How to Refinance Your Student Loans as Quickly as Possible

how long does it take to refinance

Let’s say you already know you should refinance your student loans. You’ve thought about it. You’ve dreamt of lower payments or faster payoff. You just haven’t gotten around to doing it.

Every month you don’t refinance your student loans is another month you could be overpaying on interest.

In other words, you might just be throwing money out the window. But you can stop the cycle! It only takes a few minutes.

How long does it take to refinance student loans?

I get it, refinancing your student loans sounds like it will take forever. You’ll need a mountain of paperwork, an endless application process, and weeks of waiting for an answer, right?

Nope.

It only takes a few minutes to start the process of refinancing your loans. After that, if you have your stuff together, it doesn’t take much longer to close on the new loan and start paying your debt off faster – or saving money on your monthly payments.

Let’s get started.

How to quickly and easily refinance your student loans

1. Add up how much you owe on all your student loan debt

If you already know how much you owe on your student loan debt, skip this step.

But if you’re not sure, quickly log into your student loan accounts and add up your current balances. The loan you apply for to refinance should be large enough to cover these balances – but not more than that.

While you’re at it, take a peek at your interest rates. That way you know the rates you’re trying to beat.

2. Collect student loan refinance offers

After you know how much you owe, start collecting student loan refinance offers. It’s easy to do this if you check out the top student loan refinance lenders first.

Start by picking the ones that offer what you need regarding rates, types of loans they’ll refinance, and desirable repayment terms. Then, go through with the first phase of the application.

Fun fact: you can collect multiple offers without hurting your credit score. That’s because these offers are the result of a soft credit pull. Remember, a soft credit pull has no effect whatsoever on your credit and can only result in a pre-qualification offer.

Once you spot the offer you like the best, then you can go through with the rest of your application. This will result in a hard credit pull, but that’s okay – this should be the one offer you want to explore.

3. Pick the best offer based on your specific needs

As you review offers, the lowest interest rate should be a high priority. After all, the less you pay on interest each month, the less you’ll pay on your student loan debt overall.

But don’t disregard other benefits. Student loan refinancing comes with a variety of perks such as cosigner release, repayment terms that are more suitable for your financial situation, unemployment protection, and so on.

Think about your financial situation and what it might look like in the next few years before you make your final choice. That way you can be sure to get the all around best offer for you.

4. Complete your application

Once you’ve made your pick, go ahead and complete your application. At this stage, the lender will let you know what they need. It might be paperwork to sign or send in.

Whatever they ask for, don’t drop the ball on this step. It’s the only one that requires any effort from you, and it’s vital for the completion of your application.

5. Find a cosigner if necessary

Depending on your economic situation, you might find out that your preferred lender will only let you apply with a cosigner. As it stands, roughly 94 percent of undergraduate student loans already had a cosigner in 2015-2016.

Even if you don’t already have a cosigner on your loans, but you suspect you may need one for the refinance, start looking for someone now. Just make sure you don’t take this step lightly. If for some reason you default on your loans, it’s going to hit their credit – hard.

So go ahead and pick a cosigner if necessary. But don’t move forward with it unless you’re sure you’ll be in good standing on your loans.

6. Start repaying those loans

Once your refinance loan has been closed on, you can finally sit back and focus on repaying your loans.

One of the greatest things about this step is that you’ve gone from multiple student loans servicers to just one. Suddenly, your monthly repayment just got a lot simpler.

If you want to make this step even more painless, set up automatic payments. What’s more, many lenders offer an interest rate reduction for this.

And if you want to kick your repayment into high gear, apply extra money to your student loan repayment. Most top student loan refinancing lenders don’t charge a fee for early repayment.

Go ahead and apply your tax refund, birthday money, bi-weekly payments, and more to kick your student loan debt to the curb.

How much could you save via student loan refinancing?

If you’re still not sure it’s worth the time investment, why not go through a quick example to see how much you might save with a refinance?

Using our student loan refinancing calculator, let’s see what happens if you refinance $30,100 – the average student loan debt 2015 college graduates walked away with, according to Ticas.org.

We’ll say you have an interest rate of 3.76%, the average for federal undergraduate loans according to Federal Student Aid. And, your remaining student loan repayment term is 20 years.

You’re then able to refinance with a 2.56% variable interest rate for a 20-year repayment term. While the interest rate could go up since it’s variable, assume that it stays the same for the sake of calculating the maximum amount you can save.

In this example, you’re not going to see a large drop in your monthly payment. But you would see a large drop in your overall debt repayment. Here are a few stats:

  • Original monthly payment: $179
  • New monthly payment: $160
  • Interest paid on original loan: $12,768
  • How much interest you would pay on the refinanced loan: $8,392
  • Total savings on interest: $4,376

how long does a refinance take

That’s if you took out a 20-year repayment plan. Now, let’s see what happens if you choose an accelerated 10-year repayment plan. Since it’s a faster plan, your payment will go up, but watch what happens with your total interest paid.

  • Original monthly payment: $179
  • New monthly payment: $285
  • Interest paid on original loan: $12,768
  • How much interest you would pay on the refinanced loan: $4,049
  • Total savings on interest: $8,719

how long does it take to refinance

In both scenarios, a refinance on the student loans saves a massive amount of money on interest over the life of the loans – you’ll pay way less by the time the debt is said and done.

Don’t be scared to refinance your student loans

Maybe you’ve been avoiding refinancing your student loans because you’re nervous about it.

If your loans are federal, that’s understandable. Refinancing federal student loans turns them into private student loans and removes benefits such as federal deferment or forbearance, income-driven repayment plans, or forgiveness options.

But if you weren’t likely to need these options in the first place, then this might not be something to worry about. If you’re stable in your career, have an emergency fund, and have never used federal protections like those mentioned above, then you can refinance your student loans with less apprehension.

Remember, every month you pay more on interest than you have to is a month in which you’re losing money. So do yourself a favor and at least collect the offers to see what kind of terms you could get. Then you can make a truly informed decision.

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Published in Refinance Student Loans, Student Loan Repayment

  • AWizardInDallas

    This article does not cover what refinancing (pretty much anything) does to your credit score.