Student loan refinancing is one of the fastest methods of paying off your student loan as quickly as possible.
Student loan refinancing makes it possible for you to consolidate almost any student loan including federal student loan, private student loan or a combination of the two into just one student loan.
So what’s the benefit of such consolidation? You’ll end up with a lower interest rate and a lower monthly payment.
When you end up with a lower monthly payment, you’ll have some extra funds to pay off more student loan debt and then you can invest or even save whatever is left.
Refinancing your student loan also increases your chances of obtaining other loans. Lenders are more likely to offer loans to borrowers who have shown credit worthiness by showing that the can repay their student loan.
If you’re interested in refinancing your student loan, here are key things you can do to put the right foot forward:
Student Loan Refinancing: How To Get Approval
Get a job
To be eligible for a student loan refinancing approval, you have to be employed or at least have a written job offer.
The rationale behind this is that lenders want to be sure that you have a reasonable source of income to pay off your student loan.
Also, lenders want to ensure that you pay your student loan on time and haven’t filed for bankruptcy in a short while.
In contrast, if you don’t have a job or if you’re underemployed, it will be difficult for you to be eligible for a student loan refinancing approval. A stable source of income is a good way to prove to lenders that you’re credit worthy.
Read about the modern rules of loan refinancing on this post.
Keep your credit score in a good shape
A poor or bad credit score isn’t good for your loan refinancing effort. Many lenders will take a look at your credit score or credit profile before making an eventual decision about your loan refinancing application.
These lenders want to be certain that you’re credit worthy and make monthly payments at the right time.
You can learn about why your credit score is crashing and what you can do to improve it.
Student Loan Refinancing: How Much Can You Save
You can search the web for a free student loan calculator to help you figure out how much money you can set aside by saving if you’re eligible for student loan refinancing.
Don’t limit yourself to just one lender
Applying to multiple loan refinancing is a smart way to enhance your chances of getting our loan refinancing approved. If you apply for several lenders within a 30-days period, it will only count once on your credit report.
Check your credit report
You should check your credit report for errors and don’t hesitate to fix them as soon as you find one. You can read about how to repair your credit all by yourself here. Since lenders will review your credit report, it is up to you to ensure that it contains accurate information.
Learn how to stop unauthorized access to your credit report in this article.
Find an eligible co-signer
Sometimes, all you need to get approved for student loan refinancing is a qualified co-signer. Your qualified co-signer can be a spouse, a parent or even a grandparent.
Aside helping you get an approval, your co-signer can also help you get a lower interest rate as long as he or she has a strong credit and income.
Though your co-signer is also responsible for your student loan, man lenders offer co-signers a release option. This releases the co-signer from all financial responsibilities tied to the loan as soon as you meet a specific requirement.
Do you have private student loans?
Private student loans are not eligible for federal student loans repayment programs. So, if you’re looking to save money on your student loans, you can get lower interest rates with student loan refinancing.
If you’re wondering what rates you’re likely to end up with, student loan refinancing start as low as 2.50% – 3.00%. Read about how to get a private student loan, even with a bad credit – on this post.
How good is your debt-to-income ratio?
To be eligible for a student loan refinance, odds are lenders will take a good look at your debt-to-income ratio. Your debt-to-income ratio is the proportion of your entire monthly income in comparison to our entire monthly debt payment.
For instance, if you earn $5,000 as monthly income and have a debt of $1000 as monthly expenses, your debt-to-income ratio is $1000 divided by $5000 or 20%.
The lower your debt-to-income ratio, the better it is. One of the easiest methods of enhancing your debt to income ratio is to pay off your debt.
So, if you have a lower monthly debt payment, the higher the free cash you’ll have to pay off your student loan.
Here’s a brilliant tip: before applying for student loan refinancing, do everything possible to pay off as much high interest debt as you can to boost your chances of getting the approval. Increasing your debt to income ratio is another method of enhancing your income.
Keep your credit score in a good shape
A poor credit score isn’t good for your or lenders. Many lenders will review your credit score before making an eventual decision to approve your student loan refinancing or not.
Lenders do this to ensure that you’re credit worthy and capable to handle your financial obligations such as making regular monthly payments and making such payments at the right time.
If you’re wondering why your credit score is crashing and what you can do to improve it, read this article. In the end, you should aim for a credit score of 700 or higher.
Learn about the five important things that determine your credit score.
Have a steady monthly cash flow
Lenders will assess your monthly cash flow to ascertain your ability to repay your student loan.
So, lenders will assess your after-tax monthly income, other debts you owe, mortgage payments or rents as well as your living costs. This will enable lenders to decipher your financial strength and the possibility that you can repay your student loan.
Who else do you owe?
Lenders aren’t only interested in your ability to repay your loan; they are also interested in other debts you owe.
This is so because other debts may affect your ability to repay your loan at the right time. Other debt obligations lenders look at include credit card consolidation loans, auto loan debt, mortgage, and credit card debt etc.
Consolidate other debts
Consolidating debts like credit card debt via a credit card consolidation loan can reduce your interest rate. This will also boost your debt-to-income ratio.
High variable interest rates
If the variable interest rates on your student loans are high, you may end up paying more as interest rates increases.
However, with student loan refinancing, you can opt for a fixed interest to save money and get a fixed rate that will never change.