If you’re thinking about how to pay student loans and are looking for a good option to pay early, to refinance student loans will be a good option for you. You can refinance student loans when you have a good credit score and a fixed income. In general, the sooner you refinance your student loans, the better the results.
When you refinance student loans, the lender will finance your student loans with a new, lower interest rate loan. This will ensure long-term earnings because the total amount of student loans you pay will be reduced. Refinancing student loans will earn you money, but not everyone can or should not refinance student loans. Criteria you must have to refinance student loans;
- Good credit score,
- A university degree,
- A fixed income that allows you to easily pay your expenses and debts.
Can you refinance student loans?
You can refinance both federal student loans and private student loans. You can also use pre-consolidated or refinanced student loans to refinance student loans. Federal student loans cannot be refinanced by The Department of Education. Federal student loans are also refinanced through private lenders. To refinance private student loans, you should expect offers of lower interest rates. When you refinance federal student loans with a loan from private lenders, you will no longer be able to exercise the rights you acquired in holding federal student loans. This is not the case with private student loans.
If you want to refinance private student loans, federal student loans, or a mix of both loans, lenders require you to meet certain criteria. You must meet these criteria in order to refinance student loans;
- Good credit score.
You must have at least 600 points for private lenders to refinance student loans. Many of these private lenders are addressed to people with credit points of 700 or higher. If you have a bad credit score and want to refinance student loans, you can qualify by contacting a co-signer.
- A history of on-time loan payments.
Undoubtedly, the most important matter for lenders is the timely and full payment. Therefore, lenders will review your credit reports as well as look at your credit score. Having a good credit score is not enough to refinance student loans. Due to the details in the credit reports, lenders may opt out of lending.
- Enough income to pay your debts.
Lenders check that your income is eligible for a loan so that you don’t have any problems with repayments. Having a good fixed income is not enough. Lenders will also look at your debt / income ratio. The debt / income ratio required to refinance student loans is usually 50% or less. This ratio is excellent at 20% and below and provides the advantage to refinance student loans.
Appropriate conditions for refinancing student loans
It is important that you assess your situation by learning the interest rates on student loans before reviewing the appropriate conditions for refinance student loans.
Federal student loans have a fixed interest rate. This ratio is 4.53% for undergraduate students, 7.08% for graduate students and 7.08% for PLUS credits. Private student loans have fixed and variable interest rates. The fixed interest rate for private student loans varies between 4.22% and 13.66%. The variable interest rates for private student loans vary between 2.93% and 13.01%. Refinance student loans also have fixed and variable interest rates. The fixed interest rate for refinance student loans ranges from 3.29% to 9.62%. The variable interest rate for refinance student loans ranges from 2.38% to 9.38%.
- If you have student loans with high variable rates.
If you have student loans with high variable rates, refinance student loans by 2020. Interest rates are expected to rise by 2020, so repayment of loans with variable interest rates will become more expensive. Converting student loans into fixed rate refinance student loans before interest rates rise will give you a profit.
- If you have private student loans.
If you have private student loans, you won’t lose anything by refinancing student loans. Because private student loans do not have state privileges like federal students.
- If your credit has improved.
If you wanted to refinance student loans when you graduated and were not accepted because you didn’t have a good credit score, you can try to refinance student loans again after paying your credit card debt, after taking a raise and after other credit scores or income-raising situations occur.
- The savings will make a difference.
You do not need to wait for a good credit score if you qualify for a better interest rate than your current student loans. You can also refinance again student loans once you have a better credit score.
How soon can you refinance student loans?
For most people, it takes some time to provide the necessary conditions to refinance student loans. However, if you have a good credit score while studying and you have found a good job, you can also refinance student loans during the grace period of student loans. Some lenders such as CommonBond, Earnest and SoFi will honor the remainder of your grace period.
If you still attending school, many lenders will not allow you to refinance student loans, and many lenders require that you have a degree to refinance student loans. However, SunTrust and Earnest are exceptions. Both provide the opportunity to refinance student loans before graduation.
Conditions where you cannot or should not refinance student loans
- If you have federal loans and could see a drop in income.
If you experience a decline in your income, you should avoid to refinance student loans because you may need to take advantage of income-driven repayment, which lowers federal loan payments to a percentage of your income.
- If you’re pursuing student loan forgiveness.
If you refinance student loans, you lose the rights that the government offers for federal student loans.
- If you recently declared bankruptcy.
It is not impossible, but difficult, to refinance student loans if you are bankrupt. For this to happen, it will take 4 to 10 years, depending on the condition of the lenders.
- If you’ve recently defaulted on student debt.
The most important criterion for lenders is your payment history. Payment delays in the payment history are included in the credit reports for 7 years. It is difficult to refinance student loans before these delays are cleared.
- If you’ll take much longer to pay off loans.
In general, it is not logical to refinance student loans if you have a low or normal monthly payment. For example; the maturity of your student loans is 10 years. After paying for 5 years, it is not logical to add student loans due by refinancing student loans for another 10 years. Because instead of 10 years, you will have to pay interest on student loans for 15 years. This could mean you could lose money.
Before to refinance student loans, it is important to compare the cost you have before refinancing student loans with the cost you will have after refinancing student loans. You can get help from your credit advisers.