Private student loans can be a lifeline when you don’t have enough money to pay for school, but if you’re still financially struggling after graduation, refinancing your loans can provide some relief. Now that you’ve graduated and established credit, you might be entitled to a better deal. A refinanced private student loan could come with a lower interest rate and/or a lower monthly payment – and potentially significant savings, in general. That means you’ll have more money to buy a car, put a down payment on a house, and otherwise build your future.
But some homework is required before you make the final decision to refinance your private student loans. We’ll help you get started. In this article, we’ll outline:
You needed money for school, and a bank or credit union helped you. At the time, you were probably grateful for the assistance. But look closely at your statement, and you might see that you’re making significant loan payments each month, and the loan terms aren’t as favorable as you might now be eligible to obtain.
Banks and credit unions look at a variety of factors to assess your creditworthiness. They check your:
When you were a college student, you probably had non-existent credit. Considering that most students don’t have an established credit history, you were not alone.
When you don’t have a credit track record (or if you’ve made financial mistakes), you’re a risky borrower. Banks hedge their bets by giving you a loan with a high-interest rate and/or requiring a co-signer with strong credit.
It’s common for that to change with graduation. You have a steady job, you’re earning good money, and you’ve picked up an asset or two. You’ve also worked with other loan companies during your lifetime.
You can, experts say, take advantage of that experience. When you set out to refinance private student loans, you’re likely to get a lower interest rate. That could save you thousands over the life of the loan.
While you may have a bit of knowledge on private student loans — like how they work and what you’re expected to do — refinanced loans have slightly different terms and conditions than what you’re accustomed to.
When you apply for a private student loan, the lender communicates with your college to determine the cost of tuition. You’re offered a balance that doesn’t exceed that amount (less any other aid you’ve received and/or money you are able to pay directly). When you apply for a refinanced student loan, the amount you need will be determined by how much you private student loan debt you currently hold.
You have a few options:
To refinance private student loans, you’ll need to work with a private lender. The federal government, which does offer ways to refinance federal student loans, doesn’t offer any programs that can help with debt held by private lenders. Every lender works differently, and you’ll need to read the fine print about rates and terms. (Note, however, that you may refinance your federal loans – together with private student loans – in a student loan refinance loan from a private lender).
Once you have borrowed, it’s nearly impossible to get rid of your debt, as student loans (federal or private) are not dischargeable through bankruptcy. Of course, that’s true of the existing debt, as well. Before you settle on a lender, do your homework. Research as many private loan companies as you can and compare terms.
These are five companies that offer competitive private student loan refinance products:
Drop one payment per year and make it up later. Adjust your payment amount or make an extra payment with ease using the company’s online dashboard.
This is just a sampling of the companies that refinance private student loans. There are many more, including community banks and credit unions.
Take a deep breath. Remember that you have time to make a smart decision about your financial future. Compare these companies side by side, and don’t be afraid to be methodical as you look over your options. When you find one that offers a product that works best for you, you’ll consider your time well spent.