10 Questions to Ask Before Refinancing Your Student Loans

The refinancing of your student loans can be an excellent strategy to manage your situation for the repayment of student loans and improve your financial health.

Keep in mind, when applying for refinancing or consolidation application, refinancing of your student loan can be confusing and lead to financial problems down the road if you do not make the right decisions .

Let's come to the questions directly!

1) What Would be the New term of Student Loan Refinancing?

When you refinance your student loans, banks offer various  long-term options. The "term" is the expected amount of years you are expected to repay your borrowed money.

Typically banks offer 5, 10, 15, and 20 years of repayment terms. The biggest point must be under consideration is how much you can afford to pay now, and how much interest you will run on the repayment term. For example, over a period of 5 years, you earn less interest during repayment, but your monthly payments will be higher compared to a loan of longer-term student.

2) New Student Loan would have a Variable or fixed rate?

Your student loans have interest rates either variable or fixed. By refinancing your student loans, you can convert a variable interest rate loan to a fixed interest rate or vice versa. Fixed interest rates are less risky, while loans with variable interest rates change due to economic conditions.

Because of the 2008 recession, interest rates over the last 4 years have been historically very low. Now if there occurs improvement in the economy, interest rates will very likely increase over time, making student loans with variable interest rates less favorable compared to fixed rate student loans. In today's economy, students loans with fixed rates tend to have higher interest rates, which means that you could end up paying more in the long term interest

3.) What are the Repayment Terms?

When repayment begins? What will my monthly payments be? How do I pay? What fees i would pay if I miss a payment or default on my student loans? Is there an interest rate reduction of 0.25% for ACH automatic withdrawal payment?

4.) How much Origination Fee do They Charge ?

Some banks charge origination fee of student loan up to 2% of the total amount you claim to be refinanced. For example, if you refinance $ 60,000 in student loans, you will pay $ 600 as an origination fee of 1%. The origination fee is generally added to the whole loan amount due and you don't have to pay the amount upfront.

5.) Will they combine both private and federal student loans ?

Some banks, such as SoFi and Darien Rowayton Bank are now refinancing the federal and private loans grouped together. This can ultimately help you receive a lower interest rate and you can save money, but be careful because you lose most alternative and flexible repayment plans related to the federal loan program of the government.

6.) Do I Need a Co-signer? Free yourself by Co-signer Release?

Let's suppose If your credit score or income is too low, the bank may require a cosigner to ensure your student loans in default. Alternatively, lenders such as LendKey offer the cosigner release that ultimately releases all existing co-signer of your student loans. This can help to release the revolving credit for your co-signers and allow them to make more purchases, such as auto loan or a mortgage .

7.) What are the Typical Credit Score , Debt to Income Ratio and Salary Requirements ?

According to our research, most banks require a credit score of ~ 680 or more, minimum monthly wage of $ 2,000 and the 45% maximum debt-to-income ratio, depending on your total debt borrowed. Before submitting your application, be sure to ask the credit score requirements .

8.) What is the Maximum Amount of Debt They Will Refinance?

Banks usually have a maximum amount of debt they will refinance. This amount varies on both conditions according to the level of the bank and education, such as graduate, undergraduate and other certificate programs related.

9.) Do they Refinance the Student Loans for my School and / or my desired Degree?

You must ask that which schools are eligible for refinancing product. Some banks do not lend to student loan borrowers who have attended for-profit community colleges, private institutions, , and / or certificate programs.

10.) What kind of Support and Customers Service is provided by the bank?

Here in my Charity to Donate articles, this issue is most important that we ask most of our banking partners. By comparing as student loans borrowers ourselves, we have worked with the banks that provide very desperate customer service, not to mention banks that are threatening and hostile.

By Refinancing your student loans means that you are going to work with the bank for the next 5-20 years. Make sure to do your best research before refinancing your student loans!