Your current student loans have a very high rate of interest with a very long duration to pay off the loan? What is the possible solution to loans with high rate of interest when you have less income but a stable one? Refinancing your loans is a smart move when it comes to student loans. Refinancing your student loans helps you to get loans at a lower rate of interest and shorten your time period. It helps you get a good schedule to pay off your student loans. But there are things you need to know and understand first about refinancing your student loans.
Where To Go?
The first important thing one needs to know about refinancing student loans is that the government sanctions student loans but does no refinance student loans. To get your loan refinanced you need to go to a private lender. It is also not guaranteed that your student loan will be refinanced, but if rejected by one lender you can try again to a different lender or the same one as well. You need to put some effort to get your loan refinanced so as to enjoy the benefits.
Good Credit Score
If you have a good credit score, then the probability of your loan getting refinanced increases. A good credit score depicts your financial history; the better your credit score, the better are your chances. Credit score is the tool to measure one’s financial health. One is ineligible to get his/her loan refinanced if his/her credit score is too low.
If you need to get your loan refinanced, you need to have a stable and regular source of income. With a regular income the lenders are sure about getting the money back and it increases the chances of your loan getting refinanced.
The lenders understand that you have other loans and mortgages along with your daily expenditures. This ratio depicts the total debt to your total income and it is important on their behalf to measure it because everybody wants their money back. Thus, lower the ratio better are your chances.
Work experience helps you to get your loan refinanced as it depicts that you have a stable job with a recurring job. A work offer letter also works which ensure that you will soon have a recurring source of income.
Apply To Various Lenders
It is true that you won’t be able to get your loan refinanced the first time, thus you need to apply for refinancing to various lenders. The more the applications the more is the number of chances of getting success. This will not only give you a backup option but also a chance to choose the lender offering you the minimum rate of interest.
Have A Qualified Co-Signer
Ask your parents, grandparents, friends or family close to you with a strong credit score and profile to act as a co-signer. It will only increase the chances of getting your loan refinanced since the lender is assured of getting the money back. A person with a strong profile and income is a win and win situation for you. The co-signer can later be released off his financial obligations after meeting certain obligations.
Consolidation Of Other Debt
Consolidating other loans will only help you improve your credit score as it will bring down the interest rate of other debt. You can shift from variable debt to installment pay offs thus can use your credit more efficiently and effectively.
Pay Off Your Other Debts
Lenders calculate your income ratio before granting or refinancing your loan. If your current debt to income ratio is low the chances of getting the loan refinanced increases. You can decrease it by either paying off your debt or increasing your income. Since prepayments have no punishments or penalties, it is always to pay off the installment early as well. It will help you save at the end. Use a student loan refinancer calculator and do some necessary calculations to save some chunks from your income.
The Bottom Line
You can save a lot from getting your student loan refinanced all you have to do is put some effort and have a plan of action. Saving is never a bad option. Find someone to give a good financial and legal advice and then decide how you want to further go.