Why Should You Refinance Your Student Loans Today?
To combat inflation, the Federal Reserve has already raised its interest rates once this year. Experts are predicting additional increases throughout the year.
As of now, interest rates are still not as high as they’re going to get. If you have a fixed-rate loan, it’s likely that you can refinance for a lower interest rate than you’re paying now. If you have a variable interest rate, you’ll want to refinance to lock in these lower rates before the next increase.
It’s easy to see what kind of rates you can get on a refinance right now. You can fill out the application form on Credible with no commitment and no impact to your credit score.
The best part? With Credible’s Best-Rate Guarantee, if you can find a lower rate elsewhere, the company will pay you $200. There’s definitely nothing to lose!
What Is Student Loan Refinancing?
Refinancing your student loan is a way to save money on interest and monthly payments. The refinance lender pays off your old student loan in exchange for a new loan with a lower interest rate or other changes to your terms. You can also refinance to remove a cosigner from your existing loan.
You can potentially save thousands of dollars in interest when you refinance your student loan. However, some refinance loans lower your payment by extending your loan term. You should review the terms carefully to make sure you won’t end up paying more over the life of the loan.
When you refinance, you can also consolidate multiple student loans. Consolidation refinance ideally lowers your monthly payments while streamlining several bills into just one loan.
Depending on your income and credit, you may be able to refinance your student loan right after you graduate. You could also decide to wait until you have a strong work history and higher FICO score to improve your chance of qualifying for low rates.
How Does Student Loan Refinancing Work?
The refinancing process starts when you apply for a new loan that covers the total of your existing student loans. You can find the best rates by prequalifying with several different lenders. Usually, this process does not impact your credit score, especially when you use a platform like Credible that lets you compare multiple offers instantly.
When you choose a refinance lender, you can typically select your loan term. Shorter terms have higher monthly payments but lower overall interest costs. You can also decide whether you want a fixed or variable interest rate. While variable rates start out lower, they adjust after an initial period and could end up costing more money in the long run.
Finally, you must complete the full application so the lender can verify your identity and financial information. You will submit a copy of your ID, proof of graduation, proof of address, proof of current employment such as W-2 forms and paystubs, and statements from your current student loan provider.
When you receive approval, the refinance lender will repay your previous student loan. You will begin making monthly payments at the agreed-upon date, usually a month or two after final approval on your refinance loan. You can refinance as often as you want over the life of your student loan as long as you remain eligible for better terms.
When is the best time to refinance your student loan?
With the Federal Reserve about to increase its interest rates again, the best time to refinance your student loan is now. There’s never been a better time to lock in lower rates and benefit from reduced monthly payments.
If you just want to see what kind of rates you can get without making any kind of commitment, you can fill out the application form on Credible to compare offers from multiple lenders. It only takes a few minutes and has no effect on your credit score.
What are the requirements of student loan refinancing?
Most lenders require a credit score of at least 650 and a debt-to-income ratio of less than 50% to qualify for student loan refinance. You must also show a stable employment record of at least two years with the same company.
Can you refinance a student loan with a cosigner?
Many lenders allow you to refinance your student loan with a cosigner. This person agrees to repay the loan if you default on your monthly payments. You may want to ask a trusted family member or friend with good credit to cosign on your loan if you do not have the credit score to qualify for a student loan refinance on your own.
What are some alternatives to student loan refinancing?
If you have federal student loans, you lose certain benefits such as loan deferment in case of disability. Instead, you can consolidate multiple federal loans for a lower overall interest rate. You may also qualify for income-based repayment. With this program, the lender adjusts your monthly student loan payment depending on your income.