Basically, to refinance your student loan means switching your current student loan borrower to a new one with a lower monthly interest rate. Actually, the process is quite simple. However, whether you decide to go for it depends on your current financial situation. Indeed, do it, if you can save money. Therefore, if you decide to refinance yours, follow these steps.
The Benefit of Refinancing your student loan
Refinancing your student loan can help you combine your existing federal and/or private student loans with a new low-interest student loan. As a result, the money saved can be utilized to buy a house or quickly paying off any debt. Certainly, refinancing your student loan will lower your interest rate and lower your monthly payment.
The other big benefit of refinancing your student loan is that you can choose another term that suits your purpose. Surely, you could end up with better payment terms. Choosing a longer term can reduce your monthly payments, but choosing a shorter term can help you pay off your debt faster and save money that you will be spending on interest rates. So whatever sails your boat – but at least, you have an option.
How to Refinance your student loan?
- Think it through if the decision of refinancing is the right choice for you
Taking action to refinance your student loan is great for saving. But you need to know if refinancing is the way to go for you or not. Actually, to qualify for the lowest interest rate and meet lender refinancing criteria, you need a strong loan and financing capabilities – meaning strong credit.
- Have a Strong Credit score
Your credit score doesn’t matter for many big things in life but when it comes to refinancing your student loan, this is where it steps in. indeed, your credit score measures and interprets your financial liability. Before you get selected, your credit score tells the lender that you will be repaying the debt on time. Top student lenders expect the minimum credit score to be anywhere around 600. However, some lenders do not have a minimum credit rating and that’s when things get easier.
- Do your Research for lenders
Every student loan refinance lender fits different people in different situations. There are many banks that that can refinance your student loan if that’s what you fancy go for it – but if you are someone who doesn’t have a college degree, then go for a lender who doesn’t require a college degree. Hence, do your research and pick the one that best fits in your shoes.
- Estimate your benefits
Once you’ve identified some lenders that suit your needs, you can go and check what each one has to offer. After all, the best lender is the one that offers the lowest interest rate. To refinance student loans, you can compare interest rates from multiple lenders at the same time or visit each lender’s website individually. It is not that hard; you just have to find what will get you to save more money than what you are saving right now.
- More is less – apply for multiple lenders at once
We have always heard that less is more but in this case, more is less. After comparing the interest rates, you need to contact multiple lenders to maximize your chances of getting approval. There is no limit to the number of lenders you can apply for refinancing student loans. If you want to reduce the monthly repayment amount, then choose a longer repayment plan only if you want other charges to be processed first or have other expenses to prioritize.
- Get the application done and sign it off
Let’s say you find a great lender and it looks like you qualify for a great deal in refinancing your student loan. You’ll just need to share some basic info with the lender about your current loan, along with a few docs about your financials. This is what most lenders will need from you:
• Your name and address
• Proof of residency
• Proof you graduated
• The type of degree you earned
• Proof of employment
• Your income
• Loan or payoff verification statements
- Wait for the magic to happen
At the end of the processing period, the new lender pays the existing lender or service provider. From now on, your payment to the lender shifts. You will pay monthly refinancing fees for the new lender and not to the one you used to pay before.
Make sure you continue to make payments to existing lenders or service agents until you are sure that the process is completed by the new lender. Don’t worry that you might overpay the existing because if that happens, you are definitely getting a refund. With some extra cash resting in your bank account and in between your books, trust me you will be happy if this is the right thing for you.
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