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If you feel like you’re drowning under your current repayments or think you might qualify for a lower rate, student loan refinancing can help. Not only does it allow you to consolidate your loans into one monthly payment, but you may be able to lower your repayments as well. Make sure you compare different lenders and have all the necessary paperwork handy before moving forward.
Before you begin the process of refinancing your student loans, take these precautionary steps to ensure it’s the right move for you.
You usually stand to gain more than you’ll lose by refinancing your private student loans. However, if you have federal loans, you’ll lose out on several benefits like income-driven repayment plans, forgiveness programs and multiple forbearance and deferment options by refinancing with a private lender. Think carefully about whether you’re willing to give up these perks.
Most refinancing providers require good to excellent credit — or a creditworthy cosigner — to qualify for their loans. If you’re hoping to get a lower interest rate, make sure your credit score is high enough. If not, you may want to work on improving it before refinancing.
When comparing student loan refinancing providers, consider interest rates, loan terms, repayment plans, deferment options, fees and any extra perks that could set a lender apart.
Many lenders have specific eligibility requirements based on where you live, your credit score, whether you graduated and your annual income. Make sure you meet its criteria before applying.
Get in touch with your student loan servicers to request payoff amounts — the remaining balances on your current loans. Once you know how much debt you’ll need to refinance, confirm the lender you’re interested in will accept that amount — many have limits to how much or little you can refinance.
Look at your monthly income after taxes and subtract any recurring expenses like rent, utilities, TV-streaming subscriptions, credit card payments and other monthly bills. Then leave a cushion for any emergency expenses that might crop up. What’s left is the amount you can comfortably afford to pay on your student loans each month.
This will come in handy when you’re deciding what loan term to choose based on the interest rate you’re offered.
Before applying, ensure you have all the paperwork and information handy to speed up the process.
Your lender might ask you to provide some or all of the following documents when you apply to refinance your student loans:
You’ve done your homework, gathered your documents and chosen a lender. The next step is to complete the application. While applications will vary by lender, you’ll generally go through the following steps:
Most lenders have an option to prequalify without affecting your credit score. This will help you determine if you even meet the lender’s minimum eligibility requirements.
If you don’t, you might want to ask a friend or family member to cosign your loan. Otherwise, you’ll need to go back to the drawing board and compare more lenders.
Whether you prequalified on your own or needed to add a cosigner, most lenders will let you know within several minutes what potential rates and terms you’re eligible for. Compare what you’re offered to your current student loans to make sure it’s worth it.
From here, take a look at the number you calculated earlier about how much you can afford to pay each month. Some lenders might offer you the choice of different rates and terms, while others might only give you one option.
If you’re able to choose, you can use our student loan calculator to figure out what rate and term gives you repayments you can comfortably afford to pay each month. The shorter the term, the larger your monthly repayments will be — but the more you’ll save on interest in the long run.
If you’re looking for lower monthly repayments, you’ll want to go for a longer term. Keep in mind this will increase the total cost of your loan, though.
Once you’ve decided you’re happy with the prequalification offer, it’s time to fill out the complete application. This step will require personal and financial information from you and your cosigner, if applicable.
After you submit the full application, you should receive some form of confirmation that the lender received it and it’s processing. If you don’t, reach out to customer service to make sure there aren’t any issues.
This can vary greatly depending on the lender. Some might provide a decision immediately, while others may take a few days — usually no more than 72 hours.
If approved, you’ll receive an official offer with the rates and terms you qualify for. Though not always, this might differ from your prequalification offer.
Read through the contract and make sure you’re comfortable with everything. If you have any questions, reach out to customer service for help.
Happy with your offer? Ready to officially complete the refinancing process? Sign your loan documents and return them to your lender.
Once you’ve returned your signed agreement, it can take anywhere from 10 to 30 days for your new lender to pay off your old student loans. Keep making payments to your current servicers until you receive confirmation that your loans have been paid off. From there, you’ll begin making monthly repayments to your new student loan servicer.
Did you get rejected after submitting your full application? Here are a few reasons why that might have happened:
If refinancing doesn’t fit your needs or you’re unable to qualify, consider one of these alternatives instead:
Refinancing could be a useful tool if you want to lower your interest rate, extend your loan term — or both. To find the best deal available to you, evaluate your current loans and compare lenders before applying.
You can learn more about how it all works with our guide to student loan refinancing.
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