How to refinance your student loans in 5 steps

If you have multiple student loans, you can refinance your student loans into a single loan, with one interest rate and monthly payment. However, it’s important to take the necessary steps to find the best student loan refinance product for your goals.

5 steps to refinancing your student loans

Before submitting a loan application, there are a few things you need to do to find the best offer. That includes reviewing and improving your credit profile and researching multiple lenders to find the best offer.

1. Determine if student loan refinancing is the best option

Refinancing a student loan could help you get out of debt sooner and possibly reduce your monthly payment obligations, but it doesn’t make sense for every situation.

Start by seeing if you qualify. You typically need a FICO score of at least 670 and get the best rates. Check your credit scores and credit reports to determine where you stand. If you find that your credit isn’t in the best shape, you can work to improve your credit before you try to refinance.

It’s equally important to consider the pros and cons of student loan refinancing. For example, you could lower your monthly payment by refinancing to a longer term, but you could end up paying much more in interest over the life of the new loan. If you already have federal student loans, you could lose certain benefits by refinancing them.

2. Research lenders

If you decide to refinance your student loans, the next step is to compile a list of lenders that have products and programs that work best for you. That may include competitive rates, discounts, flexible qualification requirements or top-rated customer service.

Include different types of private lenders, like banks, credit unions and online lenders, to identify all the different options you may have. Your list of lenders may include:

• Earnest: Borrowers refinancing with Earnest will find up to 180 ways to customize their student loan refinance. Other benefits include autopay discounts and the ability to skip a payment without penalties.
• Citizens Bank: Borrowers wishing to use a cosigner will be able to apply for one at Citizens Bank, which also offers cosigner release after 36 consecutive, on-time payments. And those who have another Citizens account, like a checking or savings account, will receive a 0.25 percent rate discount.
• SoFi: Borrowers with a credit score as low as 640 can still qualify to refinance their loans with SoFi. The lender also allows you to refinance up to 100 percent of the balance owed.

3. Shop for the best student loan options

Each lender uses different criteria to determine your borrowing eligibility and interest rates. Your rate will likely vary between one lender and the next and can be impacted by factors like your credit history, the repayment term you select, and whether you choose fixed or variable interest on the loan.

To find the best deal, you’ll want to prequalify with at least three lenders on your shortlist. Prequalifying typically only requires a soft credit inquiry on your credit report, and you can see the rates and loan terms you might qualify for if you refinance.

4. Submit a loan application

Once you decide on a lender and loan offer, you’ll need to submit a formal application, even if you prequalified with that lender. Most lenders make it easy to apply online in minutes.

You’ll need to provide information and supporting documentation about your current loans, graduation date and finances. The lender will likely run a hard credit inquiry to access your full credit report and score. You may hear back about your approval within one to three business days, though funding may take longer.

5. Transfer payments to your new lender

Once your student loan refinance is complete and the debt has been transferred, you should receive a payoff letter from your old lender. You will need to create an account with your new loan servicing company and begin making payments on your refinanced loan.

Keep an eye out for correspondence from the new lender identifying your first bill due date. Many lenders let you choose a date each month that works best for your schedule and budget, and some will offer a discounted rate if you enroll in autopay.

Bottom line

Refinancing your student loans can lower your interest rate and help you manage your debt with just one interest rate and payment instead of many. However, refinancing isn’t always the best option. Review the types of student loans you have, your remaining balance and repayment terms to see if it makes sense for you.

Frequently asked questions

• Who is eligible for student loan refinancing?

  In general, you’ll need to have a credit score in the mid- to high 600s, a debt-to-income ratio of less than 43 percent and a source of steady income to refinance a student loan, but the requirements vary by lender. Getting pre-qualified is an excellent way to see if you’re eligible for student loan refinancing. While prequalification doesn’t guarantee that you’ll be approved, it can help you see if you meet the minimum criteria set by lenders.

• How long does it take to refinance a student loan?

  The timeline for completing the refinance process can vary based on the lender you use. While the application process with some lenders can be relatively quick, it can take time for your existing loan to be paid off by the new lender. In some cases, this may take between 30 to 45 days to complete the process.

• Can you put student loans in someone else’s name?

  Some lenders allow you to transfer student loans to someone else. Some parents do this with loans they took out for their child’s education, transferring those loans to the adult child once they’re in the workforce. Keep in mind, though, that the loan will have new terms and new rates, which are based on the new borrower’s credit.

• Can you refinance student loans with bad credit?

  Many lenders refinance student loans for people with bad credit, although if a lender does accept a lower credit score, it will almost certainly offer higher rates. As with new student loans, you can often apply for refinancing with a creditworthy co-signer, which could help you get qualified if you have poor credit.