4. Select a lender and loan terms.
Once you’ve decided on a lender, you’ll need to make a few more decisions: Do you like a fixed or variable interest rate, and how long do you want your payback period to be?
Fixed interest rates are typically the best option for the majority of borrowers. Variable rates may appear to be lower at first, but they are liable to alter on a monthly or quarterly basis.
Choose the shortest repayment time you can afford to save the most money. Choose a longer payback period if you want lower monthly payments so you can prioritize other expenses.
5. Finish the application
Even if you have been pre-qualified, you must submit a full application in order to proceed with a lender. You will be requested to provide additional information about your loans and financial condition, as well as to upload supporting documents. You will require a mix of the following:
- Statements of loan or payback verification
- Employment verification (W-2 form, recent pay stubs, tax returns).
- Evidence of residency.
- Graduation certificate
- Identification from the government.
Finally, you must agree to allow the lender to perform a hard credit pull in order to validate your interest rate. You’ll also be able to refinance with a co-signer, which may help you qualify for a cheaper interest rate.
6. Sign the final paperwork
If you are authorized, you will be need to sign some final documentation in order to accept the loan. When you sign the loan’s final disclosure paperwork, a three-day rescission period begins. If you change your mind during that time, you can cancel the refinance loan.
If you are turned down, the lender will explain why. If it’s because of your negative credit, you might be able to qualify with a co-signer, or you might need a lower debt-to-income ratio.
7. Wait for the loan to be paid off.
When the rescission time expires, your new lender will pay off your previous lender or servicer. You will now make monthly payments to your new refinance lender.
Continue to make payments to your current lender or servicer until you receive confirmation that the transaction is complete. If you overpay, you will be refunded.