Many college students pay for education by student loans. Although Federal Student Aid can give a hand for the students who cannot afford tuition fees, it may not be a complete solution for every student. There is a limit on how much student loan can be borrowed each year. Federal Aid may not be enough for the tuition you need. A private student loan can cover the gap between the money you need for education and any federal student funding you receive. Refinancing your student loan allows you to combine your existing private and federal student loans to make it a new student loan with a lower interest rate.
Each bank has its own underwriting standard, and the economic background and situation of each applicant differ from each other. Student loan refinancing is not approved by everyone, but we can provide advice to give you a higher chance of approval.
- Credit Score
Credit score is an important reference for assessing your financial strength. Lenders assess your repayment ability by analyzing your credit score to determine how much they can lend to you. Your credit must be at least 600 to meet the requirements of the lenders. So, the first tip is that you should increase your credit score to 700 or higher in order to increase your chances of getting approval.
- Income
Private student lenders want you to have a stable source of income to ensure you have the ability to repay student loans. So, here comes the second tip: If you don’t have a stable income, you can find a co-signer to sign the agreement who is qualified with a strong credit profile. In this way, you can also increase your chances of approval.
- Other Loans
Your other debt, such as a credit card, mortgage, or auto loan, can affect your student loan application. As part of the underwriting process, the lender will record your total monthly debt. The more debt you have each month, the fewer student loans you can apply for. The third tip is that before you apply for a student loan, make sure you repay any previous debts as much as you’re capable of.
- Debt-To-Income Ratio
Student loan lenders will pay attention to your debt-to-income ratio, which is the ratio of your total monthly income to your monthly debt. That is, if you have a monthly income of $10,000 and a monthly debt of $5,000, then your debt-to-income ratio is 50%. As a result, your debt-to-income ratio is as low as possible. You can reduce your debt-to-income ratio by increasing your income or reducing your debt.
- Employment
Some student loan lenders require work experience when you are applying to refinance your student loans. Although you have a co-signer, it will be difficult for you to successfully apply for their student loans. Read the requirements carefully before you decide to apply.
Paying attention to what is mentioned above can increase the approval rate in applying or refinancing your student loans.
Featured image: DepositPhotos – karenr
