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Refinance Student Loans With Bad Credit

If you’ve been dealing with student loan debt for a long time, you may be wondering about refinance and student loan consolidation options. Some of these options may depend on your credit score. Fortunately, there are solutions that will help you refinance student loans with bad credit

The average amount of debt for student loan borrowers in the US is over $32,000.1 That’s a lot of money for anyone, especially recent college graduates who may not even have a job yet. Because they’re so large, these loans tend to take a long time to pay off. 

There may be times throughout your repayment that you wonder if you’re getting a good deal on interest rates and terms. This is just one reason some people choose to refinance their student loans. Read on to learn more about student loan refinancing with bad credit

How to Refinance Student Loans

Refinancing your student loans will be similar to many other loan processes. It will involve a lot of research to make sure you’re getting the best deal possible. Here are the steps we recommend you take to refinance:

  1. Research: research your loan options, different lenders, interest rates, and whether or not refinancing is the right choice for your specific situation. 
  2. Get estimates: once you’ve found a few lenders you may want to consider, have them all provide you with interest rate estimates. This way, you can compare rates and terms easily. 
  3. Choose your lender: usually, the lender offering the lowest interest rate will be the one you should choose. 
  4. Apply for the loan: you’ll need to fill out an application and await the lender’s decision on whether or not you’re approved. 
  5. Sign and repay: if approved, you’ll need to sign your loan documents. Once signed you’ll begin repaying the loan to the new lender.

Can You Refinance With Bad Credit?

A student loan, or a student loan refinance, will have a similar application process to many other loan products. This means that the lender will likely have requirements for approval. Oftentimes, one of the most important requirements is your credit history. 

Having a low credit score–or no score at all–will make it more difficult to get approved and to get good rates. But can you refinance at all with bad credit? The short answer is: yes. The more thorough answer is: it won’t be easy to get approved, and even if you’re approved you may not get very good rates or repayment terms. 

We recommend focusing on improving your credit score. You can do this by paying off other debts, lowering your credit card usage, and always making payments on time. By improving your credit score you’ll be ensuring that you get better deals in the future, which will save you money. 

Can You Refinance Private Student Loans?

There are two main types of student loans out there: federal and private. A federal student loan is one offered through the government. And a private loan is offered through a lender, bank, credit union, or other financial institution. 

You can refinance both types of loans. But the real question is: should you?

The first important thing to know is that you can only refinance federal loans by turning them into private loans. This is because the rates for these loans are set by the federal government. Keep in mind that If you choose this option there’s no changing them back to federal loans. 

Make sure you do plenty of research before refinancing a federal loan. Because there may be benefits to federal student loans that you might not get through a private lender. 

Whether you refinance your private loans will all depend on the current rates. If interest rates are very low, then it may be a good idea to refinance. That being said, you would want to avoid refinancing if rates are high.3 

Deciding to refinance your student loans with bad credit will mostly depend on your current financial situation and the current rates.

To learn more about loans, refinancing, and personal finance best practices, check out the rest of the CreditNinja Dojo!

References:

  1. https://www.valuepenguin.com/average-student-loan-debt#:~:text=Average%20Student%20Loan%20Debt%20in%20The%20United%20States,outstanding%20in%20student%20loan%20debt.
  2. https://www.nerdwallet.com/article/loans/student-loans/how-to-refinance-student-loans
  3. https://www.usnews.com/education/blogs/student-loan-ranger/2015/04/29/4-things-to-think-about-when-refinancing-student-loans