Considering that the average US student loan debt is $32,731, it’s no surprise that many Americans (nearly 45 million people) are struggling to manage their payments, on top of other monthly expenses. To make matters worse, many borrowers are juggling multiple student loans payments, which can be a daunting and stressful exercise.
For those who feel overwhelmed by paying off their student loans, it might be time to consider refinancing. By refinancing student loans, a borrower can turn their existing loan(s) into a brand new one, with a potentially lower interest rate and more accommodating loan terms.
Additionally, refinancing gives borrowers the option of consolidating private and federal loans into a single account. Instead of multiple payments of varied amounts, you can make one monthly payment to a single lender.
Fiona can match you with a student loan refinancing offer that best meets your individual needs.
Here are three factors to consider regarding financial fitness when it comes to refinancing student loans.
Before applying for student loan refinancing, a borrower should check the status of their credit score. Different lenders evaluate various criteria, but a strong credit score (typically above 650) is a great asset to have, which usually leads to refinancing offers with lower fixed interest rates.
Lenders want proof that a borrower can pay a loan on time and consistently. One way lenders go about this is confirming the status of the applicant’s current employment and income. Borrowers are often asked to share their pay stubs as a means of providing this information.
Recent grads may be wondering where the income requirement leaves them, as they may have secured a job, but haven’t started work yet. In these instances, lenders often accept written job offers as proof of employment and income.
Another factor that impacts a borrower’s decision to refinance is whether they’ve got other debt aside from student loans. Borrowers paying off large credit card balances, car loans, or mortgages may be negatively affected by having a high debt-to-income (DTI) ratio, which divides all outstanding debt by gross income. On the other hand, borrowers with a DTI of 50% or lower are considered strong applicants in the eyes of lenders.
Clearly, there are some personal finance factors that help borrowers get the very best offers for student loan refinancing. For those who meet the above requirements, and even if you fall somewhere below, Fiona is a fast and easy way to get matched refinancing options from top providers.