If you’re one of the approximately 45 million US adults with student loans, it’s likely you want to make them less of a burden on your life. Refinancing can be a great way to improve your situation. These are some things to think about when preparing to refinance your student loans.
What’s the Process of Refinancing Student Loans?
When preparing to refinance your student loans, you’ll want to have a firm grasp of what’s involved in the process. Knowing what to expect along the way can help borrowers stay focused, while also limiting stress and anxiety.
There are a few things you’ll want to think about when preparing to refinance student loans. The ability to check off items and requirements off your list will ensure you’re on top of the process. But before looking at those key considerations, what is refinancing, anyway?
It’s essential you know exactly what you’re getting into when you refinance student loans. Refinancing is taking out a new loan, which is used to repay and replace your old one. That’s the crux of the process, which, of course, has some finer details as well.
There are typically three main reasons why someone would refinance their loan: they want to lower their interest rate; they want to change the loan term; or they want to add or remove a co-signer. If at least one of those situations applies to you, then it’s worth continuing with the process. If not, you might not really need to refinance your student loans.
Once you’ve determined that you want to go through with a refinance, it’s time to find the right lender and loan. It’s important to note that the federal government doesn’t refinance student loans—only consolidates them for no net interest rate reduction. So, regardless of whether you have private or federal student loans, you’ll need to work with a private lender in order to do a student loan refinance.
Finding the best loan with optimal terms and low rates will take time—unless you have a way to speed up the process. This is the idea behind Juno, which helps its members get the best rates on student loan refinances without having to spend more time than it takes to fill out the application.
This works because Juno isn’t actually a lender. They simply collect bids from a range of lenders to be selected as their partner. Only those who have the absolute best loan offers are accepted, which means you as the borrower or refinancer get the best deal. And if you can find someone who will offer a better rate, it will be matched.
Are There Potential Roadblocks to Refinancing Student Loans?
Once you know how a smooth student loan refinance should go, it’s time to think about some of the things that might get in your way. The most obvious roadblock to refinancing student loans is bad credit.
Since you’ll be refinancing with a private lender, they’re going to assess whether it’s worth the risk to lend the money or not. While many loans come with some form of collateral asset, this isn’t the case with student loans. Due to this, lenders will want to see pretty good credit in order to extend a loan. If you don’t meet credit requirements, you can work to improve your credit score before refinancing, or refinance with a co-signer.
Is Refinancing the Right Choice for You?
Ultimately, this is the most important thing you need to determine when preparing to refinance your student loans. One thing that hasn’t been mentioned yet is that refinancing federal loans can sometimes be a detrimental decision. With some federal loans, you might be able to qualify for income-based repayment options, as well as benefit from loan forgiveness or postponement. You’re typically not going to get these options with private loans.
Those who already have private loans, or some federal options such as Direct PLUS Loans, will get the most benefit from refinancing. If you have other kinds of federal student loans, think long and hard about whether giving up those benefits for a lower interest rate makes sense for you.
There are many people who can benefit from refinancing their student loans. Preparing to refinance your student loans will ensure you’re able to get the best deal.