Private student loans are known to be one of the most difficult debts to get rid of in bankruptcy.
This doesn’t necessarily mean that you should avoid consolidating or refinancing them (assuming they are having a negative impact on your financial situation), though.
You should still try to make sure you take out loans with the lowest possible interest rates, and only borrow what you actually need for college costs.
If you can do all of this, but you still have a lot of private student loan debt left after school, you might want to consider consolidating your loans.
This can lower the interest rates on your loans and make them easier to manage.
You will end up with just one monthly payment that is slightly higher than all of your previous ones combined–but you’ll also be paying a little bit less in interest overall, thanks to the lower monthly payment.
There are lots of private student loan consolidation companies out there that will help you take out a new loan to cover all of your old ones.
The downside is that these loans tend to have higher interest rates than federal student loans because they’re riskier for lenders. This could be another reason why you would want to consolidate your loans, though.
Private student loan consolidation is good for all the following reasons:
- It can help lower your monthly payment by extending your repayment period
- It can make it easier to track how much money you owe overall
- It can reduce the strain on your credit score caused by too many old bills
- It can help you take advantage of a private student loan with a lower interest rate than your current one
How to consolidate private student loan
If you want to consolidate your loans, or if you just want to refinance your loans for a better interest rate, here is what you will need:
- Proof of citizenship/residency
- A way to prove that you have an above average credit rating
- A cosigner
You will also need to have proof of income, preferably through W2s or tax returns.
You may be required to provide bank statements as well, but if you are trying to lower your interest rate by refinancing, then you should already know that this is likely (and it might affect your final decision on which company you go with).
Your cosigner will need to be approved by the lender as well.
This is because he or she will be responsible for paying off your loan if you don’t–and that’s a serious financial risk to take on (especially if you’ve had trouble making payments at some point in the past).
Whenever you’re considering a private student loan, you should always read the fine print.
This is always true, but it’s even more important when dealing with a consolidation or refinancing company.
If you aren’t careful, you could end up losing money to fees charged by your lender–and this would almost certainly negate any advantage gained from changing loans in the first place.
What you need to know about refinancing a private student loan
Refinancing can be a great way to take advantage of a lower interest rate, but it also has some important downsides that you should consider before making any decisions:
- It can be easier to get approved for federal loans than private loans
- Your credit score might not be good enough to get approved
- It can take a while before you receive the funds from the new loan
- You might have to start over with your repayment plan
If you want to refinance your loans, then you should be aware of the fact that it’s going to affect your credit score.
This is because borrowing more money will lower your credit utilization, which is a contributing factor to your final credit score.
This is important because you’re likely going to need a cosigner if you want to get approved for refinancing.
It means that you have another person who will be financially responsible for paying off your loans if you can’t–so of course, they are going to check out your credit score before they agree to co-sign.
Having said that, this is also an opportunity for you to show lenders that you’ve learned from past financial mistakes and improved your credit rating.
So, if the worst comes to pass, and you can’t keep up with your monthly payments, your cosigner shouldn’t be held responsible.
How credit score affect your student loan consolidation
If your credit score is good, and you did not co-sign on the loan (it must not be a joint loan), then refinancing is an option, but it can be complicated, and you should pay attention to the details.
It’s still best to consolidate your debt as well as possible before refinancing, but keep an eye out for a good deal–you might be able to find a private lender that is willing to offer you a much lower interest rate than what you’ve been stuck with up until this point.
Best Private Student Loan Consolidation & Refinancing
If you decide to consolidate your private student loan, check these companies :
#1. SoFi: often has low rates and works with graduates from specific universities, but you must use your computer to apply (no mobile).
#2. LendKey: only gives out loans in their network of partner schools (and even then, they vary by state), but that means that the requirements for eligibility are lower.
#3. Earnest: great perks and easy to use site. They give out loans in their network of schools and non-school locations, so you might be able to find a better deal than your current company . But you’ll have to weigh the pros and cons yourself.
#4. American Education Services: has low-interest rates for people who can demonstrate consistent income (or regular monthly deposits), but you can’t apply online and must mail in your application.
How to Consolidate Your Student Loans Easily
There are many companies that claim they can help you consolidate your student loans, but in most cases, this is actually quite hard to do.
The only true consolidator (who will refinance your loan regardless of who owns it) is SoFi, and even then, they only give out loans at a handful of partner universities.
This simply means that you will need to research your options and find a company that has access to various lenders (meaning they can shop around for the best deal) and will refinance all of your student loans regardless of who currently owns them.
There are many other loan consolidators who claim they want to help you, but they won’t be able to help you with your private loans–you’re better off looking for a new lender altogether (if possible).
You can also refinance without consolidating, but this means that the interest rate of the new loan will be higher than what it would’ve been if you consolidated first.
Are There Any Downsides?
There definitely are downsides to refinancing or consolidating your private student loan.
#1. You might not be able to get a cosigner for the new loan (if you had one for your old one).
#2. It will probably be more difficult to qualify for this new, lower interest rate (so it’s definitely still worth it at higher rates and if you don’t qualify).
#3. Sometimes your payment terms might be extended, or you could be forced to start making payments while still in school (meaning that you need to pay more interest overall).
What You Should Know About Private Student Loan Consolidation & Refinancing Companies
These companies usually exist because they want a cut of the profits from lenders. They find someone who is willing to refinance your loan, but the company takes a percentage of the money for themselves.
This isn’t necessarily a bad thing, but it can make private student loan consolidation and refinancing difficult to do sometimes if you don’t know which companies are trustworthy and which ones aren’t.
You can look at their website and check out their credentials, but it’s still a bit difficult to tell which companies are truly legitimate and which ones aren’t.
How Long Will It Take to Finish Consolidating Your Student Loans?
Depending on how many loans you have and what your interest rates and repayment terms are, it could take anywhere from a few days to several months before the company is finally able to consolidate your student loans.
You’ll need accurate information about all of your loan balances (and their current interest rates) in order for them to help you, so make sure that you’re prepared when they ask for this information.
Will Refinancing My Private Loans Lower My Interest Rates?
When you refinance your private student loans, the low-interest rate will only apply to the new consolidated loan you’re receiving.
This means that any existing loans will keep their original rates, and if you’re not consolidating, then this won’t change anything at all–refinancing only helps consolidate your student loans.
You should talk with a professional if you have questions or concerns about consolidating your private student loans – don’t try to do it on your own unless you know what you’re doing.
Can I consolidate just my private student loans?
You can consolidate both federal and private student loans, but you’ll need to follow the normal procedures for each type of loan.
It won’t be possible to just consolidate your private student loans without consolidating your federal ones (and vice versa).
Can you help me consolidate my private student loans?
You can try asking SoFi if they’re able to help, but otherwise you’ll need to find a Professional who is willing to help you with consolidation–it doesn’t hurt to ask around, since many companies do this as part of their standard services.
How much will I pay after refinancing?
This question depends on how high your interest rates were before refinancing and what your new consolidated interest rate is once you’ve applied for the new loan.
Do private student loans go away after 7 years?
After the 7 years has passed, your private student loan will automatically be defaulted.
It can’t be erased from your credit report, but you won’t have to make any more payments on it either – this is a completely automatic process once the time has lapsed.
If there are any additional questions that you have about whether or not refinancing or consolidating your private student loans is right for you, then ask as many as you need to feel confident in your decision-making skills.
How do I settle my private student loans?
If you have enough money to pay your private student loans, then you should always choose this option over refinancing or consolidation.
This is the simplest way to handle these types of loans, and it allows you to settle them quickly, rather than taking several months trying to consolidate them into one new loan.
Note that if you decide not to pay back your loans right away, then they’ll keep accruing interest until they’re fully repaid – even after defaulting.
What are my options for settling private student loans?
You can talk with a professional about settlement options if you don’t think that refinancing or consolidating is an available option for your specific financial situation.
Some lenders will agree to take less than what’s owed, which is what settling means. But this option is not guaranteed.
You can look at SoFi if you want to consolidate your loans through a private company, or you could try finding a professional who may be able to help with consolidation.
Do private student loans go away after 10 years?
After the 10 years has passed, your private student loan will automatically be defaulted.
It can’t be erased from your credit report, but you won’t have to make any more payments on it either – this is a completely automatic process once the time has lapsed.
If there are any additional questions that you have about whether or not refinancing or consolidating your private student loans is right for you, then ask as many as you need to feel confident in your decision-making skills.
Conclusion
For people with private student loans, it’s worth considering whether or not refinancing is right for them.
The interest rates on these types of loans are typically much higher than what you’d get on a federal loan, so you’ll save money in the long run by refinancing them if it’s an option for your financial situation.
If you have any other questions about this process, then ask around to multiple professionals, since refinancing can be quite complex.
Thank you very much for reading my article! If there are any additional questions that you have about whether or not consolidating your private student loans is right for you, then ask as many of them as necessary until you feel confident in your decision-making skills.
