To refinance student loans, you usually need a solid income, good to excellent credit – or a person signing a good credit – and a desire to compare offers from different lenders. This will help you get the lowest interest rate you qualify for, which is often the main goal of borrowers when refinancing. Can I refinance private student loans?
The application process for refinancing a student loan can be relatively quick. After preparing the necessary documents, many lenders claim that their applications can be completed in about 15 minutes.
Make sure you qualify for student loan refinancing
Not everyone is eligible for refinancing student loans. When refinancing, you consolidate some or all of your existing student loans by taking a new loan of the total amount you want to refinance from a private lender or bank.
The refinanced loan will have other features than previous student loans, including the new monthly repayment, interest rate and repayment date. Refinancing is especially useful for borrowers with a strong credit history: if you have high credit standing, you can refinance your loans and qualify for a new loan with a lower interest rate, which helps you save money over time.
Even if you qualify for refinancing, it’s important to consider whether this is the right decision for you. After refinancing federal student loans, they become private loans. This means that you will lose some benefits and collateral such as access to income-based repayment plans and forgiveness of public loans.
In response to the economic effects of the coronavirus, the government suspended federal student loan repayments from March 13 to September 30, 2020, and set interest rates at 0%. If you refinance federal loans now, you will lose this relief.
Why is it worth refinancing private student loans
Refinancing private student loans makes sense if you want to save on interest, change repayment terms or swap lenders.
- You save money
The best reason for refinancing private student loans is to save money. Lowering the interest rate can reduce your monthly payments, the total amount you pay, or both.
- Change of loan repayment condition
Refinancing private student loans may be appropriate for you if you want to change how you pay back your loans:
Simplify repayment. If you have more than one private student loan, you can combine them into one refinanced loan with one payment.
Extend repayment to reduce monthly payments. In addition to lowering the interest rate, refinancing can reduce your monthly payments, extending your repayment period to 20 years.
Shorten your repayment to save on interest. If you want to pay off student loans quickly, you can refinance and choose a shorter repayment schedule than currently.
- Choose a different lender
If you are not satisfied with the customer service or repayment options of the current loan holder, you can switch to another lender by refinancing. This is not in itself a sufficient reason for refinancing – especially if the change means paying more money.