An Insider’s Guide To Refinancing Student Loans
Perhaps you’re interested in refinancing your student loans but aren’t sure if you’ll be approved for borrowing? It isn’t always easy to know how to go about refinancing, but here is an insider guide to help you make the right decisions and get lender approval.
If you refinance your loans you can consolidate any existing federal and private student loans into one loan that has a lower rate of interest. As a result, you’ll benefit from lower monthly repayments and this frees up your extra cash to invest, save, or repay even more of your student loans.
Refinancing student loans may save you as much as $20,000 in the lifetime of your loan. If your loans are from a degree in healthcare-related disciplines, you may save even more. So, knowing how to get approval for your loan is imperative.
How Can I Get Approval For Refinancing?
It’s no secret than student loans are expensive. Whether you’re refinancing a federal loan, private loans, or both, you’ll be working with private lenders when it comes to refinancing student loans since the federal government won’t offer this option.
Every lender has underwriting criteria of its own, and the circumstances and financial background of every applicant are also unique. Although refinancing approval is never guaranteed, this guide will help increase the chance of you getting the refinancing you need to save money.
Your Credit Score
The credit score you’ve been given indicates how financially responsible you are deemed to be. Most lenders will check your credit score since they want to know you’ll be able to meet all your financial responsibilities, and will pay regularly and on time. This is why having a credit score of at least 700 is the best course of action.
Private lenders need to know you’ll be earning enough to repay your loans. You need to show proof that your monthly income is recurring and stable and that there is enough remaining from your salary to pay for your living expenses once the amount of your loan payment has been subtracted. If your income isn’t high enough, a qualified co-signer with a good credit profile could help you out.
Your Other Debts
Other consumer debts like credit cards, car loans, and mortgages will all influence whether you’ll be approved for refinancing. You should, therefore, try to pay off as many of your other debts as you can before you apply to refinance your student loans.
Your Debt-To-Income Ratio
Lenders focus on your debt-to-income ratio – the amount of money you earn each month in comparison with your debt obligations over the same period. The lower this ratio is, the better, and you can improve yours by increasing your income or reducing your debt.
You should either have a confirmed job offer or be in employment if you’re applying for refinance. Some lenders will agree to refinance student loans if you’re in residency or in school, but many more will require you to have at least some experience of work. If you’re underemployed or unemployed, you’ll struggle to get approval for a loan refinance, but a co-sign may be able to swing the lender in your favor.