According to the United States Department of Education, the borrowing rate for private student loans is calculated using credit history, previous debt repayment behavior, and other factors.
The rates are not fixed by law or regulation.
Private student loan borrowers would do well to compare loan packages from each lender in order to find the lowest possible interest rate offered by a specific lender.
Who is eligible to apply for a private student loan refinance?
Any borrower with an existing private or federal student loan can potentially apply for a private student loan refinance.
Lenders offering attractive rates on refinanced loans include SoFi, LendKey, Credible, CommonBond and College Ave. They require good credit scores (generally 680+).
The best rates are generally the ones you find the fastest, so you should compare at least three lenders.
Keep in mind that your credit score will only take into account your personal credit history and does not reflect any co-signers or other factors involved with your loan.
How can I apply for a private student loan?
Borrowers can apply for a private student loan from multiple sources. You can find lenders via online search, your bank or credit union, family and friends borrowing from the same lender as you, etc.
As of summer 2017, some lenders may provide a free bonus to eligible refinanced borrowers who switch over their student loans from another financial institution.
The amount of money you save with a private student loan refinance depends on the current interest rate of your student loan as well as any other information lenders take into account when approving you for a new loan, such as your credit history and any co-signers. Generally speaking, borrowers will have access to lower rates than what they currently have.
What is the average interest rate on a private student loan?
The Department of Education’s latest figures estimates the average fixed interest rate for private student loans to be 13.29 percent with an origination fee of 4.31 percent, based on data from 2010-2011. Federal student loans have fixed rates that are capped at 8.25%.
Can my lender refinance my existing private student loan?
If you have a private student loan, there is a chance that your lender or another lender may offer to refinance it.
Lenders offering refinancing options include SoFi, CommonBond, College Ave and LendKey.
It depends on the original terms of your student loans as well as current market conditions and the lender’s own criteria.
What is a cosigner, and why do I need one?
A co-signer or guarantor is someone who takes on responsibility for repaying your private or federal student loans if you are unable to make the repayments yourself (for example, due to unemployment).
If you have a cosigner, they will be equally responsible for your loans in the event that you cannot repay them. However, a cosigner does not have to pay anything unless they are also the primary borrower on the loan.
You can check here for more information on private student loans.
Should I repay my entire principal balance before refinancing my private student loan?
This depends on your current repayment status and whether refinancing will reduce the monthly payment you make to repay your student loans. If refinancing will bring down your interest rate, it might be advantageous for you to pay off some or all of your original loan’s principal balance before refinancing.
However, if the refinancing does not lower the final balance you have to pay, then it is better not to refinance.
How long will it take to refinance my private student loan?
The time it takes to refinance a private student loan will depend on the lender and your credit score.
Generally, a borrower with a good credit history can expect a response from their chosen lender within one or two days. Lenders offering refinancing options include SoFi, CommonBond, College Ave and LendKey.
Should I consolidate or repay my existing private student loans before refinancing?
You may consolidate your federal student loans in the Federal Direct Consolidation Loan Program.
However, this does not apply to private or other non-federal loans. Also, if you choose to do so, certain repayment options available with federal loans are lost when consolidated.
It is generally advised against refinancing your existing student loan(s) as new private student loan(s) may have a lower interest rate at the time of refinancing.
What is a cosigner release on a private student loan, and how does it work?
If you receive a cosigner release on your loan, the lender will release your cosigner from responsibility for your loan (if you have one).
It is important to note that this does not affect the eligibility criteria for borrowers to apply for a cosigner release.
Are there any conditions under which I can qualify for a private student loan without a cosigner?
Yes, some private student loans do not require you to have a cosigner. However, these loans may come with higher interest rates than those that come with co-signers or guarantors.
To get your cosigner released from a private student loan, you need to apply for the cosigner release with the lender of your private student loans. You can find out more about how to do so by contacting your lender directly.
Can I refinance my child’s private student loan?
You may be able to refinance your child’s student loans if you are the co-signer on that loan. However, your child will need to establish their own credit history to qualify for refinancing.
If your child is an independent student, they can apply for their own private student loan or take out federal loans without a co-signer.
What is the difference between refinancing and consolidating my student loans?
Refinancing is when you apply for a new loan on your existing private or federal student loans, whereas consolidation combines all of your existing loans into one single loan.
Generally, refinancing can reduce interest rates while reducing monthly payments than repayment in full.
Consolidation, on the other hand, does not reduce interest rates, but it can reduce monthly payments because you are taking out a new loan to pay off all your previous ones.
Will Navient refinance private student loans?
As of January 2017, Navient has discontinued the servicing and origination of all private loans.
The Department of Education recently sold Navient’s federal loan servicing business to another company.
However, you should contact your lender directly for more information on refinancing your loan.
What happens if you never pay back your private student loans?
Your credit score will take a hit, and private student loan lenders could sue you in court.
If you default on your loan, your debt may also become uncollectable because the creditor can no longer sue you to recoup the money that they originally lent to you.
You will need to pay back all of your loans with interest if you default on your private student loans.
Conclusion
While you can refinance federal student loans, private loans are more restrictive in whom they will allow to apply.
By refinancing your private student loan, you may be able to get a lower interest rate or better repayment terms than what your current lender is offering you.
However, the process of applying for refinancing can be arduous, so be prepared to spend a lot of time doing research for your loan before you apply.
There are a variety of options when it comes to refinancing student loans, from government-backed federal loans to private lenders.
Knowing which one is right for you requires careful consideration and thorough research into the small print that governs each type of loan.
Are there any conditions under which I can qualify for a private student loan without a cosigner?
Yes, some private student loans do not require you to have a cosigner. However, these loans may come with higher interest rates than those that come with co-signers or guarantors, so you will need to weigh the pros and cons of applying for a private student loan without a cosigner.
If you have more questions on refinancing your private student loan, please contact your lender directly.
There are many types of loans that need a cosigner because the borrower would not be able to qualify for the loan on their own. I
n cases where you can get a private student loan without needing a cosigner, it is worth noting that these loans will usually have higher interest rates than those that come with co-signers or guarantors.
You should contact your lender directly with any questions about your private student loan.
