Student loan debt is one of the biggest financial concerns facing millions of Americans today. Overall, the total US student loan debt ($1.5 trillion) is second only to mortgage debt. According to the last Federal Reserve Report, 30 percent of adults said they borrowed money to pay for education expenses, and the average loan burden was $32,731.
The good news is that borrowers can save an average of $18,600 when they refinance their student loan. Even though many are interested in lowering their monthly payments, some are intimidated by the process. It’s actually much easier than you might imagine, but there are some mistakes you’ll want to avoid.
Ask Around
If you’re thinking about buying a new car, do you compare prices between dealerships? Well the same goes for student loan refinancing. When you refinance, you basically exchange your current loan for a new one with a better interest rate. This means you have total freedom to shop around to get the lowest rate possible. Take advantage of this. Don’t jump at the first offer you see, since you might get an even better one. Compare quotes from multiple lenders.
Don’t Take “No” For An Answer
Some borrowers looking to refinance might not get approved by the first, second or even third lender they approach. In fact, 68 percent of those who are eligible to refinance are turned down by three or more lenders. Still, it pays to keep trying. No matter what your situation, there’s a good chance there’s a lender out there that will work with you.
Not As Hard As You Think
The two mistakes described above can cause frustration since you have to communicate with various lenders. Plus, nobody likes rejection. Many borrowers shy away from refinancing since they think they will have to contact lenders one-by-one. However, the process has been made easier than ever. Today, online marketplaces exist that help you sidestep going door-to-door. Instead, you answer a few questions about yourself to see actual rates from multiple lenders — all at the same time though a single platform.
Basically, all you have to do is enter your data and the online platform does the rest. Because multiple lenders are competing for your business, you’ll be able to compare your options with any lenders you prequalify for, making it easier to get the possible rate on your refinanced loan.
Protect Your Credit Score
When you go shopping for a new loan, lenders will make a credit inquiry about you. There are two types of inquiries: hard and soft. When you request rates through a lender marketplace, you’re authorizing a soft inquiry that does not affect your credit score. If you see a rate you like and apply to the lender,the lender then goes forward with a hard inquiry that may affect your credit score — typically by five points or less.
If you apply for refinancing with multiple lenders during a rate-shopping period (typically 30 days), all of those applications get treated as a single hard credit inquiry. If you were to go around on your own, you might end up having to submit some applications beyond the 30 day limit. This exposes your credit score to multiple hard inquiry penalties.
Online marketplaces provide an advantage here as well. In a few minutes you can get rates from many potential lenders with only a soft inquiry. The online platform approach helps protect your credit score, and you don’t have to scramble around.
Get The Best Deal
If you’re looking to refinance your student loan debt, good for you. You could end up saving a substantial amount of money. Don’t get frustrated, and don’t take the first offer that comes along. Get the best offer instead. Online lender marketplaces take the stress out of the process and offer you distinct advantages.
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