How to Refinance Student Loans

If you are looking for ways to refinance student loans, but are not sure if you will even get approved or not, then here are a few ways you can ensure you will get approved for refinancing student loans.

What is Refinance Student Loans?

Refinancing your current student loans is an easy way to combine your existing federal and private student loans, into a single student loan plan that comes with a lower interest rate. This allows for the lower monthly payment plan, and you will have more extra money to save, repay more loan, or invest the money you have saved. Refinancing student loans can help you save up to $20’000, till you have repaid your student loans.

If you wish to take on a private student loan lender, then you should read and reread the contract as private lenders have strict underwriting criteria that need to be met. As private investors are putting up their own capital, they only take on students they believe will be able to repay them. Each lender has their own underwriting criteria, which means their criteria will be different.

 

However, approval for refinancing student loans is not easy, and rejections are hurtful and seem unfair. But think about it this way, if it was your money, what would you have done? Which is why there are a few things you need to get right before you apply for a refinance of student loans. These few precautions will help set you on the right track for getting approved for refinancing student loans.

How do you get approval to refinance student loans?

  1. Credit Score – when looking to get refinance student loans, you must check your credit score. Your credit score is a record of your financial responsibilities, and most lenders will evaluate you on your credit score. To ensure that you get accepted, you must ensure that you have met all the past deadlines for payments. The minimum credit score that is accepted is in the mid to high 600’s, while some lenders do not have minimum requirements. To ensure your chance, try to keep your credit score above 700.
  2. Monthly Income – your monthly income plays a huge role when you are looking into refinancing student loans. When you apply for a private student loan lender, they want to make sure that you make enough money to repay them over the years. Most lenders will ask for proof of payment and want insurance that your cash flow is regular. To make sure you have a suitable monthly income, start by finding out how much you make after the tax is deducted, and then subtract your monthly loan payment. Now, the amount remaining should be enough to cover your monthly bills.
  3. Debts – if you have other debts such as mortgage, car debt, or credit card debt. These factors will weigh in the approval or rejection of your refinance student loans. Try to repay as much of your other debts as possible, before you apply for refinance student loans.
  4. Ratio – what is your debt to income ratio? It is the ratio of your monthly income when compared to your debts. For instance, if you make $10’000 per month, and your monthly debts are $3000, then your ratio is 30%. The lower your ratio is, the better chances you will have of approval.
  5. Employment – when you apply for refinance student loans, you should be gainfully employed, or have a written job offer. As most private student loan lenders will call your work, school, and place of residence to check your track record. While most will simply ask for work experience references. However, if you are underemployed or unemployed, you will find it difficult to get a refinance student loans approval. However, a stable co-signer will increase your chances of getting approved.

 

So before you apply for refinance student loans, you should look into the matter deeply, and make the required changes. Only apply when you feel you have an actual chance of getting approved. As it will be a waste of time and resources otherwise. Factor in the points we have listed above, as they will help you a great deal when looking for ways to get approval for refinancing student loans.

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