If you have student loan debt, you know that it can be a heavy burden. Unfortunately, with the average indebted college graduate owing over $37,000 in loans, this is a problem that is not going away on its own. So if you are looking for a way to reduce your monthly payments and take some weight off your shoulders, refinancing is worth considering.
It’s no secret that student loan debt is a major issue in the United States. According to NPR, Americans owe more than $1.5 trillion in student loan debt. If you’re one of the millions of people dealing with this burden, you may be wondering if refinancing your student loans is an option. Here’s what you need to know about refinancing your student loans and how to get started.
How To Refinance Student Loans
What is a student loan?
If you are in the market for student loans, it’s important to know what one is. A student loan is borrowed money used to pay for tuition and living expenses. There are many different types of loans available, but they all have one thing in common: they must be repaid-with interest; therefore, the sooner you repay the money, the less interest you will pay.
Why refinance a student loan?
Student loans are not easy to repay. If you have federal student loans, the government has various repayment plans to help you manage your debt. But if you have private student loans, you will need to decide whether refinancing is the best choice. Refinancing can help reduce monthly payments and shorten the amount of time it takes to pay off your loan, whether the interest rate is the same or better than your current interest rate.
How To Refinance Student Loans
If you’ve been wondering how to refinance a student loan, then this article’s for you. The steps to refinancing a student loan are relatively simple and involve refinancing the current loan with a private lender. This can be done by contacting a private lender to find out the rates and requirements of the loan and filling out any required paperwork. You will also need to provide your tax returns from last year and details your income and expenses.
1. Check rates with multiple lenders.
Lending to students is a large industry in the United States. One of the most common things for people to do when they graduate from college is get loans. These loans are often offered at lower interest rates because borrowers have proven creditworthy and can afford an interest rate than those typically offered to new borrowers.
Student loans can be refinanced through banks, online lenders, and credit unions. You may enter your information and check rates in just a few minutes. SoFi, CommonBond, and LendKey, for example, offer competitive interest rates, transparent policies, and excellent customer support.
Compare refinancing options to find which is suitable for you. Then go to the lender’s website and submit some basic information to see your rate. The majority of lenders demand the following:
- University and a degree
- Student loan debt as a whole
- Rent is paid every month.
Although different lenders may have varying requirements, the gist will remain the same. You may also be asked to establish an account so that you can go back and review your information later. The lender will immediately do a soft credit check after receiving this information. This check will not affect your credit score.
2. Choose a lender and your loan terms
It’s time to choose a lender and a loan if you get attractive offers. The majority of borrowers choose the lender with the lowest interest rate. Calculate how much you’ll save with a new interest rate with a student loan refinancing calculator.
You can also compare loan terms to assist you in deciding whether to take out a five-year, ten-year, or longer loan. A more extended period may lower your monthly payments, but it may also result in higher interest accrued throughout your loan.
A longer-term could be the way to go if you need to free up more of your monthly income. On the other hand, a shorter term will save you money on interest and help you get out of debt faster if you can afford larger payments. In addition to interest rates, repayment safeguards may have a role in your decision. For example, if your work is in jeopardy, you should look for lenders who offer unemployment insurance or hardship forbearance programs.
3. Prepare your documents and complete the application.
You must complete a full application before locking in your new interest rate. After that, documents such as loan statements and evidence of income will be uploaded. At this time, you’ll also agree to a hard credit check.
Most lenders require the following paperwork and information:
- Photo identification issued by the government, such as a driver’s license or passport
- Number or social security card
- Proof of earnings (pay stubs or a job offer letter)
- All of your federal and private loans have official statements.
If you’re applying with a cosigner, you’ll also need to include their details. Any supporting papers will be uploaded to your lender’s online account. The lender will tell you if anything is missing.
Suppose you have any questions, phone or chat with customer care. Call your current loan servicers if you’re not sure where to look for comprehensive statements. Statements must include your original balance, the disbursement date, and complete repayment history.
4. Continue to make payments on your loans while you wait for approval.
Even while you can look at initial offers right away, you may have to wait a few weeks for your refinancing application to be fully approved. It usually takes two to three weeks to complete the procedure. Don’t stop paying your present loans in the meanwhile. You can stop paying your current servicers when your new lender gives you the go-ahead.
Set up automatic withdrawals from your bank account once you’ve been accepted, so you don’t miss a payment. Many lenders will give you an additional 0.25 percent discount on your interest rate when you set up autopay. In addition, if you refinance with a bank that already has a bank account, you may be eligible for an additional loyalty discount.