Each year in November and December, there is an uptick in the number of people who choose to refinance private student loan debt.
These are popular months for refinancing because many loans come with a six-month post-graduation grace period when no payments are due. Once the grace period ends and borrowers must begin repayment, individuals with educational debt start looking for opportunities to lower their monthly bills and interest costs. Refinancing could provide that chance.
If you have a private student loan you're considering refinancing, you can always use multi-lender marketplace Credible. With a private student loan refinance, you simply have to fill out one form to compare rates and access options from several lenders.
If you have private loans, taking part in the refinancing season may be a smart move. Here's what you need to know.
Should I refinance my private student loans?
Private student loans are made by private lenders, with your interest rate and loan terms determined by your income and credit score at the time you applied, as well as by prevailing rates when you borrowed.
Student loan refinancing involves securing a new loan from another private lender and using the proceeds to pay back your current loan. The new loan, however, will usually have more advantageous terms, such as a lower interest rate, a more affordable monthly payment, or both.
Student loan refinancing loans have recently hit record lows, so there's a very good chance most people who borrowed in the past can get a new loan at a lower rate than they're currently paying. This means more of your money will go to the principal and debt payoff should be less expensive and easier.
If you can save money by refinancing private student loans, there's little reason not to do so as many lenders don't charge any origination fees for the loan and you won't have to give up borrower benefits. You can visit Credible to view a rates table that compares rates from multiple lenders without affecting your credit score to see if a refinance loan can save you money.
Should I refinance my federal student loans?
The grace period on your federal student loans is probably also ending around the same time so you may be wondering if you should also refinance this debt. In almost all cases, the answer is no.
That's because federal loans can't be refinanced with the Department of Education so you'd have to secure a loan from a private lender to refinance them. This would mean giving up all the borrower benefits that only federal loans offer, including Public Service Loan Forgiveness (PSLF) options, income-driven payment plans, and extensive repayment flexibility.
Giving up these benefits would typically be a major mistake, even if refinancing federal loans could potentially lower the interest rate you're paying on them.
How can I get the lowest student loan refinance rate?
When you refinance private student loan debt, you want to make sure you get the best interest rate you can in order to maximize your savings. There are a few key ways to do that.
You'll want to become as well-qualified as possible prior to applying, which means having solid proof of income, a good credit score, and minimal other debt. Asking a cosigner to guarantee your loan could also help you qualify for a low rate as lenders will take your cosigner's credentials into account too.
Perhaps most importantly, however, you'll need to shop around and get quotes from several different lenders to maximize your chances of getting the best possible rate. The APR on private loans can vary from one lender to the next, unlike with federal loans, so it pays to get multiple quotes. Find your rate today.
An online student loan refinancing calculator can help you to see how much different loan options could cost you.
How to prepare for student loan refinance season
If you want to refinance private student loan debt to save money, either during refinance season or at any time, it's important to make sure your credit score is as high as possible. You'll generally need a score in the mid to high 700s to be offered a loan at the most competitive rate, although different lenders do have different qualifying requirements.
You should check your credit history before applying for a refinance loan to see your score as well as what's on your credit report. If there are any mistakes, you'll want to correct them by contacting the reporting agency. You can also work on raising your score as much as possible by reducing your debt balance and making all your payments on time.
After improving your credit as much as possible, it's time to shop around for a private refinancing loan that's affordable for you. Visit Credible today to compare rates from multiple student loan lenders at once so you can find a loan that's right for your needs.