Getting through college is a great achievement. What’s not so great may be the pile of student loans waiting for you after you’ve graduated. If you’re struggling to pay back your loans and you’re considering refinancing, let Benzinga help you navigate your best options and important factors to consider throughout the refinancing process.
Refinancing Student Loans
How do you refinance student loans in the first place? It’s a lot easier than you think. Stick to these 4 easy steps and make some major headway with your loans in no time.
1. Compare rates from various lenders.
Before jumping into a contract with a single lending institution, make sure you look into various credible lenders and compare interest rates, fees and the quality of customer service. These are the main factors that impact your long-term refinancing experience, so take time to find the best options that work for your budget and banking preferences.
Interest rates on these loans are offered as variable or fixed. Variable rates can fluctuate with the market while fixed rates stay the same over the course of time.
Most lenders ask for information such as your monthly housing payment, income, total loan debt and credit history to give you an estimated rate and a range of loan terms.
2. Choose a lender and loan term.
Does your credit history meet the right criteria according to the institution you’ve applied to? Lenders may be able to offer you various repayment term lengths. A longer term can help lower your monthly payments and free up some of your monthly income but you’ll accrue more interest in the long run.
Besides interest rates and terms, factor in prepayment penalties. Some lenders enforce prepayment penalties for trying to pay off the loan earlier than outlined in the loan agreement since institutions profit from charging you monthly interest. Make it a point to prioritize lenders without these penalties if you think you want to pay off your loan ahead of schedule.
If you’re between jobs after graduation, you can also prioritize lenders with unemployment protection or economic hardship forbearance programs.
After you’ve compared your options, you can choose the lender and term that works best for you.
3. Apply for your refinance.
To lock down your refinance, you’ll submit documentation such as loan statements and proof of income and you need to agree to a hard credit check. You will most likely need:
- Your Social Security card or government ID
- A valid driver’s license or passport
- Proof of income such as pay stubs or a job offer letter
- Official statements for all your federal and private loans
If you’re applying with a cosigner, you’ll also provide your cosigner’s information.
4. Keep paying off your debt as you wait for your loan.
The process for approving a refinance loan application usually takes 2 to 3 weeks. While you wait, it’s important for you to continue paying off your current loans. Only stop paying your current servicers when you get the green light from your new lender.
Best Lenders for Refinancing Student Loans
If you’ve already tried researching for lenders, you already know that finding good lenders isn’t as stressful as it seems. Here are some of the best, most accessible lenders for refinancing your student loans.
Qualifying for Student Loan Refinance
The hardest part of finding a refinancing option for your student loans is making sure you qualify when applying to various lenders. Some factors that boost the chance that you’ll be approved and guarantee the best possible offers from lenders include maximizing your credit score, bringing a co-signer onto the loan.
Your credit score is an appraisal of your responsibility based on your financial history, and it shows lenders the likelihood that you’ll make minimum payments on time for the loan. Some lenders don’t enforce a minimum credit score for applicants, but most tend to favor scores of 700 and over.
Having a qualified co-signer can help you get approved and get offered lower interest rates. This could be a relative, spouse or a trusted close friend who is comfortable having equal financial responsibility for your loan.
You want a cosigner who has a good to excellent credit score and a stable monthly income. Some lenders will even allow you to release your cosigner from their responsibility for the loan after you get approved, and if you meet certain requirements.
As mentioned above, your credit score is based on your financial history and lenders heavily take that into account when putting together a loan offer for you. Some lenders don’t enforce a minimum credit score for applicants, but the lenders that only offer loans based on a credit minimum generally require a score in the mid 600s and higher.
Student Loan Refinance Timing
If you think you’re paying too much in interest or if you have high monthly payments, refinancing your student loans might be a smart choice. If you have enough steady income to pay off your loan fast, refinance lenders might offer terms that work with your timeline goal.
Refinancing vs. Consolidation
Consolidation means combining multiple student loans into 1 loan. Consolidation allows you to keep certain loan benefits and lets you potentially change your repayment plan for a lower monthly payment or an extended term.
Refinancing, on the other hand, means taking on a new loan to pay off all of your separate existing loans. You can refinance multiple government and private loans, but refinancing must be done through a private lender since the government doesn’t offer the option to refinance.
Types of Student Loans Eligible for Refinance
Both government and private student loans are eligible for refinancing through a private lender.
Refinance Your Student Loans
Don’t let the stress from looming debt overshadow the pride of finishing your degree. Remember to compare multiple refinancing options and lenders to make sure you’re getting the best offer for you. Also consider discussing cosigning with a responsible loved one to maximize your chances of getting approved and being offered the best terms.
Lend-Grow offers 5-, 10-, 15-, 20- and 25-year student loan refinance terms with fixed rates as low as 2.80% APR and variable rates as low as 1.89% APR.
Lend-Grow pays down your loan, too — 0.10% APR every month for 3 years! Here’s what this means: Lend-Grow deposits 0.10% APR of your loan amount funded each month for up to 3 years (as long as your account is active) with payback rewards.
Lend-Grow deposits the payback reward directly to the loan account you specify at the time of Payback Reward enrollment. Payback reward is not a rate discount and you must continue to meet your full payment obligations with the lender each month.