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How To Refinance A Student Loan

how to refinance a student loan

Refinancing a student loan happens when a lender pays off your debt, after which you start making regular payments to the moneylender. There are over forty million graduates in the United States today paying off student loans. If you have ever wondered how to refinance a student loan, this article will show you how. The procedure to refinancing is not esoteric; it is made up of seven steps that we break down in this article. 

Step 1: Do your research.

Let’s assume that your refinancing application is approved and your student loan has been paid off. You start payment, and soon after, your friend finds a firm that offers better interest rates. You can’t leave the lending firm you are working with because you signed the contract. You are stuck. You could have avoided this if you had done your due diligence. 

Student loan refinance companies consider different factors when gauging the rates to offer clients. They will assess your current credit score and current income when generating terms and conditions. Generally, the lower the risk you present, the more favorable the rates. Take your time and research the average interest rates for persons in your credit bracket. This will help you know what you can achieve, improving your bargaining power.

Step 2: Determine If Refinancing in Your Best Interest

Due diligence will increase your knowledge on the best student loan refinance options in the market but is there a way to improve the rates offered? The answer is yes. If you improve your credit score and pay off most of your smaller loans, you will stand a chance to improve your rates. It would also help if you increased your income or found a reliable source of income. This might take time to achieve, but it is the surest way to simultaneously keep your financial health in check and improve your rates. Refinancing a student loan might be a bad idea because it takes away the lenient terms offered by federal student loans, this is Daily Prosper can help students and If you find yourself unsure about your ability to pay up, take a step back and analyze the decision.

Step 3: Read the Fine Print.

Once you have decided to refinance your student loan, it is time to settle down and read the different contracts. Each contract has its advantages and disadvantages. Note down the contracts that suit your unique situation best. 

Step 4: Get Your Documents Ready for the Application Process

Having all relevant documents ready on hand will make the application process a breeze. Here are a few examples of documents you need to have on hand;

  • Driver’s license
  • Proof of income 
  • Social security number or equivalent
  • Proof of student loan payment 

Step 5: Make the Application.

The application process is mandatory even if you know you qualify. This process might involve submitting proof of residency and graduation. Employed applicants need to submit a W-2 form. Some firms will let you co-sign to improve your rates.

Step 6: Put Pen to Paper.

Once your application is approved, you need to sign the paperwork to finalize the loan application process. If your application is denied, it might be because of bad credit or a high debt to income ratio. 

Step 7: Wait for The Loan Payoff.

After the contracts have been signed, your lender will pay off your student loan debt. After the payoff you will start making the agreed-upon payment to the lender. It is important to note that you should not default on your loan repayment to avoid dire consequences.

Final Thoughts

According to studies, the average graduate has over thirty-seven thousand dollars in student debt by graduation. It might seem like the odds are stacked against these students, but loan refinancing options make it easier to finish paying off their debts. If you are wondering how to refinance a student loan, follow these seven steps to the T to increase your chances of successfully paying off your debt. Imagine starting life debt-free; what goals would you achieve? You could finally start investing in that dream house or start-up that project you dreamt of for years. Start your refinancing journey today for a debt-free tomorrow. 

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