Step 1 Check your credit
To qualify for student loan refinancing and get a lower interest rate, you’ll need a credit score at least in the high 600s and a steady income. If not, you might need a cosigner who qualifies.
So before you apply for refinancing, review your credit reports from Equifax, TransUnion, and Experian. That way, you know where you stand, and you can clear up any errors ahead of time.
You can claim a free report from all three credit bureaus once every 12 months at AnnualCreditReport.com.
Step 2 Check rates
The key to getting the best fixed or variable rate loan is to research student loan refinancing lenders. You can search online to compare lenders’ rates, fees, and loan terms. You can even use a site like credible.com to check your options with multiple lenders at once.
As you’re researching, you’ll get an idea of the terms you’re eligible for by going through the prequalification process. While each lender is different, many lenders give you an estimated rate by making a soft credit inquiry, which doesn’t affect your credit score.
To give you a rate estimate, many lenders will ask for:
Step 3 Review offers
Hopefully, more than one lender offers you the opportunity to refinance. If so, your next step is to compare the repayment options. Look over the contracts. Decide what type of interest rate you want. Some lenders will offer borrowers with excellent credit variable annual percentage rates starting near 1.2% and fixed interest rates near 2.48%. Loan borrowers with modest credit scores will qualify for loans with higher interest rates.
Also, choose how long you want to take to pay back the loan. Lenders will offer 5, 7, 10, 15, and 20 year-terms. Remember, the longer term you take, the more interest you’ll pay over the life of the loan.
Other loan terms to check:
when a cosigner can be released
what happens if you become disabled
forbearance and deferment options
job loss protections
Step 4 Complete your loan application
To complete the refinance application, you’ll typically need
Loan or payoff verification statements.
Proof of employment (W-2 form, recent pay stubs, tax returns).
Proof of residency.
Proof of graduation.
The lender will perform a hard credit check to lock in your interest rate. If it denies your application, the lender will send you a letter explaining why. Borrowers denied for bad credit may be able to qualify by adding a cosigner.
Step 5 Review final paperwork
If you’re approved, you’ll need to sign the final disclosure statement to accept the loan. Once you sign, a three-day rescission period begins. You can cancel the refinance loan anytime within that window if you change your mind.
Step 6 Wait for the loan payoff
Once the recession period ends, your new lender will contact your loan servicer to payoff the Parent PLUS Loans. From there, you’ll make monthly payments to your new refinance lender.
You’ll want to keep making payments to your existing servicer until you get confirmation that the process is complete. Your previous lender will refund any excess payment.
Keep making payments to your existing lender or servicer until you get confirmation that the process is complete.