How to Refinance Student Loans

How to Refinance Student Loans

If you have student loan debt, you know it can be a huge burden. Unfortunately, given that the average indebted college grad owes over $37,000 in loans, it’s a problem that doesn’t go away on its own. So if you’re looking for a way to lower your monthly payments and lighten your shoulders, refinancing is worth considering.

It’s no secret that student loan debt is a major problem in the United States. According to NRP, Americans owe over $1.5 trillion in student loan debt. If you’re one of the millions facing this burden, you might be wondering if refinancing your student loans is an option. Here’s what you need to know about refinancing your student loans and how to get started.

How to Refinance Student Loans

What is a student loan?

If you’re in the student loan market, it’s important to know what it is. A student loan is borrowed money used to pay tuition and living expenses. There are many types of loans available, but they all have one thing in common: they must be repaid with interest; therefore, the sooner you repay the money, the less interest you will pay.

Why refinance a student loan?

Student loans are not easy to repay. If you have federal student loans, the government offers various repayment plans to help you manage your debt. But if you have private student loans, you’ll need to decide if refinancing is the best choice. Refinancing can help reduce monthly payments and shorten the time it takes to pay off your loan, whether the interest rate is the same or better than your current interest rate.

How to Refinance Student Loans

If you’re wondering how to refinance a student loan, this article is for you. The steps for refinancing a student loan are relatively simple and involve refinancing the current loan with a private lender. This can be done by contacting a private lender for loan rates and requirements and completing all required paperwork. You will also need to provide your last year’s tax returns and detail your income and expenses.

1. Check rates with multiple lenders.

Student loans are a big industry in the United States. One of the most common things people do when they graduate from college is get loans. These loans are often offered at lower interest rates because borrowers have proven creditworthiness and can afford a higher interest rate than those typically offered to new borrowers.

Student loans can be refinanced by banks, online lenders and credit unions. You can enter your information and view rates in minutes. SoFi, CommonBondand LendKeyfor example, offer competitive interest rates, transparent policies and excellent customer service.

Compare refinancing options to find the one that’s right for you. Then go to the lender’s website and submit some basic information to see your rate. Most lenders require the following:

  • Last name
  • Address
  • University and degree
  • Overall student loan debt
  • Income
  • The rent is paid monthly.

Although different lenders may have different requirements, the basics will remain the same. You may also be prompted to create an account so you can go back and review your information later. The lender will immediately carry out a credit check after receiving this information. This check will not affect your credit score.

2. Choose a lender and your loan terms

This is the time to choose a lender and a loan if you get good offers. The majority of borrowers choose the lender with the lowest interest rate. Calculate how much you’ll save with a new interest rate with a student loan refinance calculator.

You can also compare loan terms to help you decide if you want a five-year, ten-year, or longer loan. A longer period may lower your monthly payments, but it may also result in increased interest accrued throughout the life of your loan.

A long term might be the way to go if you need to free up more of your monthly income. On the other hand, a shorter term will save you money on interest and help you get out of debt faster if you can afford larger payments. In addition to interest rates, money-back guarantees may play a role in your decision. For example, if your job is in jeopardy, you should look for lenders that offer unemployment insurance or hardship forbearance programs.

3. Prepare your documents and complete the application.

You must complete a complete application before locking in your new interest rate. After that, documents such as loan statements and proof of income will be uploaded. At this time, you will also agree to a credit check.

Most lenders require the following documents and information:

  • Government-issued photo ID, such as a driver’s license or passport
  • Social security number or card
  • Proof of income (pay stubs or job offer letter)
  • All of your federal and private loans have official statements.

If you are applying with a co-signer, you will also need to include their contact information. All supporting documents will be uploaded to your lender’s online account. The lender will tell you if anything is missing.

Suppose you have questions, call or chat with customer service. Call your current loan officers if you don’t know where to look for complete statements. Statements should include your starting balance, payment date, and full repayment history.

4. Continue to make payments on your loans while you wait for approval.

Although you can view initial offers immediately, you may need to wait a few weeks for your refinance application to be fully approved. It usually takes two to three weeks to complete the procedure. Don’t stop paying your current loans in the meantime. You can stop paying your current repairers when your new lender gives you the green light.

Set up direct debits from your bank account once you’ve been accepted, so you don’t miss a payment. Many lenders will give you an additional 0.25% off your interest rate when you set up autopay. Additionally, if you are refinancing with a bank that already has a bank account, you may qualify for an additional loyalty discount.

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