Refinancing your student loans could save you money and it only takes a few minutes to get personalized quotes from lenders.
The Federal Reserve predicted that they’d keep their interest rates low through 2023, which means you may have time to prepare to refinance your student loans. If you don’t qualify for a refinance right now, here are three things you can do to put yourself in a position for approval in a few months:
1. Reduce other debt
Take a few months to reduce the amount of debt you owe on credit cards. If you can reduce your debt-to-income ratio, your credit score will improve, and you’re more likely to get approval for a loan to refinance.
If you want to take advantage of low-interest rates, consider refinancing your student.
2. Increase your income
Consider taking on a side-hustle, a second job, or overtime to increase your paychecks. More money could help you pay off other debt, and it can approve your credibility with lenders.
3. Review your credit report for errors
According to Consumer Finance, the FTC determined that 1 in 5 people have errors on their credit report. These errors can affect your credit score and your ability to qualify for loans. Make sure to review your credit reports at least once per year. If you find errors, contact the reporting agency to request a change.
Take time to look for the best rates possible. If you’re going to refinance your loan, you want to get terms that work best for your financial situation. Credible can do the work for you.
4. Improve your credit score
Your credit score tells student loan lenders how risky of a borrower you are. The higher your score, the more likely you are to pay your debt back. Your credit includes several key factors:
- Payment history
- Credit utilization
- Credit age
- Credit mix
- New credit
Credit scoring agencies look at all these factors to compute a three-digit number. Lenders use this number to determine if they should loan you money and what interest rate to charge. Lenders will give better interest rates to borrowers with higher credit scores. Your credit score could also affect insurance rates and your ability to rent an apartment.
How to qualify for a student loan refinance
When you refinance a student loan, you replace your old loan with a new one. Since you’re getting a new loan, you’ll need to meet traditional loan standards. Your new lender will review your credit score, credit history, loan balance, payment history, and income.
To qualify for student loan refinancing with the best rates, aim to have a credit score over 650 and a debt to income ratio below 50%. To maximize savings, consider refinancing your student loan if you have a balance of over $5,000. Additionally, lenders want to see that you have a steady income.
While researching if student loan refinancing is right for you, use an online tool like Credible to view a rates table that compares rates from multiple lenders at once.
Whether you’re struggling to make your student loan payments or want to save money on your education, student loan refinancing could be a practical option. With current interest rates at record lows, now may be an excellent time to refinance and save a lot of money. Although refinancing a student loan is a great way to save money, not all borrowers will qualify.
Note: Federal student loan borrowers can only refinance into a private loan. If you’re currently taking advantage of loan deferment or loan forgiveness, refinancing your student loan may not be your best option. You cannot refinance back into a federal loan. If you refinance to a private loan, you could miss out on any future benefits of federal loans. At publication, CARES Act protections that suspended payments and interest on federal student loans are set to expire at the end of January 2021.