How to avoid common student loan refinancing mistakes
While there are many mistakes a borrower can make during a student loan refinance, being informed is the best way to avoid making these same mistakes.
Here are some ways to avoid common student loan refinancing errors.
Begin your student loan refinance today when using our marketplace to connect with a lender to start your online application.
When is the right time to refinance a student loan?
The right time to refinance a student loan depends on your financial situation.
Your financial situation can not only determine whether you qualify for a student loan refinance but also helps you secure the most affordable terms on your refinance. If you have recently gained steady employment and consistent pay, or built up your credit score, you could get a more favorable rate on your loan.
Another indicator on whether it is the right time to refinance your student loan is the current market rate. Refinancing when market rates are lower than your current rate could lead to paying less and saving more during the life of your student loan.*
What are the common mistakes borrowers make when refinancing student loans?
When looking to refinance student loans, there are some mistakes borrowers make. Here are some of the most common mistakes and how you can avoid them during your student loan refinance.
Not comparing loan rates and terms
Many borrowers assume that loan rates and terms are standard across all lenders, but this isn’t true. Rates and terms of your student loan refinance can vary from lender to lender. Comparing loan rates and terms that lenders offer could help ensure you are getting the most affordable refinance for your situation.
Not considering a cosigner
Cosigners are typically borrowers who have a better credit history and score than you may have. If your credit isn’t where you’d like it to be, cosigner could potentially help you get a better loan rate. If you do not meet a private lender’s requirements for a student loan refinance, a cosigner may help you qualify.
However, a cosigner can be removed from your student loan if a borrower meets requirements. Eligibility for this cosigner release is proof of graduation, on-time payments, proof of income and a borrower’s credit improves.
Not looking into additional fees
While many lenders offer student loan refinancing without fees, not all do. Knowing whether your lender has refinancing fees before finalizing your loan could save you from any surprise expenses during closing or the life of your loan.
Not thinking about the new monthly payment
Many borrowers refinance their student loans to lower their monthly payments but don’t think about their new payments. Not only will this let you know the amount you will be able to save each month compared to your previous loan, but it lets you plan out and budget for your new monthly payments.
Not knowing your current credit score
When refinancing your student loan, credit score and history will determine whether you qualify for and the rate you get on a refinance. Knowing your credit score before refinancing can let you get an idea of what your new student loan could look like and what you can do to get the best rate. The higher the credit score, the better the rate on your refinance you may be able to receive.
With your current credit score and history, you will also be able to find out if it is beneficial to get a cosigner for your refinance.
Not knowing you can refinance more than once
If rates drop or your financial situation improves after your refinance, you can always refinance again. This is helpful for borrowers as they can take advantage of rates whenever they drop lower than what they have.
If you plan to refinance more than once, make sure you check to see if your lender charges any fees.**
Not being able to pursue loan forgiveness
Loan forgiveness could remove part or all of a borrower’s student loans. However, to qualify for loan forgiveness, borrowers need to meet specific requirements and have a federal loan. Loan forgiveness is not available after refinancing your student loan to a private lender.
How can I start the student loan refinance process?
You can start the student loan refinance process by filling out an application online.
Before you start the student loan refinance application, make sure you review the mistakes others have made during this process. Knowing how to avoid these mistakes can put you in a great position when beginning your new student loan.
Start the student loan refinance process today when using our marketplace to connect with a lender for your online application.
* Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact the student loan lender you choose to get their current rates. Restrictions apply.
**Each refinance application may result in a hard credit inquiry, which can temporarily affect your credit score.
This student loan refinance marketplace is presented by Rate for marketing purposes only. When you click the button to “Continue” you are leaving Rate and entering the marketplace. The marketplace is operated by FitBux, Inc., which facilitates connections to third-party Platform Partners (such as LendKey and Splash Financial) and their lending institutions, and may receive compensation when you complete a loan transaction. Rate and Fitbux are affiliated companies under common ownership. Clicking the “Continue” button you will be sharing your information with third party Platform Partners LendKey and Splash Financial, and agree to be subject to the terms of use and privacy policies posted by these third parties. Rate is not a lender, does not participate in credit decisions, and does not receive compensation in connection with any loan transaction. Prequalified rates are informational only, do not constitute offers of credit, and are subject to change. Final rates may differ based on your credit profile and other factors. Lowest rates require highly creditworthy applicants and may require a cosigner. All credit decisions are made solely by lending institutions in their discretion. This platform does not represent all available loan options. Product availability varies by state. Not financial advice — consult a qualified advisor before refinancing.
