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If you’re one of the 40 million Americans with student loans, you may be curious if refinancing is worth pursuing.
Student loan refinancing could potentially save you money if you get a loan at a lower interest rate.
But with so many lenders to choose from, how do you know which one is right for you? Here are five steps to help you pick the best lender to refinance your student loans if you decide that refinancing is right for you.
- Compare repayment terms
- Assess your eligibility
- Understand the benefit of refinancing
- Understand the fine print
- Research reviews about each company
When reviewing lenders, it’s wise to compare their repayment terms. The repayment term refers to the amount of time you have to pay back your loan. Each lender is different, but most repayment terms range from five to 20 years.
You’ll want to find a payment plan that works with your budget, since the repayment term will affect the size of your monthly payments. For example, if you choose a shorter repayment term, you’ll likely pay more each month, but less overall since you’ll have fewer interest payments.
Before applying for student loan refinancing, you can try to assess your eligibility by looking at the loan requirements for each lender. Ask yourself the following questions:
- What are the minimum and maximum amounts you can borrow?
- What are the credit score requirements? Most refinance companies use credit scores to assess risk.
- What are their debt-to-income ratio requirements? Many lenders use this to assess how much you can afford to pay, based on your current income and debt load.
- Are there specific income requirements? Lenders typically want to know that you have sufficient income to cover the payments.
- Do they refinance student loans from your school? Some lenders only work with borrowers from specific schools.
- Are you eligible for refinancing based on your degree? Some lenders, like Darien Rowayton Bank, offer loan programs for borrowers in certain fields including medicine and law.
Different lenders typically come with their own unique advantages and perks. For example, some lenders offer unemployment protection, so if you lose your job, you can put your payments temporarily on hold.
Others offer more flexibility on the repayment term, monthly payments and interest rate. As a borrower, you’ll want to know what unique benefits each lender can offer you so you can choose appropriately.
When looking at various lenders, it’s important to read the fine print so you can avoid any surprises down the road. Here are some things to look for.
- Does the loan have an origination fee? This is a fee that lenders can charge to cover the costs associated with processing the loan.
- Are there prepayment penalties if you pay off your loan early? If so, how much?
- If you need a co-signer, does the lender offer co-signer release? This can release co-signers from the loan contract if you’ve proven you can make the payments by yourself.
- What happens if you’re late making a payment?
When choosing the best lender to refinance your student loans, consider researching reviews about the company to see how others have rated their experience. Was the actual refinancing process as described? Were others satisfied with the overall service? When is customer support available (and are they helpful)?
Consider the fact that you’ll likely be with this company throughout your repayment journey, so you’ll want to choose a company that works best for you.
Student loan refinancing could potentially save you money, but it’s key to do your research to figure out if refinancing is a good option for you. If it is, it’s also key to research your refinancing options and find a plan that’s a good fit.