Many individuals find themselves wondering how to refinance student loans. Due to financial constraints or the need to simplify financial matters, many people find themselves looking for ways to pinch pennies and save money wherever they can. For most college graduates, a way to do this is to refinance their student loans.
Most people refinance their student loans with the aim of reducing monthly payments and saving money. In many cases, if an individual’s financial prospects have improved since they began repaying their loans, they may qualify for a lower interest rate than the one they currently have. Refinancing may lower this rate and thus lower the amount of time needed to repay the loans themselves.
Before embarking upon the task of refinancing student loans, a few things will be needed.
First, any person hoping to refinance their student loans needs to acquire a current credit report. There are many agencies that offer this service to the public. However, many people do not realize that certain of these corporations are required under the Fair and Accurate Credit Transactions Act of 2003 (FACT) to provide one free copy of the consumer’s credit report upon request each year. These corporations are Equifax, Experian, and TransUnion.
Once a person has obtained his credit report, he needs to carefully and thoroughly review the report for any errors that may appear on it. If there are any inaccuracies that reflect poorly upon the individual’s debt management abilities, such as a collection account that appears on the report in error, these claims need to be contested and resolved before the individual begins loan shopping. The Fair Credit Reporting Act (FCRA) permits an individual to challenge any data that appears on the credit report with both the credit bureaus and the creditors that furnished the information to the bureaus. The creditors and credit bureaus are then required by the provisions of the FCRA to investigate the individual’s complaint and correct any errors that may have been reported.
Although it is not required, buying Fair Isaac Corporation (FICO) scores can be helpful when refinancing student loans. If a lender approves an individual’s loan application, this is the score that the new interest rate will be based upon. Knowing this score ahead of time allows an individual to obtain estimated quotes on loans more quickly.
Next, an individual should make a list of potential lenders. He or she should then call each lender and discuss refinancing student loans and the processes involved. If the FICO score has been purchased, giving this score to the customer service representative will allow him to inform the inquiring individual what interest rate he or she would qualify for. After speaking to many loan providers, the individual should then weigh the pros and cons of each institution and make an informed decision on which corporation to refinance with.
Once an individual has determined which loan corporation he or she would like to refinance with, he needs to provide the lender with collateral or apply for the loan with a co-signer. The loan paperwork should be read meticulously and methodically. Be sure to discuss any terms that seem vague or confusing with a customer service representative. After the paperwork is signed, be sure to know when the monthly payment is due and make timely installments.