When borrowers refinance student loans, they reset the terms based on their current financial status. Changes in employment or moving to a new location are a few reasons that trigger the need.
Fortunately, borrowers have a lot of options. The process is relatively short, and several lenders are willing to refinance student loans at a better rate than just a few years ago. If you’re considering going with another lender, here’s what you’ll need to do:
1. Make sure you have a stable source of income.
Refinancing away from federally-held loans may disqualify you from select benefits. Private lenders often do not offer programs like income-driven repayment. Before applicants try to refinance, they should research their choices.
2. Calculate how much money you will save.
The refinancing process only works if you can lower your total repayment costs. Additionally, extending your term is acceptable if it means not having to sacrifice other living necessities. Use a student loan refinancing calculator to determine how much you could save.
3. Check the eligibility qualifications.
Most private lenders require a minimum credit score of at least 650. Co-signing is an option but is not guaranteed to be successful. If it is not the right time to refinance, work on your debt-reduction strategies and try again later.
Benefits of student loan refinancing
For most borrowers, there are many advantages to refinancing your student loan to a better term. You can get a lower monthly payment or even pay off your loan faster. The key is to look at your situation closely. Involve a certified financial counselor if needed. Then, after reviewing all options, decide what works best for you.
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