9 Questions You Should Ask During the Refinancing ProcessAugust 18, 2016
- Research student loan refinancing and loan consolidation. Check.
- Pay off credit card debt and increase credit score. Check.
- Reduce debt-to-income ratio. Check.
- Compile financial paperwork. Check.
Every student loan holder has a checklist — whether it is a mental or a paper list — that is intended to help them successfully obtain a newly refinanced loan and save money. This checklist is usually comprised of items and actions required to apply for student loan refinancing and obtain the best interest rates and terms. During this process, borrowers tend to become more aware of their financial landscape, which can be highly beneficial, but applicants can sometimes forget to ask some very pertinent questions regarding their new, soon-to-be refinanced student loan package. That is why we believe it is time for borrowers to start asking the right questions, to become more informed, and obtain the best deal in their refinanced student loan offer.
Ensure Your Needs Are Met by Asking Lenders the Following Questions:
- What will my new term be?
Lenders typically offer repayment terms anywhere from five to twenty years. It is imperative that borrowers understand that while longer terms may mean smaller monthly payments, the additional interest spread over a longer loan-life creates a higher overall cost of the loan. Borrowers should, therefore, carefully weigh how much they can really afford to pay each month and then assess what a feasible loan term would be.
- Is the interest rate variable or fixed?
Fixed interest rates eliminate the risk of loan interest rates rising during the life of a loan, but they also eliminate the possibility of them dropping (as they can with a variable rate). There are benefits and downfalls to each type of interest rate, so borrowers will have to decide and ask for guidance on which type of rate is best for them.
- What are the other terms of repayment?
Remove all the surprises of repayment by asking specific details about the time and way in which payment is due. These questions could include:
What will monthly payments be?
When does repayment start?
Are there fees for late or missed payments? What are those fees?
What processes exist for payments (online, in person, over-the-phone)?
With Education Loan Finance, borrowers never pay application fees, origination fees, or prepayment penalties.
- Is there an origination fee?
A student loan origination fee is the amount that a lender will tack onto a loan for paying off a loan from another banking resource. For example, in order to pay off a $20,000 loan in the borrower’s name, a lender may add up to two percent to the refinance loan, making the new loan $20,400. If there is an origination fee, calculate how much the fee adds to the life of the loan. With Education Loan Finance, borrowers never pay application fees, origination fees, or prepayment penalties.
- What are the loan requirements?
In general, most lenders typically look for borrowers with a credit score that is above 680 and a debt-to-income ratio of less than forty-five percent. For the best options, borrowers should attempt to align themselves with these figures before applying for student loan refinancing and/or consolidation. However, we recommend contacting your preferred institution — including us — for specific details.
- What is the minimum or maximum amount that can be refinanced?
With Education Loan Finance, borrowers must have at least $15,000 in student loan debt to be eligible for refinancing. Maximum refinancing amounts are at the lender’s discretion and are typically determined by the borrower’s education level and schooling, debt-to-income ratio, and credit score. Keep in mind that each lender will be different with their minimum and maximum allowances.
- What happens to my federal student loans? What will change?
Student loans that are refinanced with Education Loan Finance are consolidated into one loan, with one monthly payment. This means that if federal student loans are included in this package, the loan may lose special protections and benefits. Federal loans are not required to be included in a refinancing package, but if they are included for the ease of one monthly payment, borrowers must make sure they understand what will change and what benefits may be lost.
- Is my degree or school eligible?
Some banks and financial institutions have restrictions on which type of degrees and what schools are eligible for educational loans. In Education Loan Finance’s case, applicants must have earned a bachelor’s degree or higher from one of these approved post-secondary institutions.
- Are there any special benefits associated with the lender?
Along with unique rates and terms, some lenders offer special incentives, like referral programs. These referral programs offer cash for referring new clients to the lender. Check out Education Loan Finance’s referral program here.
Ask Us, We Are Here to Help
Now that you are armed with these questions, you can confidently find the best refinancing loan — along with the best financial lender — for your personal financing situation. Our team of lenders would love to answer your questions about student loan refinancing. We want you to feel comfortable and confident with your financial and refinancing decisions.