How To Refinance Your Student Loans Bankrate
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Gorodenkoff/Shutterstock Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. Gorodenkoff/Shutterstock Written by Contributing writer Michelle Lambright Black is a credit expert with over 19 years of experience, a freelance writer and a certified credit expert witness. In addition to writing for Bankrate, June 30, 2022 Edited by Student loans editor Chelsea has been with Bankrate since early 2020. She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans. June 30, 2022 Share
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PREV NEXT Refinancing your student loans involves taking out a new loan to pay off your existing educational debt. For some people, it's a smart move that can save money and improve their financial lives. For others, may not be the right step. Read on to learn how to decide if refinancing student loans makes sense and the steps you can take to start the process. Should I refinance my student loan
Refinancing a student loan could help you get out of debt sooner and possibly reduce your monthly payment obligations, but this hinges on whether you can qualify for a good deal. Before you decide to refinance your student loan, there are a few factors to consider: Type of loan: The type of loan you have may impact your options for refinancing. Refinancing can only be done through private lenders, so means that you'll lose federal protections - like federal forbearance, income-driven repayment plans and more. Remaining time left: Refinancing into a longer repayment period could increase the overall amount of interest you'll pay on your loan, so if your loan is almost paid off, it could be cheaper to stick with the loan you already have. If you're at the start of your repayment period, on the other hand, refinancing may not impact you as much. Current interest rate: Most people choose to refinance in order to get a lower interest rate. Getting a lower rate means you could pay less in interest over the loan term, as long as you don't stretch out your repayment term. Monthly payment: Refinancing is a good idea if you have an unmanageable monthly payment. Extending your repayment term may ultimately increase the amount of interest you pay, but it will also lower your monthly bill. When in doubt, use a to compare your current loan with any new loans you're considering. How to refinance your student loan in 5 steps
There are five steps to take if you're ready to refinance your student loan: Check your credit. Shop for the best rate. Choose a loan offer. Fill out an official loan application. Sign your loan documents and start paying your new loan. 1 Check your credit
When you apply to refinance your student loans, one of the first steps a lender will take is checking at least one of your . This is why you should go over your reports from regularly to check for any mistakes or errors. If you discover inaccurate information on a credit report, the Fair Credit Reporting Act (FCRA) gives you the right to those items with the appropriate credit-reporting agency. It's also wise to get an understanding of where your credit currently stands prior to filling out loan applications. If you find that your credit isn't in the best shape, you can work to before you try to refinance. The FCRA lets you claim free reports from all three credit bureaus weekly at . Loan Student Key takeaway Reviewing your credit scores before refinancing will help you understand where your credit stands and confirm that your reports are error-free. 2 Shop for the best rate
Researching and checking with multiple lenders to find the best rate is a key element in successfully refinancing your student loans. In fact, rate shopping should be something you do anytime you're looking for a new loan or credit card. Search online to compare lenders' rates and fees. If a lender offers a prequalification tool, take advantage; these types of applications require only a on your credit report. Getting prequalified can help you see the type of rates and loan terms you might qualify for if you refinanced. You can use this information to see if refinancing would leave you any better off in terms of your monthly payment or total interest paid. Loan Student Key takeaway Take the time to check rates and fees with at least three separate lenders before you commit to a new loan. 3 Choose a loan offer
Once you've reviewed (and hopefully prequalified for) several loan offers, you'll be better equipped to choose the option that suits you best. The lender you choose to work with may let you select your preferred repayment terms as well. A shorter loan term (e.g., five years) might help you secure a lower interest rate and pay off your debt faster. However, your monthly payment would likely be higher. If you extend the loan term, on the other hand, you could reduce the size of your monthly payments and make easier. The trade-off would be more interest paid over the life of the loan and more time passing before you eliminate the debt. Loan Student Key takeaway Look at your budget and overall financial picture to decide which loan terms make the most sense. 4 Fill out an official loan application
Once you've narrowed down your preferred lender and loan offer, you'll need to fill out an official loan application. Even if you went through a lender's prequalification process, you will need to complete this step before your loan can be approved. At this point, the lender will likely run a hard credit inquiry to access your full credit report. The lender will also want additional information that you didn't include on your prequalification form. If you're applying with a co-signer, you'll need to provide their information as well. You may need to provide the lender with copies of documents and information such as: Social Security number (SSN). Driver's license or government ID. Loan payoff statements from existing student loan lenders or servicers. Proof of graduation. Proof of employment (paystubs, W-2, etc.). Loan Student Key takeaway Having your loan documents ready before you fill out your application to refinance will help the process go smoother and faster. 5 Sign your loan documents and start paying your new loan
Once you're approved for your loan, you'll sign your loan documents. Technology has made this step considerably easier; where you once had to sign loan documents in person or fax or mail them in, most student loan companies now handle their entire process online for ultimate convenience. Once your documents are signed and filed, you will begin making payments on your new loan just like you were with your old one. However, keep in mind that your new lender may not pay off your former loans right away; sometimes the process can take a few weeks. Continue making any student loan payments that come due in the meantime so you don't face late fees or potential negative credit reporting. Loan Student Key takeaway After signing your loan documents, keep making payments on your old loans until the transfer officially goes through. FAQ about student loan refinancing
Who is eligible for student loan refinancing
In general, you'll need to have a credit score in the mid- to high 600s, a debt-to-income ratio of less than 43 percent and a source of steady income in order to refinance a student loan, but the requirements vary by lender. Getting prequalified is an excellent way to see if you're eligible for student loan refinancing. While prequalification doesn't guarantee that you'll be approved, it can help you see if you meet the minimum criteria set by lenders. How long does it take to refinance a student loan
Once you fill out a loan application and submit the required documentation, your refinance request could be approved within a few days or a few weeks. Can you refinance federal student loans
You can , although you will need to do so with a private lender. This means that you'll give up federal protections like deferment and forbearance, as well as access to benefits like income-driven repayment plans. Can you put student loans in someone else s name
Some lenders allow you to transfer student loans to someone else. Some parents do this with loans that they took out for their child's education - transferring those loans to the child once they're in the workforce. Keep in mind, though, that the loan will have new terms and new rates, which are based on the new borrower's credit. Can you refinance student loans with bad credit
There are many lenders that , although if a lender does accept a lower credit score, it will almost certainly offer higher rates. As with new student loans, you can often apply for refinancing with a creditworthy co-signer, which could help you get qualified if you have poor credit. Does refinancing student loans hurt your credit score
When you submit an application to a refinance lender, the resulting hard inquiry can knock a few points off your credit score. However, this impact is temporary and likely won't do significant damage. If you get approved, the resulting opening of the new loan account and closing of the original accounts can also temporarily impact your length of credit history, which is a factor in your credit score. But again, the impact is usually minor and temporary. Refinancing could improve your score in the long term if it helps you more consistently make payments on time and in full. Written by Michelle Black Contributing writer Michelle Lambright Black is a credit expert with over 19 years of experience, a freelance writer and a certified credit expert witness. In addition to writing for Bankrate, Michelle's work is featured with numerous publications including FICO, Experian, Forbes, U.S. News & World Report and Reader’s Digest, among others. Edited by Student loans editor up next Part of Learn more Nov. 13, 2022