Home > 2016 > Students

4 Things to Do Before Refinancing Your Student Loans

Advertiser Disclosure Comments 0 Comments

Thanks to new programs from banks and specialized student loan refinancing companies, getting a great interest rate on your student loans is easier than ever. But before you apply for a student loan refinance, take a few steps to brush up your credit and be sure you’re really ready.

1. Pull Your Latest Credit Reports & Scores

If you’re like most U.S. graduates, you’ve got quite a bit of student loan debt hanging around. And with a big loan like this one, you’ll want to be sure your credit is up to snuff before you apply.

Since it’s impossible to know which major credit bureau’s credit report and score potential lenders will pull, it can be a good idea to pull all three, since they can each contain slightly different information. You can check your credit score, which is the number an algorithm assigns to all that information in each credit file, in a variety of ways. You can see your two free scores, updated each month, on Credit.com. Also, many credit card companies are now offering free credit scores each month as well.

2. Take Time to Boost Your Credit

Student loan refinances are relatively high-risk operations for lenders. They’re often for large amounts, and there’s no collateral (like a home or car) that the lender can seize if you default. Because of this, you’ll need a pretty high credit score to get a good rate on your student loan refinance.

If you’re in the 600s or low 700s right now, it may be worth your time and effort to boost your credit score before you apply for a refinance. Here are the top steps to make it happen:

  • Clean up your report. It’s not unusual for credit bureaus to show mistakes on your report. This is why you should check all three reports, and then take time to correct these errors.
  • Pay bills on time. Missed any bill payments recently? There’s no quicker way to tank your credit score.
  • Get your budget in gear, and make sure all your payments are made on time. Your credit score will thank you.
  • Pay down revolving debt. If you’ve got high credit card balances, paying them down is one of the fastest ways to boost your credit score.
  • Take out a new type of loan. If you’ve never had a car or home loan, adding on to your credit report can actually boost your score (as long as you make payments on time). If you’re already in the market for your first home, for instance, you might consider waiting until you’ve made six or eight mortgage payments before you apply to refinance your student loans.

3. Get a Grip on Your Repayment Options

Before you sign up to refinance your student loans with a private lender, take a step back and look at your repayment options. If most of your loans are through the federal government, you’ll have a huge variety of repayment options, including income-driven repayment options.

Plus, if you work as a teacher, public servant or for a nonprofit, you may be eligible for student loan forgiveness. In some cases, making lower, income-driven payments for 10 years and then taking loan forgiveness can save you a lot of money.

This all depends on your current financial situation, what you might earn in the future and even your current student loan’s APR. It’s essential to think through your options before making the assumption that a refinance is the right choice.

4. Shop Around for a Lender

If you do decide refinancing your student loans through a private lender is a great option, take time to shop around. Any time you’re dealing with a large amount of money, the best practice is to research at least two or three different lenders.

Many banks and credit unions these days are offering special programs for refinancing student loans. And some companies have popped up to serve the student loan refinance market. If you have a low loan balance and great credit, you may also be able to refinance with an unsecured personal loan.

The key is to scope out your options. Look for the company that offers the lowest APR, but also look at additional terms and conditions that could save you money. For instance, some lenders may reduce your interest rate after a certain number of on-time payments.

So long as you apply for a refinance to all of these potential lenders within a week or two, the credit inquiry should only ding your credit score once. But don’t drag the process out too long, or each inquiry will take another chunk out of your score.

Refinancing your student loans can be a great option. It can lower your APR, give you a lower monthly payment, and generally reduce the total amount you pay towards your student loans. Before you apply, take these four steps to ensure you get the best possible refinance deal.

More on Student Loans:

Image credit: mihailomilovanovic

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team