shopping is extremely important for student loan refinancing. You should avoid making a commitment to the first offer or lender. You will not hurt your credit score by looking at what different lenders are offering. You are not obligated to accept any offer.

There is a wide selection of credit unions, private lenders, online lenders, personal loans and banks that will refinance student loans. It only takes a few minutes to get online, put in your information and look at the rates.

Compare what you find to determine what is best for your needs. When you find a rate that interests you, go to the website for the lender and provide them with your basic information to see what they have to offer.

The requirements for each lender are slightly different. The basics will be the same. If you want to take another look at the lender later, you can create an account.

According to Student Loan Hero, the lender will immediately perform a soft credit check once you have entered your information. This will not affect your credit score.

Your credit score is a reflection of your financial responsibility. This is what shows whether or not you make your payments on time. Most top lenders want a minimum credit score in the mid to upper 600s. Some have no minimum.

Your student loan refinancing will also be affected by your other debt including auto loans, credit cards and your mortgage. In order to be able to refinance your student loans, you must have a job offer in writing or already be employed.

There are private loan lenders for students that will refinance your loans even if you are in residency or school. Other lenders will require you to have work experience. The focus of student loan lenders is you ratio of debt to income.

This is the amount of money you earn each month compared to your debt obligations per month. If your total monthly income is $10,000 with your monthly debts totaling $3,000, your ratio of debt to income is thirty percent.

The example at Forbes is student loans for $100,000 with a repayment term of ten years and an eight percent interest rate. If the student loan is refinanced with a repayment term of ten years and an interest rate of three percent, the monthly payment would decrease by $248. This is a savings of $29,720 over the term of the loan.

The Steps to Take If Your Student Loan Refinancing is Rejected

• Apply to multiple new lenders
• Check your credit score
• Increase your income
• Consolidate your debt
• Find a qualified co-signer