Refinance Student Loans

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Refinancing Student Loans. If you want to refinance your student loan but are not sure if you will get approval, here's an inside tip you need to know.

Refinancing your student loans allows you to consolidate existing private and federal student loans into a new single student loan with a lower interest rate. The result is lower monthly payments, which free up extra money to pay more student loan debt, save or invest.

Refinancing student loans can save you over $ 20,000 over the life of your student loan. If you have student loans from the health level, your savings may be even higher. According to Doc Benjamins, affiliates of Make Lemonade who focus exclusively on new student loans and refinancing student loans to dentists, doctors, pharmacists and veterinarians, your cost savings can be even higher considering the average student loan balance after graduation for each degree. type:

Dental School: $ 260,000

Medical School: $ 180,000

School of Pharmacy: $ 160,000

Veterinary School: $ 140,000

So how exactly do you get approval to refinance student loans?

It's no secret that private student loan loans have strict underwriting criteria. By lending money to you, private lenders put their own capital at risk (not federal money). Thus, private student loan companies lend to borrowers whom they believe will pay off their student loans.

Of course, each lender has its own underwriting criteria and financial background of each applicant and the situation is unique. While approval for student loan refinancing is not guaranteed and the rejection letters may seem unfair or frustrating, here is a general roadmap to help you increase your chances for student loan repayment approval.

1. Credit Score

Your credit score is a barometer of your financial responsibility. Most lenders evaluate your credit score (or its basic components), and want to make sure you meet your financial obligations and have a timely payment history. Generally, the top creditors expect a minimum credit score in the mid to high 600's, while others do not have a minimum.

Insider Tip: To maximize your chances of getting approval, you must earn a credit score of 700 or higher.

2. Earnings

Private student loan lenders want to make sure that you have enough income to pay off your student loans. The lender wants proof that you have a steady and repeating monthly income and cash flow. Check your salary stubs and recognize your monthly after-tax income. When you reduce the monthly student loan payment you are proposing, is the amount sufficient for other important living expenses?

Insider Tip: If you do not have enough income, you can increase your chances of getting approval with a qualified co-signer who has a strong credit profile.

3. Other Debts

Your other consumer debt like mortgages, credit cards or auto loans will affect your student loan underwriting. If you have an existing debt obligation, the creditor will take into account your total monthly debt payment as part of the underwriting process.

Insider Tip: Try to pay off your other debt obligations as much as possible before applying to pay off student loans.

4. Debt-For-Revenue Ratio

The student loan lender will focus on the ratio of debt to your income, which is the ratio of your total monthly income compared to your monthly debt obligations. For example, if you have $10,000 in monthly income and $3,000 of monthly debt costs, then your debt to income ratio is 30%.

Insider Tip: The lower the debt to income ratio, the better. You can increase your debt to income ratio by increasing revenue or reducing debt (or both).

5. Work

You must be hired or have a written employment offer when applying to pay off student loans. Some creditors of private student loans will refinance your student loans while in school or residence, while others require some work experience.

Insider Tip: If you are unemployed or underemployed, it will be difficult to get approved for student refinancing (although you can try with a signing partner / co-signer).

Zack Friedman is the founder & CEO of Make Lemonade, a personal finance website with comparison tools, calculators and free reviews to help you make smarter financial decisions and save money.

How Much Money Can You Save By Refinancing Student Loans?

You can use a loan refinancing calculator Make Lemonade student to calculate how much money you can save from refinancing student loans.

What To Do If You Are Refused To Refinance Student Loans

1. Apply to multiple creditors
There is no limit on the number of lenders you can use to refinance your student loans. You must apply to several creditors to maximize your chances of getting approval.

Insider Tip: If you sign up with several creditors within 30 days, this is usually treated as a single investigation of your credit report.

2. Check your credit report
Make sure that you have reviewed your credit report for any errors. If there is an error, you have to argue.

Insider Tip: You can get a copy of the free credit report from all three agencies (Equifax, Experian and Transunion) through AnnualCreditReport dot com.

3. Consolidate debt
If you have debts, you should consolidate your debt to a lower loan interest rate.

Insider Tip: If you have outstanding credit card debt, you should consider debt consolidation with a personal loan to lower your interest rate.

4. Pay your debt
The debt to income ratio is driven by two factors: debt and income. If you lower your debt or increase your earnings (or better both), you'll improve your debt to income ratio. Use a monthly budget to cut costs and manage your finances. Use cost savings to make extra debt payments.

Insider Tip: Avoid repayment plans, which can increase your interest payments over time. Your goal is to reduce your loan principal so that your monthly payments decrease.

5. Increase your income
The other side of lowering your debt is increasing your income.

Insider Tip: Ask for a raise, negotiate a higher bonus or find the crowd.

6. Get a qualified co-signer
Ask your spouse, parents, grandparents or other people close to you to act as a signer for your student loan. The signing together You need to have a strong credit profile and are willing to be equally responsible for your student loans.

Having a qualified co-signer can make the difference between "agreeing" and "disapproving."

Insider Tip: The good news for your co-workers is that many lender loans offer students the release of coworkers, who release your financial responsibility to meet certain qualifications.