How you handle your student loans can transform your financial future. If you’re struggling to pay them back, there are options out there you might not know about. Finding good student loan refinance rates is the key to lifting the weight of your debt. But what does it mean to refinance your student loans? And how do you do it? We’ve highlighted the five most important steps you should take if you’re looking into student loan refinance programs.
Basically, student loan refinancing is a way of renegotiating the terms of your student loans. A private lender pays off the loans you currently have, and in return, they give you a new loan with new terms. The good news is that it’s completely free. Beyond what you’ll pay in interest, it costs absolutely nothing to get started. You can make it easier to pay off your loans, space your payments out, pay less per month, or do anything else you think would help you out.
1) Decide If It’s Right For You
You know your debt situation best. Would it help you to pay back your student loans on a different schedule, or is the one you have now working for you? Student loan refinance rates vary, and the ones out there may not be right for you.
You’ll also need to make sure that the ramifications of refinancing student loans won’t affect you too much. To get the best student loan refinance rates, you’ll need a great credit history. Federal student loans that get refinanced also won’t be eligible for government programs like income-driven repayments. If you have private student loans, though, this won’t affect you.
2) Get More Than One Rate Estimate
Finding the right student loan refinance quote can take time and effort. If you want to make sure that this financial choice is one that genuinely benefits you, you’ll need to shop around and take your time. Look on student loan refinance providers’ websites individually, or use a comparison tool that will compile all of their rates for you. It’s important to get the lowest interest rate possible.
If you’re worried this will tank your credit score, you don’t have to be. Some student loan refinance programs ask potential borrowers for information about their credit score or financial situation to give them an accurate quote. However, getting this from multiple companies will not impact your credit score.
3) Pick a Lender and Loan Terms
Once you’ve looked at all the student loan refinance rates out there, it’s time to pick the best one for you. By now, you’ll know which company offers the lowest rate you can get. Go for that whenever possible. It’ll ensure you don’t have to pay much more than what you owe, and will mean that refinancing your student loans will make a real difference in your life.
We have a few key tips for you when arranging your loan terms with student loan refinance programs. First, pick the shortest repayment period you can afford to avoid unnecessary interest payments. If you can, pick a fixed interest rate, as this will ensure you always know how much you owe.
Filling out financial applications can be complicated, and student loan refinance programs are no different. It’ll be a combination of providing financial information about you and your loans, as well as providing supporting documentation. These documents will include at least some of the following: your government-issued ID, proof of college graduation, proof of residency, some proof of employment such as tax returns, a W-2 form or recent pay stubs and loan or payoff verification statements. The application will also include a hard credit pull to ensure the company knows your current interest rate.
5) Sign the Application and Wait
If your application is denied, the lender in question will let you know why. Bad credit history can be a contributing factor to a refusal, but it doesn’t have to hold you back. Adding a co-signer can help you overcome a high amount of debt.
If you’re approved, you’ll then need to sign some final paperwork if you want to accept the loan. There’ll be a three-day rescission period after signing this final document for you to back out if you change your mind. After that, you’ll be ready to go.
Conclusion
It’s clear that looking into student loan refinance rates can be life-changing for you. It can help you go from struggling with your debt to paying it off once and for all. Of course, it’s important to always do your own research when it comes to financial matters. But with these tips on your side, you can finally make your debt work for you.
References
- “How to Refinance Student Loans in 7 Steps”, Nerdwallet, accessed 22nd February 2021, https://www.nerdwallet.com/article/loans/student-loans/how-to-refinance-student-loans.
- “What Is Student Loan Refinancing, Really?”, Nerdwallet, accessed 22nd February 2021, https://www.nerdwallet.com/article/loans/student-loans/what-is-student-loan-refinancing.
- “Best Lenders to Refinance Student Loans”, Student Loan Hero, accessed 22nd February 2021, https://studentloanhero.com/featured/5-banks-to-refinance-your-student-loans/.
- “Should You Refinance Student Loans?”, Forbes, accessed 22nd February 2021, https://www.forbes.com/advisor/student-loans/should-you-refinance-student-loans/.