Student loan refinance can be an amazing way to lift some of the burden of student loan debt from your monthly bills. Unfortunately, when it comes to choosing which borrowers they want to work with, lenders spend a lot of time swiping left, as it were. That’s because lenders only want to take on clients who are low-risk and unlikely to default on their loans. Just like a good filter helps your profile pic, there are a few things you can do to make yourself a bit more attractive to a lender’s first glance.
1) Improve your credit
The top student loan refinance lenders look for a credit scores in the mid-600s or higher. While a lower credit score doesn’t necessarily preclude you from all lenders, improving your score will increase your choices of lenders, terms, and interest rates. There are a few actions you can take to improve your credit score—including using a credit building app like Self or Grow Credit.
2) Pay down other debt
Lenders take into account all your debt when assigning you an interest rate. The less debt you have, the more attractive you are as a borrower candidate. To increase your chances of qualifying for a low rate, look at your current debt and pay down where you can, particularly in areas like credit card debt that have high interest.
3) Consider debt consolidation
It’s very common for people undergoing a student loan refinance to consolidate multiple loans into one loan, both for convenience and to secure a lower rate. You can do the same with other types of debt, such as credit card debt, by consolidating at a lower rate under a personal loan.
4) Look for a co-signer
If you’re not an exemplary candidate for refinance (perhaps because of a low credit score or low income) you can increase your chances of qualifying by finding a co-signer who has a higher income and excellent credit score. Because a co-signer is responsible for your loans if you default, you’ll want to look for someone who trusts you a great deal. You may not need them, but it’s good to have someone in mind.
5) Get a higher-paying job
Easier said than done. However, if you are expecting an upcoming raise or planning to leave your current employer for a bump in salary, it may be wise to wait until that time to undergo a student loan refinance. Lenders look at your debt to income ratio (how much money you owe for your cumulative debt vs. how much you make) to help determine your eligibility for a refinance. The further you can push that ratio in favor of your income, the better.
6) Get a side hustle
If getting a higher paying job isn’t in the cards for you this year, you may want to consider taking on a side hustle to earn a bit of extra income in your spare time. You could use a particular skill to start a freelance business, sell items online, or check out some of the other ideas on our extra-income list here.
Follow these tips to become the most eligible borrower, and you’ll have multiple lenders swiping right in no time.
