How to Refinance Student Loans

Student Loans

Youíve decided to refinance your student loan. Good. There are times when better terms are needed to make repayment more manageable. Now all you need to do is learn how to refinance. Itís not that difficult once you understand what the process entails and what is required, such as certain documents. The bottom line is, if you want it done in just a few weeks, hereís how to refinance student loans.

What is Student Loan Refinancing?

Letís start there. Student loan refinancing is when you swap out your existing current student loans for a new one with a lower interest rate.

Why Should I Refinance?

A lower rate on a private student loan can save you cash. However, you still must qualify and have solid finances. You generally need a credit score in the high 600s and sufficient income to pay your debts and other living expenses. You can also refinance with a co-signer. 

When Should I Refinance?

When to refi private student loans hinges upon whether youíll locate a rate that makes things better for you. If a refinance will save you, say, $50 monthly or so, thatís probably enough to do it. And yes, you should do it as soon as possible.

Whatís the Process Like?

Shop Around

Itís your job to search around for the best rates. And the cool thing is, doing so wonít hurt your credit score. Check with banks, credit unions, and online lenders. Most lenders just want info such as your education level, debt amount, income, and what youíre paying monthly for housing, and will run a ďsoftĒ credit check. If you qualify, youíll get plenty of offers. Look for transparent practices, competitive rates, and good customer service.

Repayment terms are typically five, seven, 10, 15, or 20 years. Try to avoid going with a variable rate, though, since they tend to start out relatively low but might increase later.

Go for It

What is refinancing but a better loan rate? So, thatís what you want: the lowest rate you can get. You might want to use a student loan refinancing calculator to see how much a new rate will save you. 

Youíll also have to decide how much time you need to pay off your loan. A longer term generally means lower monthly payments, but it could also mean more accrued interest over time. If you can deal with higher payments, a shorter term will save you cash, plus you can get out of debt quicker.

Consider your income situation, though. If youíre at all worried, you should go with a lender that offers unemployment protection or a forbearance program.

Get Your Paperwork Together 

Submitting a full application necessitates provision of documents such as an ID, social security card, proof of income, and official loan documents for your original loan balance, disbursement date, and repayment history. If you canít locate the latter, call your current loan servicer.

Keep Your Payments Up

Full refi approval may take a few weeks, so you must continue paying your current loans. Establish automatic bank withdrawals once youíre approved so that your payments are always on time. Youíll usually get a lender discount for doing so. You may even get another break if you go through an institution where youíre already banking. 

Now you know how to refinance student loans. If you can qualify for a refi and your income is stable, AND if you get a rate low enough to make your life better, then go for it. You should consider getting a company to help you, though, and we recommend Juno.