Many people today are on the brink of going into debt because of their student loans. The cost of education in this day and age is extremely high. If you are worried that your existing student debt is getting out of hand, there are a few alternatives you can try to help reduce the amount of money you owe, one of them is student loan refinancing.
When you opt for the process of refinancing your student loan, a loan provider will pay off your existing debt and replace that loan with a new one. The new loan will come with a better interest rate as well as a better repayment plan. You can refinance both the main types of loans, federal and private loans but, keep in mind that you will lose certain privileges when refinancing a federal loan. If you are heavily dependent on the federal privileges, refrain from opting for the student loan refinancing option.
When Should You Consider Going Ahead With Student Loan Refinancing?
The following questions listed below can be used to determine whether or not you will benefit from refinancing your student loan.
- Did you avail a private student loan?
It may be of no surprise to know that each private loan vendor has their own set of terms and conditions. This also includes their eligibility criteria.
- Is the loan you availed come with a high interest rate?
Sometimes, people avail student loans with very high interest rates. This can fasten the process of going into debt as high interest rate student loans often go hand in hand with high monthly repayments.
- Do you have an excellent credit history and credit score?
When it comes to the process of refinancing student loans, lending organizations will consider your application if you have an impeccable credit score as well as a good credit history. This will help them gauge you as someone who is a responsible and trustworthy borrower.
If your answers were mainly yes, then you may benefit from refinancing your student loan. There are many loan providing companies such as MyFedLoan that can simplify the process of your student loan repayment. They can walk you through the process, step by step and will give you a clear insight on how much of your existing debt will be reduced.
How to Know if I am Eligible for Refinancing a Student Loan?
It is fairly simple to find out if you qualify for the process of refinancing your student loan. Each loan provider has their own eligibility requirements but there are certain general elements that can increase your chances of approval.
Generally, lending organizations that offer student loan refinancing require the applicant to have an above average credit score. Apart from this, the applicant will also need to show proof that they have a steady source of income and possess good saving habits.
In case you desperately need to refinance your student loan but have a bad credit score or your monthly income is much less than what is required, you can still approach the loan provider as long as you have a credible co-signer. To ensure that you get approved for the student loan refinancing process, your co-signer must possess an excellent credit score and an immaculate credit history. To summarize, most loan providers who offer student loan refinancing will require the following.
- Proof of the applicant’s degree.
- The applicant’s savings and miscellaneous assets.
- The credit score of the applicant.
- The annual income of the applicant.
How to Pay Off Student Loans?
To start, use a loan payoff calculator as this can give you a better understanding of how fast you can clear your existing loan balance and how much of the interest amount you can save. The suggestions listed below can be useful when looking for ways on how to pay off student loans.
Make extra payments
Apart from the monthly loan repayments, try to pay more than the minimum amount required. Even making one large payment every 3 months can reduce the loan amount you owe. This will have a direct effect on the loan repayment term as you may be able to clear the loan sooner than expected.
Consider refinancing if you have good credit and a steady source of income
Refinancing student loans can help you clear your debt much faster when done in the right way. If you already have a steady source of income, a history of making loan repayments on time and a credit score above 600, then refinancing might be the best option for you.
Enroll in autopay
Autopay is another way you can lower the rate of interest of the student loan. Once autopay is set up, the monthly loan amount is automatically deducted from your bank account on a specific date agreed upon by you and your loan provider.
Make bi-weekly payments
Another method to pay off your student loan much faster is to make loan repayments on a bi-weekly basis. This way, you can make half of the monthly payment every 2 weeks rather than paying the whole monthly amount.
If you manage to do this regularly, you will end up making an extra payment every year, this will have a direct effect on your loan repayment schedule by cutting down on the estimated total time and will help you save money off the cost of interest.