Refinancing Private Student Loans

1.   Know your current loan terms: Before you begin the refinancing process, it's important to know the details of your current loan. This includes your interest rate (and if the rate is adjustable, you should know what spread/margin is and the index your loan is tied to), monthly payment, repayment term, and any other relevant information. You'll also want to know if your loan has any prepayment penalties, as this could impact your decision to refinance.

2.  Check your credit score: Your credit score will play a big role in determining your eligibility for refinancing and the interest rate you'll be offered. If your credit score has improved since you first took out your student loan, you may be able to qualify for a lower interest rate by refinancing. On the other hand, if your credit score has declined, refinancing may not be the best option.

3.   Third party guarantor: It’s important to consider whether your loan is tied to another person – ie if your parent was a guarantor of your loan they need to be involved. Similarly, if you are the parent your child needs to be involved. If your income is limited and/or your credit score is low you will likely need to have a parent guarantor.

4.   Shop around for the best rates: When refinancing a private student loan, it's important to shop around and compare offers from multiple lenders. This will help you find the best interest rate and repayment terms for your needs. Keep in mind that some lenders may offer incentives, such as cashback or discounts for setting up automatic payments. Also, make sure to consider points and fees payable up front. Some lenders will provide a refinance loan with no up front fees

​Once you have rate and terms from the lender, ask them how long the rate and other terms are committed for. That way you can continue to shop without losing the first offer. ​

5.   Consider interest rate type: When refinancing your student loan, you'll have the option to choose between a fixed or variable interest rate. A fixed rate will remain the same throughout the life of the loan, while a variable rate may fluctuate based on market conditions. While variable rates may start out lower than fixed rates, they can be riskier in the long term if interest rates rise.

6.   Impact on your credit score: Refinancing your student loan will involve a hard credit inquiry, which can temporarily lower your credit score. As long as the credit inquiries are all around the same time it will have minimum impact on your credit score. However, if you're able to lower your interest rate and make on-time payments, your credit score will improve over time. It's important to weigh the short-term impact on your credit score against the potential long-term benefits of refinancing. Bottom line: if the new loan has better terms (eg lower rates), don't worry about short term credit score effects.

7.   Consider the repayment term: When refinancing your student loan, you'll have the option to choose a new repayment term. A longer repayment term can lower your monthly payments, but you'll end up paying more in interest over the life of the loan. On the other hand, a shorter repayment term will result in higher monthly payments, but you'll pay less in interest over time.

8.   Check for any fees: Before refinancing your student loan, be sure to check for any fees associated with the process. Some lenders may charge origination fees, application fees, or prepayment penalties. These fees can add up and impact the overall cost of refinancing.

9.   Consider the benefits of refinancing: Refinancing your student loan can offer several benefits, including lower interest rates, lower monthly payments, and the ability to consolidate multiple loans into one. It can also simplify your finances by allowing you to make just one payment each month. However, it's important to weigh these benefits against the potential risks and costs of refinancing.

10.  Paying off the old lender: Once you sign and agree on the loan some of the amounts may shift as the final amounts owed to the old lender will depend on when your next payment is due. 
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In conclusion, refinancing a private student loan can be a smart financial move, but it's important to consider all the factors before making a decision. Be sure to shop around for the best rates, consider fixed vs. variable interest rates, and think about the impact on your credit score. By doing your research and weighing the potential risks and benefits, you can make an informed decision and improve your financial situation.