Refinancing the student’s loan makes you consolidate the previously taken loans like federal, private loans into the single loan with low-interest rates. This will render the students to pay less and get free from the debts. According to some business people, if you know how to refinance student loans, it can save the huge amount of money for the students. If a student is specifically from the health course degree, then he/she save more money.
If you have made your mind to refinance the student loan and don’t know the eligibility criteria, then look at the following points given below.
When a private lender is giving the money, the borrower has to go through many underwriting criteria. This is clear that by lending the money to the borrower private lenders are risking their money on other’s hand. So, these loan companies only lend to those borrowers who can repay money easily.
Moreover, the student’s financial background, circumstances are looked for the approval of refinancing. It may happen sometimes that a student can get rejection letter, so here are some of the tips which will help you to know how to refinance student loans successfully.
- Credit score
The credit score can be the most crucial thing to look out at first, for the financial source. Most of the lenders first check the credit score and wants that you to meet the financial obligations to have a timely payment. Top lenders seek for the least credit score in a range of average to high as 600’s, and others don’t have the minimum.
The private student loan lenders seek for the information about the borrower. They want the proof that borrower has a stable and regular source of income. They will examine the after-tax income of the borrower on monthly basis and their pay stub to lend their money. They also ensure that after removing the repayment amount from the monthly income, does an adequate amount is left for other necessary things.
In case, the borrower doesn’t have adequate income, they may get into the dilemma of refinancing student loans. Well, the answer is they can ask for a co-signer having a high credit score.
- Other debt
The other debts like credit card, auto debt or mortgage debt will certainly influence underwriting the student loan for you. If you already have an existing debt, then the lender will account the total debt payments in a month and, it will be included in underwriting process.
Moreover, as you know how to refinance student loans from the lender, you certainly need to clear maximum debt obligations before applying.
- Ratio Debt-to-Income
The student loan lender will certainly look at your debt/income ratio; this will show the ratio of total monthly income with the debt obligations every month.
Let’s consider an example-
If you have 20000USD income per month and 6000USD of debt obligations per month, then the debt-to-income ratio will be 30%.
It is necessary that you should have the job or a written offer of a job to apply for the refinancing of student loans. The private student loan lenders may refinance the student loan in the school time or residency, and others may require the work experience.