When is the Best Time to Refinance Student Loan? If you are wondering what is the best time to refinance student loans, you will find it in this post itself. In this post, I will try to provide you with good clarity on refinancing student loans. As you read this post till the end, you will gain excellent clarity, and can go about applying for a student loan more confidently.
Student loan refinancing is an excellent way to have all the existing loans paid off with a new loan. Student loan refinancing can largely help borrowers in lowering their interest rates over time. Borrowers can choose to have multiple loans combined into one, or selected loans combined into one. For example, a borrower with existing federal, and private student loans can choose to refinance only the private loans.
While refinancing student loans can be an excellent way of managing the finance, it may not entirely hold true for federal student loans since refinancing federal loans have some drawbacks. First, you need to understand that when you refinance federal student loans, they are converted into private debt. What it means is the moment you refinance a federal loan, and it’s converted into a private debt, you will no longer be able to capitalize on benefits such as loan forgiveness programs, and income-driven repayment (IDR).
If you make up your mind to refinance a federal student loan, you can refinance it with a private lender, and it can take 30 to 45 days for the consolidation of a federal student loan. In case you opt for federal student loans consolidation, it will not reduce the interest rates unlike in private loans. Paying off student loans usually takes around 10 to 30 years.
One question that might be crossing your mind at the moment is what it takes to qualify for a student loan refinancing. Don’t worry, I will walk you through all the essential eligibility criteria for student loan refinance.
First things first, borrowers need to have a minimum credit score of 650 to qualify for a student loan refinancing. In the event your credit score is below 650, you may need a cosigner to qualify for a student loan refinance.
Another important eligibility criteria for student loan refinancing is a steady job. Borrowers will need to submit proof for a steady job. Besides, borrowers need to have a debt-to-income ratio under 50% to qualify for a student loan refinance.
Borrowers also need to have a minimum balance of $5,000. Apart from this, borrowers will need to complete a degree program to qualify for the loan refinance. Borrowers need to be a US citizen, with no history of bankruptcy, and should not be behind on their mortgage or rent payments.
Refinancing student loans shouldn’t be difficult as long as you meet the eligibility requirements. However, as you have seen it can be a little hard to meet all the eligibility requirements. Besides, it’s always wise to consider a few factors before going ahead with student loans refinancing. Here are some of the essential things you can do ahead of applying for a loan:
Refinancing student loans is a great idea for managing personal finance. However, it’s not as simple as it looks, and you can only go ahead with it when you understand the inside-out of student loan refinancing. As already pointed out, refinancing federal student loans can deprive you of several benefits. Hence, you will need to be very thoughtful about your decision. Besides, you have to be very particular about the interest rates when looking for lenders.
In simple words, the most important factor in student loan refinance is the interest rate. If you manage to find a lender with low interest rates, you will surely be on the profitable side. However, the eligibility criteria in student loan refinance can be a little hard to meet but if you go a bit slow, and go about it carefully, you can certainly fulfill them.
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