Can you think of any time, ever, that you’ve had the opportunity to save money and turned it down?
Like many college grads, you likely had to take out student loans in the course of completing an undergraduate and/or graduate degree. Now that you’ve graduated and found gainful employment, you’re diligently paying down loans to maintain a stellar credit rating.
But are you paying more than you have to?
If you have yet to consider student loan refinancing, there’s a chance you could be leaving money on the table. But what does student loan financing really do? By refinancing, you could lower student loan interest rates, monthly payments and possibly overall debt. Doesn’t it seem worth looking into, at the very least?
It’s not difficult to find out if you’re eligible for student loan refinancing and whether or not it’s right for you. It starts simply enough by speaking with lenders. Here are a few things you need to know going into the process.
Am I Eligible For Student Loan Refinancing?
Many people seem to suffer from the misconception that in order to refinance a loan, they have to first be in serious financial straits. This is not the case. In fact, people who are doing well financially tend to enjoy greater eligibility and stand to benefit the most from student loan refinancing (or other loan refinancing).
Just because you aren’t necessarily desperate for a lower student loan payment doesn’t mean you can’t take advantage of savings and work smarter instead of harder. It’s a question of setting yourself up for the most profitable and advantageous financial situation, now and in the future.
Finding out if you’re eligible requires little more than applying. Qualifications for refinancing student loan debt vary by lender, but the main thing you need to prove is an ability (and willingness) to repay any loan you’re given. Other possible qualifying factors could include:
- Good credit score
- Solid history of repayment to date
- Steady income
- Debt-to-income ratio
In other words, being well-situated financially can greatly increase your odds of getting approved for student loan refinancing, as well as getting a low interest rate. Other considerations on your part may include carrying loans with variable interest rates (which are likely to go up in coming years) or carrying already high interest rates that could be reduced through consolidation and refinancing.
How Does Student Loan Refinancing Work?
The process of refinancing begins with filling out an application to find out if you’re eligible to participate. This generally includes providing information about your financial situation, including the number of loans you wish to consolidate/refinance. You may also be asked to provide other information such as your income and other debts (i.e., credit card debt, auto or mortgage loans, etc.).
You will also have to agree to a credit check, which will reveal your credit score and credit history, including current debts and whether or not you have any black marks over the last three to five years (late or missed payments, defaults, bankruptcies, etc.). If everything looks good, you may receive an offer for refinancing or consolidating loans and potentially lower student loan interest rates and debt in the process.
From there you will have to consider your options. Accepting a new loan means figuring out which terms are going to provide you with the greatest overall benefit. There are several questions you should ask.
- Can I reduce monthly payments?
- Can I reduce overall debt?
- Can I replace variable rates with a single, fixed-rate loan?
- Will I save money with a lower interest rate even if the term is longer?
- Are comparable or shorter terms for repayment an option?
- Will I reduce my debt-to-income ratio?
- Are there fees attached and how will they impact overall savings?
Refinancing your student loans ultimately has to make sense for you, but determining your options begins with finding out if you’re eligible to consolidate and refinance.
Benefits of Refinancing Student Loans
There is no shortage of benefits to refinancing student loans, especially if you’re already doing well financially. When you refinance your student loans, you could enjoy:
- The convenience of a single, consolidated loan payment
- One rate (as opposed to a combination of rates over multiple loans)
- Lower monthly payments
- Reduced overall debt
- Improved debt-to-income ratio
If it turns out you’re one of the millions of people that are currently eligible to refinance student loans but have yet to do so, you may be able to do a lot more than lower student loan interest rates. You may be able to take advantage of a major opportunity.
In these uncertain times, it becomes even more important to retain as much control over your finances as possible, and a great way to do that is through refinancing your student loans.
By refinancing now, you can potentially save in your student loan payments. You may also be able to consolidate loans, reduce monthly payments and, depending on the term you choose, reduce long-term debt. Now is the time to find out if you are eligible for refinancing so you can say yes to significant savings. A great way to start is checking out the ELFI student loan refinancing calculator!
