Some student loan refinancing rates are now less than 2%. 6 ways to get the lowest rate

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Student loan refinancing rates are very low right now, with some borrowers finding rates from just 1.89%. In addition, unlike mortgage refinancing, it is generally not expensive to refinance your student loans: “Most lenders do not charge any set-up fees or application fees,” explains Rebecca Safier, certified student loan advisor. and Debt Expert at Student Loan. Hero.

But just because you can technically refinance your student loans whenever you want, doesn’t mean it’s wise to do so. If you have federal student loans, you risk losing built-in protections – like generous loan repayment and forgiveness options – if you refinance. That said, if you can shorten your loan term or get a better interest rate, it can make sense to many borrowers regardless of their loan type. We asked experts to share the best ways to get the lowest rates on student loan refinance:

Improve your credit

Lenders typically offer the best student loan refinancing rates to borrowers with the highest credit scores, so take steps to improve your credit. “You could work on paying off debts, especially revolving debts like credit card balances,” says Safier. Paying bills on time could also help, as could getting a copy of your credit report and correcting any errors.

Get your finances in order

In addition to your credit score and credit history, lenders will also look at your debt-to-income ratio – which is your monthly debt payments divided by your monthly income – which tells them how well you would be able to pay. • make monthly payments on the refinanced loan. Most lenders want an DTI of less than 50%, and the lower your DTI the better. If you want to improve your DTI, look to increase your monthly income or reduce your debt level, if possible.

Apply with a co-signer

A co-signer who has excellent credit and a solid income could help you get a lower interest rate. That said, if you default on the payments, your co-signer will be responsible for making the payments, but the good news is that some lenders end up letting the co-signer off the hook if the primary borrower is able to make the payments. on-time payments for a certain amount. of time.

Get quotes from 3 to 5 different lenders

“Getting the best student loan refi depends on your skill level, but also how you shop,” says Anna Helhoski, student loans expert at NerdWallet. “Many lenders allow you to prequalify online without impacting your credit score. By shopping around, you can find the best refinance deal. You can also check with your bank or credit union to see if it refinances student loans first and second, offers special interest rate reductions for bank customers, ”says Safier.

Ask how to get more than one discount on your fare

Another consideration is to work with a financial services partner who offers rate reductions for things like direct deposit or the use of other banking services. Indeed, some lenders offer an interest rate reduction of around 0.25% for borrowers who opt for monthly withdrawals from their bank account. Others offer benefits to those who refit with the bank and also have a checking account or other account with the bank.

Shorten the term of your loan

“You can also get the lower rate with the shorter term, but make sure that the trade-off for paying less over the course of the loan with a lower interest rate is a higher monthly payment amount,” Helhoski explains. .


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