Refinancing your student loans is one of the easiest ways to save money and interest payments and lower your monthly student loan expenses. You can easily free up additional cash, get your budget under control, and experience a sigh of relief after refinancing is complete. To help prevent getting rejected for refinancing you should use Parent PLUS loans. These loans help gain lenders approval since the parents are cosigners, which can offer reduced interest rates.
It’s impossible to claim you will receive approval for student loan refinancing. Remember, the refinancing company is in the process of loaning you a tremendous amount of money, so they will do their due diligence to ensure you can repay them.
According to Studentloansconsolidation.co, a website sharing a list of the best student loan consolidation companies, “Student loans are necessary for most students who are pursuing a degree at an institution of higher education.”
If you intend to apply for student loan refinancing in the future, please pay attention to the common reasons why you may end up getting denied. We will share the most popular below, so if you pay attention your chances will improve if you plan ahead.
1. Your Credit Score Needs to Improve
The purpose of refinancing is to take out a new loan at a lower interest rate. So companies that refinance student loans are going to look at your credit score during the application phase.
Did you know that lenders often set a minimum credit score requirement to qualify for student loan refinancing? They typically want their borrowers to have a minimum score of 660 to 680.
Your lender may not have a minimum credit score requirement at all, but having a low score will typically disqualify you from receiving financing during the application process. So it’s certainly in your best interest to keep this in mind.
You should always take steps to increase your credit score if you feel it’s too low to qualify for additional credit. To accomplish this, always make sure all your credit card and loan payments are made on time. Pay down your debt to lower the amount of credit you’re using, and ask your creditors to raise your credit limits to improve your debt to credit ratio.
Lastly, it’s helpful to check all three of your credit reports from each credit bureau including Equifax, Transunion, and Experian. Look for inconsistent information and information that’s incorrect because it could have a negative impact on your score. If you discover something out of place, immediately contact the credit bureau and tell them about the errors so they can fix them.
2. You Don’t Make Enough Money
There’s no guarantee that every lender will require specific income levels to qualify for refinancing, but your chances of successfully applying for a new loan will improve greatly if you have a higher income. Some lenders might require a salary of $25,000-$75,000 to reach eligibility requirements.
Do you believe your income will hold you back from refinancing possibilities? If so, take the time to research potential eligibility requirements prior to applying for student loan refinancing. By doing so, you’ll discover lenders without a minimum requirement, and realize it may be in your best interest to stick with them instead of choosing stricter companies.
3. Your Debt to Income Ratio Is Out Of Balance
You can make more money than Warren Buffett and still get denied for student loan refinancing if you currently have lots of debt. Before getting approved for a refinancing loan, your lender will take a strong look at your current debt to income ratio. If it appears out of balance – meaning you are carrying too much debt – you will get rejected.
If you plan to apply for student loan refinancing soon, pay attention to the information shared today and work on your financial picture to prevent being rejected.