If you want to save money on your student loans, here are the secrets.
Student loan refinancing is one of the smartest ways to pay off your student loans faster. Student loans refinance enables you to consolidate your existing private student loans, federal student loans or both into a new, single student loan with a lower interest rate. The result is lower monthly payments, which frees up extra money to repay more student loan debt, save or invest.
When you refinance student loans, lenders want to lend to borrowers who have a strong likelihood to repay their student loans. Here are 15 secrets to refinancing your student loans.
To get approved for student loan refinancing, you need to be employed or have a written job offer. The reason is that lenders want to ensure you can pay off your student loans. Similarly, you haven’t recently filed for bankruptcy or fallen behind on student loan payments.
Insider Tip: If you are unemployed or underemployed, it will be challenging to get approved for student loan refinancing.
2. Credit Score
Focus on your credit score. Most lenders will evaluate your credit score or credit profile. Lenders want to ensure that you meet your financial responsibilities, including making monthly on-time payments and at least the minimum payment.
Insider Tip: While many top lenders do not have a minimum credit score or expect a minimum credit score in the mid to high 600’s, you can maximize your chances for approval with a credit score of 700 or higher.
To get approved for student loan refinancing, you will need to be employed and show proof of stable and recurring monthly income. Lenders want to ensure that you have sufficient income to repay your student loan payments.
Insider Tip: If you don’t have sufficient monthly income, you can still get approved with a qualified co-signer who has a strong credit score and income.
4. Cash Flow
Lenders will want to examine your monthly cash flow. Specifically, they will look at your after-tax monthly income, less your monthly expenses such as rent, mortgage payments, other debt obligations and other living expenses.
Insider Tip: By evaluating your monthly cash flow, lenders can assess your ability to repay your monthly expenses, including your student loans.
5. Other Debt Obligations
Lenders want to understand what other debt obligations you have. This includes a mortgage, credit card debt, auto loan debt, credit card consolidation loans and other forms of debt.
Insider Tip: Lenders want to assess how much money remains for your student loans after your repay these other debt obligations.
6. Debt-To-Income Ratio
Your debt-to-income ratio is an important financial ratio that lenders will evaluate for student loan refinance. The debt-to-income ratio is the ratio of your total monthly income compared to your total monthly debt payment. For example, if you earn $10,000 of monthly income and have $2,000 of monthly debt expenses, then your debt-to-income ratio is $2,000 divided by $10,000, or 20%.
Insider Tip: You want a low debt-to-income ratio (the lower, the better).
7. Pay off your debt
You can improve your debt-to-income ratio by paying off debt. The lower your monthly debt payment, the more free cash flow you’ll have to repay student loans.
Insider Tip: Before you apply for student loan refinancing, first pay off as much (high interest) debt as possible.
8. Consolidate debt
You can consolidate debt such as credit card debt through a credit card consolidation loan, which can help lower your interest rate.
Insider Tip: If you consolidate credit card debt, you can not only lower your interest rate, but also improve your debt-to-income ratio.
9. Increase your income
You can also improve your debt-to-income ratio by increasing your income.
Insider Tip: Side hustle. Raise. Higher bonus.
10. Determine how much money you can save with student loan refinancing
This student loan refinancing calculator will show you how much money you can save from student loan refinancing based on your circumstances.
11. Apply to multiple lenders
You can maximize your chances of being approved for student loan refinancing if you apply to multiple lenders.
Insider Tip: Applying to multiple lenders within a 30-day period will only count once on your credit report.
12. Check your credit report
Review your credit report for any errors – and correct them accordingly.
Insider Tip: Lenders will evaluate the information contained in your credit reports, so you need to ensure your credit reports are accurate.
13. Get a qualified co-signer
A qualified co-signer may be the difference between you getting approved and not approved.
You don’t have to apply for student loan refinancing by yourself. You can apply with a qualified co-signer such as your spouse, parent or grandparent. Your co-signer can help you get approved and receive a lower interest rate, so long as they have strong income and credit.
Insider Tip: While a co-signer is equally responsible for your student loan, many lenders offer a co-signer release option, which release your co-signer from financial responsibility once you meet certain requirements.
14. You have private student loans
If you have private student loans, they are ineligible for federal student loan repayment programs. Therefore, if you want to save money on your student loans, student loan refinancing may help you get lower rates.
Insider Tip: Student loan refinancing rates start as low as 2.50% – 3.00%.
15. You have high variable interest rates
If you have high variable interest rates on your student loans, you could be paying even more money as interest rates rise.
Insider Tip: With student loan refinance, you can choose a fixed interest to save money and lock in a rate that will never change.
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