How Does Refinancing Impact My Credit Score
Applying for any new loan can knock a few points off your credit score, but on-time payments will improve your score over time. New credit applications only account for about 10% of your FICO Score, whereas your payment history makes up 35%.
Many refinancing lenders let you shop around with no impact on your credit score. With prequalification, you can compare rates before submitting a full application and consenting to a hard credit inquiry.
Since youll be refinancing your current loans rather than taking on new debt, your DTI ratio should not be affected.
Brazos: Best For Texas Graduates With Strong Credit And Income
Brazos Higher Education is a nonprofit lender specializing in student loan refinancing to Texas residents with competitive rates and flexible terms.
Minimum credit score: 690
Terms: Five, seven, 10, 15, and 20 years
Fixed and variable
Maximum loan amount: $400,000
Pros:
- Forbearance options for economic hardships, active-duty military members, and natural disasters
- Interest rate reduction with automatic payments
Cons:
Best Cosigner Release Option
If your parents are willing to help you pay for college, they may have considered a federal Parent PLUS loan. However, depending on their credit score, your parent may be able to qualify for a lower interest rate by cosigning a loan with you.Some lenders offer a cosigner release option, which is ideal for parents who are willing to help you get a loan but may not want a long-term commitment. Here is a list of the student loan providers with the best cosigner release options.
ixWhile Savingforcollege.com strives to keep the information up to date, the lender rates, terms and other information are subject to change at any time.ixWhile Savingforcollege.com strives to keep the information up to date, the lender rates, terms and other information are subject to change at any time.
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How To Get The Best Student Loan Refinance Rates
Your primary goal when shopping around for a student loan refinance lender is to get the lowest rate. The lower your rate, the more you save.
Its important to compare lenders advertised interest rates , but there are also some things you can do to ensure you get the lowest rate possible.
- Work on improving your credit score: Your credit score is the most important factor in your student loan refinance rate.
- Take advantage of all discounts: As mentioned above, many lenders offer discounts for things like setting up autopay or having a bank account with them. Check which discounts are available and, if possible, take advantage of them.
- Choose a shorter repayment term: Almost all refinance lenders offer a variety of loan terms. Shorter repayment options typically come with lower rates. Just be sure you can afford the higher monthly payment that comes with a shorter term before refinancing to one.
- Add a creditworthy cosigner: If you are having trouble qualifying for a student loan refinance rate that is lower than you are currently paying, adding a cosigner with a good credit score can help significantly.
- Possibly choose a variable rate: Choosing a loan with variable interest can help knock a few percentage points off your rate. The risk, however, is that interest rates may go up and you could end up paying more than the fixed rate you were offered. If you are planning on paying off your loan quickly, choosing a variable interest rate may especially make sense.
Can I Refinance Student Loans With Bad Credit
Some lenders may refinance student loans if you have bad credit, but its often not worthwhile. With poor credit or a spotty financial history, youll likely only qualify for the highest interest rates. Since most people refinance to get a lower rate, it probably doesnt make sense to refinance if you have subpar credit.
However, you may be able to add a co-signer to your application. If they have excellent credit and a stable income, you could qualify for better rateseven if your own credit score is low. But adding a co-signer comes with its own set of risks and rewards, so make sure you understand the pros and cons before using this strategy.
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Am I Eligible For Student Loan Refinancing
You can refinance one or more federal and/or private student loans, but you must meet a lenders requirements for credit and income. Most lenders look for a of 650 or higher, along with a steady source of income or an offer of employment. If you cant meet these criteria on your own, you could qualify by applying with a creditworthy cosigner, such as a parent.
Along with your credit score and annual income, some lenders also look at your savings and debt-to-income ratio. Finally, some lenders require proof of graduation, as theyll only approve borrowers who have obtained their degree. If you left school before graduating, there are relatively few student loan refinance providers that will work with you.
When Finding The Best Student Loan Refinance Companiesmake Sure They Are Capable Of Reducing Your Rate As Low As Possible After Allthe Very Purpose Why Borrowers Get Into Refinancing Is To Be Able To Lessen Theamount Of Money They Pay For Loans
In a report published by Center for American Progress, it says that about 43 million adult Americansroughly one-sixth of the U.S. population older than age 18currently carry a federal student loan and owe $1.5 trillion in federal student loan debt, plus an estimated $119 billion in student loans from private sources that are not backed by the government.
In addition, the report also stated that college debt is even more concentrated amongyoung people, and that there is an estimated one-third of all adults ages 25 to 34 have a student loan.
As you can see, based on the numbers shown, a student loan is indeed growing as years pass by. In fact, according to an article published by Forbes online, it says that there are 45 million borrowers who collectively owe nearly $1.6 trillion in student loan debt in the U.S, which makes student loan second highest consumer debt category .
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Well, we thought its not surprising because there are more young people now. Needless to say, a lot of the young population are very much eager to finish school even if it means they need to get into a student loan.
Good thing though as the number of lending companies that offer student loans is growing as well, giving borrowers more options to choose from. From the business perspective, it means there is a better competition when it comes to interest rates.
But before that, heres a quick refresher first:
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Best Student Refinance Companies: Reviewed And Rated
Before you refinance your student loans, its important to compare as many lenders as you can to find the best loan for your needs.
Edited byAshley HarrisonUpdated May 18, 2022
Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. By refinancing your mortgage, total finance charges may be higher over the life of the loan. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”
The best student loan refinance companies provide competitive interest rates, a wide selection of loan terms, inclusive eligibility requirements, and responsive customer service.
Through Credible, you can compare your prequalified rates from all of the lenders below without affecting your credit score.
Am I Sure I Will Not Be Going For Public Service Loan Forgiveness
PSLF is a program where any remaining direct federal student loans are forgiven tax-free after you make 120 on-time monthly payments in a qualifying program while working full-time for a qualifying employer.
If you’re absolutely positive that working at a 501 and going for PSLF is not in your future, then you can consider refinancing federal loans. If you’re not sure, don’t refinance!!
Refinance or PSLF?
- If you’re sure you won’t work at a 501 and going for PSLF is NOT in your future Refinance
- If there’s a chance you will work at a 501 Don’t Refinance
- Debt-to-income ratio of 1.25 or lower Refinance
- Debt-to-income ratio of 1.25 2, run the numbers on refinancing vs PSLF. The longer your training , the better PSLF is.
- Debt-to-income ratio of 2 or higher PSLF
- Weigh the risk of not being awarded PSLF
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Student Loan Planner Disclosures
Upon disbursement of a qualifying loan, the borrower must notify Student Loan Planner® that a qualifying loan was refinanced through the site, as the lender does not share the names or contact information of borrowers. Borrowers must complete the Refinance Bonus Request form to claim a bonus offer. Student Loan Planner® will confirm loan eligibility and, upon confirmation of a qualifying refinance, will send via email a $500 e-gift card within 14 business days following the last day of the month in which the qualifying loan was confirmed eligible by Student Loan Planner®. If a borrower does not claim the Student Loan Planner® bonus within six months of the loan disbursement, the borrower forfeits their right to claim said bonus. The bonus amount will depend on the total loan amount disbursed. This offer is not valid for borrowers who have previously received a bonus from Student Loan Planner®.
Sofi: Best For Borrowers With Excellent Credit
SoFi is known as the first lender to offer refinancing for federal and private loans together.
Minimum credit score: Not disclosed
Terms: Five, seven, 10, 15, and 20 years
Fixed and variable
Maximum loan amount: $5,000 up to the full balance of your qualified education loans
Pros:
- Academic, military, and medical deferment
Cons:
Compare private student loan rates from various lenders using Credible.
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Should I Refinance Or Consolidate My Loans
You should consider refinancing if your finances are stable and youre able to qualify . Refinancing is best for borrowers who are looking to lower their interest rate, restructure their debt or combine multiple loans into one. Since refinancing is typically done through a private institution, you should only refinance federal loans if you dont need federal repayment plans or programs.
If youre looking to combine several federal student loans into one loan, consider direct loan consolidation. This federal option helps you simplify repayment, and apply for a new repayment plan, but it wont result in a lower interest rate. Also check out direct loan consolidation if you want to combine your federal loans while maintaining access to federal repayment plans.
Student Loan Refinance During Covid
Due to the coronavirus pandemic, the federal government ordered a pause on student loan repayments. According to the latest update from the White House, President Joe Biden extended the deferment until May 1, 2022. Theres been no official announcement of an additional extension, or of student loan forgiveness initiatives.
If youre unable to service your loan, most lenders do offer some form of forbearance options. Youll need to apply for the program with your lender and demonstrate the cause of your hardship.
A common forbearance arrangement is a suspension of payment for up to 12 months. This will usually be granted in three-month increments, requiring you to prove the hardship each time.
Forbearance is not automatic upon application. In fact, the requirements can be quite strict.
For example, SoFi requires that you must have lost your job involuntarily, which is a common requirement. They may also refuse forbearance if youve had any late payments on your loan. And in another common provision, the forbearance will be reported to the credit bureaus, which may affect your credit score.
If forbearance is required, you should know that interest will continue to accumulate on your loan, even while payments are not required. This means the principal amount of your loan will increase during forbearance.
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Laurel Road: Best For Borrowers Pursuing Health Care Degrees
Laurel Road is a part of KeyBank and offers refinancing for undergraduate, graduate, and some associates degrees.
Minimum credit score: Not disclosed
Terms: Five, seven, 10, 15, and 20 years
Fixed and variable
- Special rates for certain medical professionals
- No application, disbursement, or origination fees
Cons:
- $50,000 maximum loan amount for associates degrees in certain health care fields
- Short six-month grace period
Can You Refinance A Student Loan More Than Once
Yes, theres no hard-and-fast rule on the amount of times you can refinance student loans you might decide to refinance with your current lender, or switch to another.
Refinancing a second time could make sense if your financial situation has improved to the point where you could score a significantly lower interest rate. If you extend your loan term as part of refinancing again, though, youre likely to lose not save money until your balance hits zero.
Compare your current loan to your potential refinanced loan using our student loan refinancing calculator
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When Is The Best Time To Refinance Student Loans
Many lenders require a degree in order to refinance, so its best to wait until youve graduated. Some lenders have more relaxed degree requirements, but they may want to see a history of on-time student loan payments for a period of time first . You also typically must be out of school before refinancing, with some exceptions.
If you dont yet meet the credit and income requirements but you want to refinance anyway, its possible to use a co-signer. Due to the risk to their credit score the co-signer takes on, though, its ideal to wait to refinance until you have the financial profile to be eligible as the sole borrower. You can take the time to improve your credit score and refinance later on.
Best Repayment Options: Commonbond
The company offers flexible repayment terms, hybrid loans, and no application fees.
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Medical and dental school loans
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No application fees
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Co signers required for undergraduates and graduate students
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Some loans have higher repayment amounts
If you’re looking for a lender that offers flexible repayment options, CommonBond is hard to beat. Two features make CommonBond stand out from other lenders:
- Hybrid Loans: With a hybrid loan, the first five years of the loan have a fixed interest rate. After that, the loan will have a variable interest rate. This approach is a good idea if you want to take advantage of a low-interest rate and pay off your loans as quickly as possible but also want the security of a fixed-rate loan.
- Forbearance: If you’re dealing with financial difficulties after losing your job or receiving a medical diagnosis, you can postpone making payments on your loans for up to 24 months over the length of your loanthe longest forbearance option offered by any lender. Being able to skip payments without entering into default can give you time to get back on your feet.
There are no application or origination fees, and this lender’s missed payment penalties are reasonablea late fee of 5% or $10 and returned check fee of $5.
Term lengths include 5, 7, 10, 15, and 20 years. Borrowers with the best credit profiles will earn the lowest interest rates. CommonBond offers the following rates :
- Variable: 2.00% to 6.86%
Read the full review: CommonBond Student Loans
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If You Dont Qualify For Student Loan Forgiveness
Qualifying for student loan forgiveness is for federal employees, teachers, or those who work in a public service. If you work in one of these fields and you have been consistent in your payments, you could be eligible to have your federal student loans forgiven. Once you refinance, these benefits will no longer be available to you. If you are eligible for student loan forgiveness, we recommend calculating whether student loan forgiveness or refinancing will save you more money over the life of your loans.
What Are The Benefits Of Refinancing A Student Loan
Eligible borrowers can refinance student loans to achieve a number of objectives, such as:
- Saving money on interest with a lower rate
- Adjusting your monthly payments to match your goals
- Combining multiple loans into one, simple repayment
- Removing a cosigner from your debt
- Switching to a new loan servicer with better customer service
Whatever your goals, refinancing can be a savvy strategy for managing your student loan debt.
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When Should You Consider Refinancing
In general, you should consider refinancing if you have a private student loan and can get a refinance with an interest rate significantly lower than your current rate. However, you should also consider non-rate factors such as the opportunity to change the loan term or the convenience of consolidating multiple loans into one as well as your personal financial goals and situation.
It can make sense to refinance private loans, since theyre already private. For federal loans, even if you get a better interest rate, it might not make sense to give up those benefits, Minsky says.
How much youll save depends on your current interest rate and total debt amount, Kumok says. You can use the monthly difference to invest, pay down your other, higher-interest debt like credit cards faster, save for a down payment or more.
Who Qualifies Fora Student Loan Refinancing
The requirements or qualifications for a refinancingprogram differ from one lending company to another.
However, to give you an idea, here are some of the commonrequirements for student loan refinancing:
- You must be at least 18 years old, and a legal resident of the United States.
- You must have at least $5,000 worth of student loan debt.
- You must have at least a bachelors degree from an accredited university.
- You must have a low debt-to-income ratio.
- You must have a good or excellent credit score.
- You must have a history of on-time payments.
- You must have solid employment.
If you meet these requirements, the more likely you areto get approved of a loan. We highly recommend, however, to check with thelending company that you are eyeing for regarding their requirements and/orqualifications for a student loan refinancing to be sure.
Before moving on, if you want to assess whetherrefinancing is right for you or not, heres a very helpful video by Aja Dang.Check it out by clicking the play button below:
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