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3 Solutions To Refinance Student Loans with Bad Credit

There are a few things to consider if you’re looking to refinance student loans with bad credit.

First, it’s important to understand that your credit score is just one factor that lenders will look at when considering your application.

In addition to your credit score, lenders will also take into account your income, employment history, and other financial factors

Today, we’ll discussing 3 solutions to help you refinance your student loans with bad credit.

Solution 1: Use a Co-Signer to Refinance Student Loans

If you have poor credit, the easiest solution is to get your loans refinanced with a co-signer who is in a better financial position.

The refinanced loan will be included in the co-signer’s overall debt burden, according to lenders.

If you fail to make a payment, it will reflect poorly on the co-signer’s score, and he/she will be required to reimburse if you can’t.

Some refinance lenders offer a co-signer release.

To remove the co-signer, you must first show that your credit has improved and that you’ve made a certain number of on-time payments.

Solution 2: Improve Your Credit Score

Whether you have a co-signer or not, consider improving your credit if you don’t have one.

Make on-time payments to your creditors and keep well below your credit limits. Your credit history accounts for 35% of your FICO Score.

To see where you’re at, get your credit score and study your credit reports.

You can get a free copy of your report from each of the three major credit bureaus once per year at the annual credit report.

More: Is There Any Fee to Refinance Student Loans

Solution 3: Increase Your Cash Flow

Lenders evaluate your cash flow or the amount of money you have left over after paying for regular monthly bills like rent and automobiles.

The more cash you have on hand, the more likely a refinanced loan is to be paid back from the lender’s standpoint.

To improve your cash flow, enhance your revenue, or lower your expenses.

To reduce your debt-to-income ratio, consider resolving your credit card bill or increasing your revenue through a side business like consulting and freelancing.

Use our Calculator To See How Much You’re Going to Save

Student loan refinance calculator

Step 1: Know what you owe

How much can refinancing save? Enter details of your existing loan

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Step 2: Estimate your new rate

The better your credit, the lower the rate you’ll likely get. If you have bad credit, the best thing you could do is using a co-signer

Fixed APR: 2.15% – 5.85%. Variable APR: 1.80% – 5.28%. + ($500 Gift)

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Fixed APR: 1.99-5.79%. Variable APR: 1.74% to 8.27%

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Fixed APR: 2.49-7.04%. Variable APR: 1.98-7.14%

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Fixed APR: 2.69-7.93%. Variable APR: 2.05-5.25%. Min. credit score: 660.

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Step 3: Know how much you could save

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Alternatives to Refinancing Student Loans For Bad Credit

If your monthly payments are too high, you may not be able to pay off your substantial loan debt.

Consider one of these 2 alternatives instead, depending on your objectives and financial status:

1. Signing Up for an Income-Driven Repayment Plan

If you have federal student loans and can’t comfortably afford monthly payments, income-driven repayment plan is the good option to consider.

You’ll get a lower monthly payment based on your earnings, with repayment terms of 20 or 25 years.

You won’t save money on interest, but you will be released from your obligation at the end of the term.

You may also like: Can I Refinance Student Loans During My Grace Period?

2. Federal Student Loan Consolidation

A consolidated loan is one that permits you to combine many obligations into a single, bigger loan.

If you have various loans with varying interest rates and terms, this can help you simplify your monthly payments while also potentially saving you money on interest.

It won’t reduce the interest rate like refinancing with a private lender. However, extending your term of credit may lower your monthly payment.

Frequently Asked Questions