Outstanding student loan debt amounting to around $1.4 trillion is the second highest form of debt in the United States, falling just behind mortgage debt. The average debt for college graduates is $32,731.
After the jubilation of finishing college and the exhilarated relief of attaining a position in their chosen field of study, the reality of paying off student loans strikes many college graduates. For those graduates who do not succeed in finding a lucrative position, their looming student debt poses a real threat. As they face the dilemma of paying back their loans and paying all their other expenses, graduates are often overwhelmed. One solution for these college graduates is to refinance their federal and private loans at a lower interest rate. Doing so reduces their monthly payments and frees up some money for them to use for other expenses. Here are some helpful hints for when it comes to refinancing your loans.
Reduce your debts
Before applying for refinancing of student loans, graduates should make every effort to remove any debt they can and reduce remaining debts as much as possible so that they can better qualify for refinancing. For, as part of the underwriting process, lenders account for a person’s total monthly debt payments. If the other debt is considerable, the refinancing will not be approved unless they have a co-signer.
Attain a better credit score
Checking your credit score is essential because it indicates a sense of financial responsibility. Lenders are much more willing to give loans to those who have a record of on-time loan payments or those who have reduced their credit card debt. Lenders also expect a credit score in the mid to high 600’s. Other lenders may accept lower scores, but they also may charge higher interest rates and demand a co-signer.
Apply for refinancing with multiple lenders
Applying for refinancing with multiple lenders in the same period increases your chances of approval. Also, if an application to these lenders is made within 30 days, this effort is considered as just a single inquiry on a person’s credit report.
Sometimes outstanding debts such as debt on a credit card or company charge cards carry higher interest rates than the consolidation of this debt as a small loan. Reducing interest payments adds cash to your income that can, in turn, be added to your loan payments to reduce the debt.