Questions to Ask Before You Refinance
Sometimes, people feel so crushed by the weight of their student loan debt that they leap before they look. It’s true that the financial pressures can be enormous once you’ve got to start making those payments every month, but there are some hard questions you should ask of anybody who is trying to convince you to do a refinance, and if you don’t like the answers they give you, or worse, if they’re unable to give you a direct answer, then you should probably reconsider.
Which Loans Are Eligible?
This is probably the first question you should ask. If your loans aren’t eligible for refinancing, then there’s no point in having the rest of the conversation, and sometimes, the loans might not qualify. You find this most often if you’ve attended a for-profit private college or community college, so it always pays to double check!
What’s The Maximum Amount I Can Refinance?
Again, it’s best to get this out in the open right up front. Refinancing doesn’t do you a lot of good unless you can get all your loans done at once. If they can’t do the full amount, then the benefits of the refinance will be greatly diminished and it might not be worth doing at all. Before you get too deeply involved in the conversation, find this out.
What Are The Minimum Requirements?
Here, you’re essentially looking at three things. You need to know what salary you’ve got to have, what your debt to income ratio needs to be, and what your credit score needs to be, at minimum, in order to get accepted in their program. If you know going in that you don’t have a high enough salary to qualify, or if your debt to income ratio is too far out of whack, then you know you won’t be able to proceed further with the talks. At least though, you’ll know what to focus on in order to get yourself in a position to refinance.
Do You Combine Federal and Private Student Loans?
This is an interesting wrinkle to consider, because some banks won’t. If your loans all come from one source, then you don’t have to worry about it, but oftentimes, this is not the case. These kinds of details matter, and you don’t want to get neck deep in the process, only to find out that your refinancing plan won’t do what you need it to do.
Is There A Loan Origination Fee?
And if there is, how much is it? Is it something you have to pay upfront, or can it be built into the loan itself?
What Are The Repayment Terms?
Once you’ve gotten all of the particulars above nailed down, now it’s time to get down to brass tacks. You need to know when your repayment would start and how much the monthly payments would be. You also need to have a firm understanding of what happens if you are late, or miss a payment. What kinds of penalties apply?. Is there some kind of discount or deduction for going with an ACH auto payment plan?
What Are The Terms Of The Loan Itself?
Here, you’re looking at two things. What’s the duration of the loan (10 years, 15 years, 20 years, etc.), and does the loan have a fixed or variable interest rate. A follow up question to the interest rate one is what that rate is, exactly, and if it floats, how the float is determined.
