Top-Rated Student Loan Refinancing Companies

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What is Student Loan Refinancing?

Student loan refinancing is a process where you take out a new loan from a private lender to pay off your existing federal or private student loans. When you refinance your student loans, you may be able to secure a lower interest rate, which could save you money over the life of your loan. Refinancing can also simplify your student loan repayment by combining multiple loans into one.

3 Top-Rated Student Loan Consolidation Companies

Saturday, April 13th

#1
#1 Top Rated | We Recommend
RATING
8.5
Very Good
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Read Our Full Review
PROGRAM HIGHLIGHTS
  • Prequalify in minutes with no credit impact
  • Co-signers permitted
  • No application or origination fees
#2
RATING
8.1
Very Good
Read Our Full Review
Read Our Full Review
PROGRAM HIGHLIGHTS
  • Lowest starting fixed-rate APRs
  • No late fees
  • No credit impact to apply
#3
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PROGRAM HIGHLIGHTS
  • Can ask to skip 1 payment per year
  • Flexible payment options
  • Can apply with co-applicant

Consolidation vs. Refinancing

The terms "refinancing" and "consolidating" are frequently used to discuss student loans. While they have distinct meanings, both options share a common goal: simplifying the repayment of your student loans by merging multiple loans into one, resulting in a single monthly payment.

The key distinction lies in the benefits offered by each option. Refinancing may enable you to save money by reducing the interest rate on federal and private student loans, while consolidation could grant you enhanced control over your federal loans. The choice between refinancing and consolidation depends on your objective and whether maintaining federal loan benefits is necessary.

Reasons to Consolidate and Refinance Student Loans

There are several compelling reasons to consider consolidating or refinancing your student loans:

  • Lower interest rate: If you qualify, a lower interest rate could help you pay off the principal balance faster or decrease how much you pay each month.
  • Lower monthly payments: Many people refinance or consolidate student loans to make their monthly payments more manageable.
  • Faster repayment: With a lower interest rate, you may be able to choose a shorter term, potentially allowing you to pay off your student loans sooner without increasing your monthly payments.
  • Extended terms: If you need to lower your payments, you may be able to extend the term of your loan beyond the 10-year standard repayment period to 15 or 20 years. This could help you reduce your payments significantly. However, it could result in paying more interest over the life of the loan.
  • Fixed, predictable monthly payments: If you have student loans with variable interest rates, a rate change could increase monthly payments. Refinancing could allow you to convert those loans to a fixed-rate loan, offering predictable monthly payments. Private student loans may offer variable interest rate options, but federal student loans are fixed rates.
  • Streamlined repayment: When you consolidate or refinance your student loans, it can combine multiple loans into one, resulting in one monthly payment, which is simpler to manage.
  • Option for co-signer: If you don't qualify for refinancing alone, a co-signer with good credit and low debt-to-income ratio can help you secure approval.

How Student Loan Refinacing Works

Student loan refinancing requires a credit check from the borrower. If you have good credit, you may be eligible for a better interest rate, which could save you a lot of money over the life of your loan. Once you qualify, your lender will pay off your existing loans, and you will be left with a single loan with a new interest rate and terms. In most cases, refinancing entails selecting and working with a new lender.

Steps to Refinance Student Loans

If you decide that refinancing your student loans is the best option for you, here are the steps you can follow:

  1. Research the different lenders
  2. Compare their interest rates, fees, and repayment terms
  3. Apply to the lender that you think is the best fit for you
  4. Submit all the required documents
  5. Once approved, you can then choose the loan terms that are right for you
  6. Start paying on your new loan

Student Loan Refinancing Rates and Fees

Refinancing rates and fees vary depending on the lender and the borrower's creditworthiness and other credit factors. Before selecting a lender or refinancing option, take the time to explore and compare rates and fees. This way, you can apply for options that align with your specific needs.

Pros and Cons of Student Loan Refinancing

Refinancing your loans can bring a range of benefits, such as streamlined payments and improved control over your repayment strategy. With the option for a co-signer and the potential to boost your credit score over time through timely payments, it can be a great opportunity to improve your finances. However, it's important to note that eligibility requirements, including a good credit score and low debt-to-income ratio, must be met.

Pros
  • Steamlined payments, instead of multiple monthly payments to different lenders
  • Option for co-signer if you don't qualify for refinancing alone
  • Refinancing may help improve your credit score over time with timely payments
  • New loan terms may give you more control over how you pay off your loans
Cons
  • Not every borrower is eligible for refinancing
  • Good credit and a low debt-to-income (DTI) ratio are usually required for approval
  • A credit score of at least 650 is typically necessary for approval
  • Lenders prefer a DTI ratio under 50%
  • Co-signers may be needed for borrowers who don't qualify on their own
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