Student loan refinance can be a smart strategy if you want to change the original terms of your loan. Regardless of why you’re looking to refinance, the first thing to do is choose the right lender for you. There are thousands of private lenders that offer student loan refinancing. Because refinancing is only offered by private lenders, eligibility criteria, interest rates, and other terms and perks can vary widely. Comparing student loan refinance lenders and their respective terms is the best way to find the right lender for you. These are the main factors to look at when you want to compare student loan refinance lenders.
As we said earlier, each lender sets its own eligibility requirements to qualify for refinancing. While the specific criteria may vary, in general, all lenders will require you to meet these eligibility criteria:
#1- High credit score – The minimum score requirement will vary among lenders. Look for a lender whose minimum credit score requirements you meet (or exceed).
#2- Steady employment and income – Employment and income requirements also vary from one lender to another.
#3- Completed your degree – If you don’t have a degree, you’ll have to look for a lender who doesn’t have this as one of their requirements.
#4- Loan minimum and maximum amounts – Shortlist only those lenders whose criteria you meet in terms of minimum and maximum refinancing amounts.
As you look through student loan refinance lenders, you’ll find that you may qualify with some lenders but not others. The first step in your search for lenders is to shortlist only those whose requirements you meet.
This is one of the most important factors when comparing lenders. The rate you pay will affect the amount of interest that accrues over the loan term. This affects the total cost of the loan. Even a small drop in rate can add up to thousands of dollars saved in accrued interest.
When comparing interest rates, there are a few very important things to keep in mind.
#1- Quotes aren’t set in stone: The interest rate that’s quoted on lenders’ websites is not necessarily the rate you’ll pay. Lenders typically publish their lowest rate but only borrowers with excellent credit scores qualify for those rates. The rate you’ll pay will depend on your credit score and other financial credentials.
#2 – Different interest rates: Every lender uses its own algorithm for calculating applicants’ interest rates. When you apply for refinancing, each lender will calculate your personalized score based on their own algorithm. This means your interest rate could vary significantly from one lender to another even with the same credit score.
#3 – Hidden fees: Some lenders quote very low-interest rates but compensate for it by adding in hidden fees. These fees can make your loan more expensive overall. When comparing interest rates, make sure you compare interest rates as well as APR. APR is the annual percentage rate. This takes into consideration all the fees that are charged when you refinance.
#4 – What affects rates: Your credit score, loan term, and whether you choose a fixed or variable rate will impact the rate you’re offered. When comparing lenders, make sure you’re comparing using the same criteria for all.
We touched on this briefly when discussing interest rates. Here’s what you should consider when comparing fees:
#1- Look at fees: Not all lenders charge fees when refinancing student loans. Ideally, you should look for a lender offering low-interest rates and no refinancing fees. This will maximize your savings.
#2 – Add-ons: Any additional fee that’s tacked on can increase the cost of your loan substantially. Make sure to take these fees into consideration when calculating the cost of the loan.
#3 – Hidden fees: All lenders may not state their fees outright. If you don’t see any fees clearly mentioned, don’t presume there aren’t any. Read the fine print thoroughly to see if there are any fees tucked into the details somewhere. To be doubly sure, ask the lender so you know in advance about potential fees.
#4 – Origination fees: The most common student loan refinancing fee is an origination or administration fee. This is to cover the cost of processing the loan. When charged, lenders roll this fee into the principal loan balance. This means you end up paying interest on this amount too. Other fees to look out for include returned payment fees, late payment fees, and alternative payment plan fees.
Only a few private lenders offer borrower protections such as temporary forbearance in case of financial hardship. This is especially important as you’ll no longer have access to federal protections when you refinance federal student loans. It can be a relief to know that you have some protections available if you can’t afford your payments at any time.
This only applies if you took the original student loan with a cosigner. If your credit and income have improved, you may be able to relieve your cosigner of that responsibility when you refinance. Not all lenders offer cosigner release, however. And those who do, usually have some release requirements. If you’re looking to release your cosigner from your loan, make sure to ask lenders about their conditions.
Comparing student loan refinance lenders is worth the time and effort that it takes. It’s the single best way to identify a lender that’s a perfect match for your financial needs.
We hoped you enjoyed this article! Remember, you canand potentially lower your monthly student loan payments and save money.