Take these 3 steps before applying for refinancing your student loans.
You can save money as a percentage and make it much easier to manage student loan payments.
But you should not rush to refinance student loans without taking a few preliminary steps. Currently, preparing to refinance your student loans can save you from headaches, increase your eligibility, and improve your chances of getting approval.
1. Check compliance
The first thing you need to do before refinancing student loans is to check eligibility requirements for each lender. You want you to fully understand their requirements and read the entire fine print so as not to waste your time. For example, SoFi does not offer refinancing for residents of Nevada.
Lenders will usually consider your credit rating, employment situation, and debt to income ratio. Some lenders may only work with borrowers in a particular area or in a particular school.
Before you apply, do your research and check eligibility requirements for all lenders.
2. Calculate your savings.
Refinancing your student loan discharge has the potential to simplify your payments, but you can qualify for a lower interest rate than the rates you paid. This is especially true if you are in a better financial position than when you first took out loans.
However, this is not always the case. It is important to spend some time looking at what the lender will offer you compared to what you already have.
If you have multiple loans, and only one of them has a high interest rate, it may be unprofitable to consolidate all your students together to include loans with lower interest rates.
Spend some time with a student loan refinancing calculator and review the fine print to make sure that you are considering a situation that will really help you.
You can choose a repayment method that works for you and helps you save money. Your monthly payments may be higher with a shorter repayment term, but you will save money on interest.
If you choose a longer repayment period, make sure that you like the compromise of additional interest payments in exchange for lower monthly payments.
3. Check your credit rating and report
Before refinancing your student loans, check your credit rating and credit report.
Your loan is what lenders consider to evaluate your creditworthiness – they want to know that you can repay your loans in full and on time.
Start by checking your free credit report at AnnualCreditReport.com. Your credit report contains a comprehensive picture of your credit history, balance sheets and payment history. Look carefully to make sure everything is accurate.
According to the FTC report, about 20 percent of consumers have an error in their credit report. If you find an error in your credit report, you can dispute this error and ask for a correction.
In addition to your report, check your credit rating.
Good credit scores usually have a value of 700 or higher, and most lenders require you to have an account in this range or higher. You can check your credit rating for free on sites like Credit Karma or Credit Sesame.
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