In a nutshell, here’s how you refinance student loans: Look for lenders who will provide you a reduced interest rate. Contrast them. Apply. If you are authorized, the new lender will pay off your old one. You will make monthly payments to the new lender in the future.
Here’s a closer look at the seven steps that comprise the student loan refinancing procedure.
1. Determine whether refinancing is appropriate for you.
Refinancing may make sense if it may save you money, but it is not for everyone. To qualify for the lowest rates and meet the eligibility criteria of a refinance lender, you’ll need to have good credit and a stable financial situation.
Because of the coronavirus outbreak, refinancing federal student loans will make them ineligible for government programs such as income-driven repayment and student loan relief. Do not refinance federal student loans unless you are certain that your career is not in jeopardy and that you will not require these options.
Refinancing private student loans, on the other hand, has few drawbacks. These federal programs will not accept private loans.
A soft credit check, also known as pre-qualification, usually has no effect on your credit ratings. An genuine application necessitates a hard credit check, which may temporarily reduce your credit scores.
2. Investigate lenders
Most student loan refinance lenders appear to be relatively similar at first sight. However, depending on your situation, check for specific qualities.
For instance, would you like to refinance parent PLUS loans in your child’s name? Find a lender who will approve it. Didn’t complete your education? Find a lender who does not demand a college diploma.
3. Obtain various rate quotes
Once you’ve identified a few lenders who meet your requirements, request rate quotes from each of them. Finally, the best refinance lender for you is the one with the lowest interest rate.
You can compare rates from many student loan refinance lenders at the same time, or you can visit each lender’s website separately.
As you shop, some lenders will ask you to pre-qualify, which means providing basic information so that the lender can give you its best estimate of the rate you might qualify for. Other lenders will only show you a quote once you complete a full application, but that rate is a real offer.