Refinancing your student loans is as easy as comparing different lenders and interest rates until you find the best one. SoFi offers customers a way to easily compare different loan rates. According to the experts at SoFi, “Waiting to refinance could cost you $2,000-$6,000 over the life of your student loan, assuming rates rise 1% in the next year.”
Once you find a lender willing to pay off your current loan with a better interest rate, you will be on your way to lower monthly payments and a lot of savings. Below are some steps to take when you are looking into student loans refinancing.
1. Determine If a Refinance is Right For You
Although it’s possible to save money by refinancing, it’s not always the best idea for everyone. You’ll need to have strong credit and financial stability to qualify for the lowest interest rate.
If you’re considering a student loan refinance, make sure that you’re not affected by the coronavirus pandemic. Refinancing federal student loans will not allow you to participate in government programs such as income-driven repayment plans.
2. Research Many Lenders
When you first begin your research, a lot of lenders will appear to offer similar loans. However, the truth is that some lenders offer features that suit your needs better than others.
For instance, if you’re looking to lower the interest rate on your student loans by refinancing in your child’s name, look for a lender that allows that. If you didn’t graduate college, find a lender that doesn’t require it during the application process.
3. Obtain Multiple Estimates to Compare
After identifying the lenders that will meet your needs, get in touch with them to get their rates. The best one will be able to offer the lowest interest rate. You can get multiple estimates from a comparison site or visit each lender’s site separately.
Before you start shopping, some lenders will ask for pre-qualification information so they can provide you with an estimate of the interest rate they’re willing to offer. Other lenders will only show you an actual offer once you submit a full application. Although pre-qualification is helpful, it doesn’t affect your credit score. An actual application will require a hard pull on your credit and could end up lowering your score.
4. Choose Lender and Loan Offer
Do you want to have a fixed or variable interest rate? Also, how long will you need to pay off your loan? Most borrowers prefer to have a fixed interest rate instead of a variable one. Variable rates can change monthly or quarterly. If you’re looking to save money, choose the shortest possible repayment period.
5. Complete Loan Application
Even if you’re already pre-qualified, you still need to complete a full loan application to get approved. You will have to provide information such as your income and financial situation. You’ll have to agree to a hard credit check to confirm that you’re in good financial shape. You can get someone to cosign the loan and lower the interest rate if they have better credit than you.
6. Sign Final Documentation
After you’ve been approved, you’ll need to sign the final documentation to get the loan. It is possible to cancel the loan before signing the paperwork. In case you are denied this opportunity, your lender will let you know the reason. Usually, people with bad credit can still qualify by adding a co-signer. After the rescission period has ended, your existing loan will be paid off, and the monthly payments will be sent to the new lender.
Make sure that you’re paying the right amount to your current lender in the meantime. In case you overpay, you will receive a refund.