Refinancing student loans is simple. The process involves finding a lender that offers lower interest rates, comparing rates, and applying for the loan. After getting approval, the new lender will pay off the existing lender. Afterward, you’ll only need to make monthly payments to the new lender.

As simple as it sounds, this article discusses the steps to take when applying for a student loan refinancing. 

Kindly read along.

Is Refinancing Right For You?

Before refinancing your loan, you have to decide if it is the right step. Although refinancing can save money, it is not ideal for everyone. Furthermore, having strong credit and finances can help you qualify for the lowest rates; it can also help in meeting a refinance lender’s criteria.

It is important to note that due to the coronavirus pandemic, refinancing four federal student loans makes you ineligible for government programs, including student loan relief and income-driven repayment. Therefore, unless you're sure your job is not at risk, do not refinance your federal student loans.

On the other hand, private student loans have minimal downsides when you refinance them. However, they won’t qualify for the federal programs.

Researching Lenders

Although most student loan refinance lenders look the same, they are different. It is essential to look out for features that suit your situation when looking for a lender.

For instance, if you didn’t graduate, look for a lender that does not require a college and if you want to refinance parent PLUD loans in your child’s name, look for a lender that allows it.

Getting Multiple Rate Estimates

After identifying lenders that satisfy your needs, get rate estimates from all of them. The best refinance lender for you will be the one that offers the lowest rate.

You can compare multiple lenders’ estimates at once by visiting their website individually. When searching for estimates, you’ll have to supply basic information to prequalify before some lenders give you an estimate of the rate you qualify for. You may have to submit a full application for other lenders before seeing their actual rate.

It is important to note that soft credit checks do not affect your credit scores, while actual applications require hard credit checks that may lower your credit scores briefly.

Choosing A Lender And The Loan Terms

After getting a lender, the few decisions left to make include choosing between a fixed or variable interest rate and the length of the repayment period.

Although variable rates are lower at first, they can change monthly or quarterly. Therefore, fixed interest rates are the best option for most borrowers.

Also, it is best to choose the shortest repayment period that is affordable for you to save money. However, you can pick a longer repayment period if you want to prioritize other expenses while paying lower monthly payments.

Completing The Application

After pre qualifying, you still need to submit a full application before moving forward with a lender. Providing loans and financial situation information and uploading supporting documents are necessary. Documents you’ll need include loan or payoff verification statements, proof of residency, proof of employment, proof of graduation, and a government-issued ID.

Finally, you have to agree to a lender doing a hard pull to confirm your interest rate. You can also qualify for a lower rate if you use the option of refinancing with a co-signer

Signing The Final Documents

After approval, you have to sign the paperwork, accepting the loan. Afterward, a three-day rescission period begins once you sign the final disclosure document. If you change your mind during this period, you can cancel the refinance loan.

If you’re denied the loan, the lender will let you know why. If it’s because of bad credit, adding a co-signer can help you qualify.

Waiting For The Loan Payoff

Your new lender will pay off your existing lender at the end of the rescission period. Afterward, you’ll have to make monthly payments to your new lender.

You have to keep paying your existing lender till you get a confirmation that your refinancing process is complete. In case you end up overpaying, you’ll get a refund.

Conclusion

Refinancing your student loan can save you money. However, you have to decide if you need to decide if refinancing is right for you before searching for a lender.