Refinancing your student loan can help save you lots of money. You can reduce the amount of interest you pay annually, consolidate your loans, release a co-signer, or even alter your interest rate from variable to fixed.
Luckily, the process is much simpler than it seems. First, you need to look around for the best rates and then fill out an application with the lender of your choice.
The rest of this article will detail the process of refinancing your student loans and some tips on how to do so as quickly and efficiently as possible.
How do I refinance my student loan?
Refinancing your student loans is a reasonably straightforward process. The most challenging part is browsing through all the potential lenders to find the one with the best deal, but even if you are not sure if you want to refinance, it is simple to consider offers without impacting your credit score.
You may also have questions about how to fill out an application and what documents are necessary.
Keep reading for a simple, easy-to-understand, five-step guide to refinancing your student loans.
1. Find a lender
This is often the most overwhelming part of refinancing your student loans. Countless banks and various other lenders can refinance student loans with various terms and offers. So, how do you choose the best one?
It would be best if you shop around until you find a lender with the most favorable terms for you. There is no harm in checking rates to see which option will most benefit you.
Your credit score will not be affected. Some of the most common lenders are SoFi, CommonBond, and LendKey. All of these lenders can offer competitive rates and transparency in their practices.
Once you have a few different lenders lined up, you can check your rates by entering your basic information on the lender’s website.
This information will often include your name, address, degree, the total amount of student loan debt, and income. Some websites may ask for slightly more or less information.
After entering all this information, the lender will conduct a soft credit check. This has no risk to your credit score, but it will allow the lender to come back to you with various offers, assuming you meet their eligibility requirements. This is where you can begin to compare offers to see which ones are the most favorable to you.
2. Choose your loan terms
Once you have a variety of offers on the table, you can choose the loan terms that most appeal to you. Usually, people will choose the lender that offers the lowest interest rate.
Next, you can use an online refinancing calculator to check how much money you will be saving with the new interest rate. Again, it’s usually wise to go with a fixed interest rate over a variable rate.
Some things you will want to consider besides the interest rate are the length of the terms (usually five, seven, ten, fifteen, and twenty-year options) and the lender’s online reviews. You want to choose somewhere with good customer service.
3. Collect the necessary documents
After you have decided which offer you want to apply for, it’s time to start filling out the application.
However, before you can do so, you will need to gather all the necessary documents. Most lenders will require the following documents:
- Photo identification, such as a state ID card, driver’s license, or passport.
- Your social security number/card.
- Pay stubs, job offer letters, or other proof of income.
- Complete official statements for all your student loans.
At this point, the lender will also want to conduct a hard credit check.
4. Fill out the application
Now that you have all your documents together, you can fill out the application! If you have any questions about this part of the process, you can speak with their customer service.
This is where it comes in handy that you checked all the online reviews to make sure the company is willing to help you!
5. Wait for approval!
Next, you wait for approval on your refinancing application. It may take a few weeks to hear about approval, so make sure you continue to pay your current loans in the meantime.
Refinancing Frequently Asked Questions (FAQ)
We have broken down how to refinance your student loans into five steps, but you may have some remaining questions about the process and how to make it easier to get approved for your new refinancing offer.
Keep reading to find the answers to some of the most frequently asked questions surrounding refinancing.
What kinds of student loans can I refinance?
Private student loans can easily be refinanced at any time. Federal student loans, however, cannot be refinanced by the government. Instead, you can only consolidate them.
Therefore, it is essential to remember that consolidating federal student loans will result in you paying a higher interest rate.
Private student loan refinancing will allow you to refinance private or federal student loans. You can even refinance both into new private loans. However, if you are a federal student loan borrower, you should carefully consider your options before refinancing your loan. It may not always be the wisest option.
Should I refinance my student loans?
When considering whether to refinance your student loans, make sure that you consider all the angles and pros and cons. In many cases, refinancing your loans can save you money, but you may lose benefits in other cases.
For example, if you have federal student loans, refinancing them means losing eligibility for many government assistance programs.
If you are a teacher or other public service employee working toward loan forgiveness, you will no longer be eligible for that program if you refinance.
It makes the most sense to refinance your student loans if you are sure that you will be saving money. For example, if your current private loan has a variable interest rate, but you can refinance to a fixed interest rate, or if you know you have an excellent credit score, you can lower your current interest rate.
How can I quickly get approved to refinance?
To maximize your chances of getting approved for refinancing, there are a few tips you’ll want to abide by. Firstly, you want to have excellent credit.
In fact, according to Forbes, it is best to have a credit score of 700 or higher. Some lenders will even have a minimum credit score you must reach, usually in the mid 600’s or higher.
You should also ensure that you have a regular, stable income. Lenders want to be sure that you have the resources to quickly pay off the loans that they are signing on to refinance. If you do not have a regular income, it may make it much harder for you to get approved.
Lastly, you should remember that you can get a co-signer if necessary. If you have a qualified co-signer, this can drastically improve your approval chances.
Do I have to be employed to refinance student loans?
Yes, you generally need to be employed to refinance your student loans. If you are not employed, the lender will not have proof that you have a regular income and that you can pay off the loans they are about to refinance.
If you are currently unemployed, it may be best to wait to apply for refinancing until you have found a stable job. However, if you are a freelancer or have some other form of self-employed income, you may be able to find a co-signer to help you get approved.
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