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Debt-To-Income Ratio Student Loan Refinancing

Want to know the required debt-to-income ratio to be able to refinance your student loan?

Borrowers with debt-to-income ratios below 50% are typically sought after by lenders for student loan refinancing.

Lenders compute your debt-to-income ratio by dividing your total monthly debt payments and other financial obligations by your gross monthly income. 

The lower your debt-to-income ratio, the more likely you are to qualify and obtain a low-interest loan.

In this post, we’ll provide an overview of your debt-to-income ratio for student loan refinancing, how to improve it, and refinance lenders that accept high DTI.

Are Student Loans Considered In Your Debt-to-Income Ratio?

Lenders usually consider your current student loan payment when calculating your debt-to-income ratio.

The total amount you’ll owe will be based on your mortgage, any other debt payments, and obligations like child support, as well as your housing payment.

Consider pre-qualifying for student loan refinancing if your DTI is high to see if you meet additional lending criteria.

It won’t harm your credit, and it will provide you with a predicted personalized interest rate.

Can you Refinance With a High Debt-to-Income Ratio?

If your debt-to-income ratio is high (more than %50), you may be able to renegotiate student loans by increasing your income or paying down debt.

If none of these options are available, you might be able to get your loan refinanced if you have a co-signer.

A high debt-to-income ratio suggests that a significant amount of your income goes toward debt.

According to the Federal Reserve, a debt-to-income ratio of 40% or more is an indication of financial strain.

A low debt-to-income ratio (less than 20%) indicates that you have flexibility in your budget.

By lowering your monthly student loan payment, refinancing student loans can help you reduce your debt-to-income ratio.

If you get this, you may be able to get a mortgage in the future to buy a home.

Consider alternative options such as enrolling in an income-driven repayment plan if you can’t qualify for a student loan refinance because of your DTI.

You may also like: Is There Any Fee to Refinance Student Loans

Bonus: Refinance With Splash Financial With High Debt-to-Income Ratio (35%-50%)

Splash Financial Student Loan Refinance

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  • Min. credit score: 650
  • Fixed APR: 1.99-5.79%
  • Min. Credit Score: 640 (or your co-signer)
  • Loan amounts: $25,001 to $500,000

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You could estimate how much you could save by using our student loan refinancing calculator

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

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How to Lower Your Debt-to-Income Ratio to Qualify for Refinancing

When a loan is approved, each lender will check for various requirements such as your credit score and debt-to-income ratio.

Certain refinancing lenders may demand a lower DTI than 50%, while others will allow you more leeway to go above that crucial threshold (such as Splash financial).

If you don’t have a qualifying student loan refinancing debt-to-income ratio, consider using one or more of the following five strategies to improve your DTI:

1. Start a Side Hustle to Increase Your Earnings

If you have the time and flexibility, moonlighting during the week or on weekends might be a gold mine for your money.

Many interests may be transformed into a modest, part-time business.

2. Pay Off Credit Cards

A credit card bill is typically costly, and it should be paid off in full every month.

When you pay off your debts, the minimum monthly payment on your credit report will be zero.

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

3. Pay Off Other Loans to Decrease Your Debts

It’s considerably more difficult to pay off a car or house than it is to pay off a credit card in most cases, but if you have the funds with which to settle a loan, your DTI will go down.

4. Find a Better-Paying Job

It’s not always simple.

However, if you’ve been in your role for a while and don’t see a rise on the horizon, perhaps a higher-paying position at a new firm is yours.

5. Get a raise at work

It’s more difficult said than done, but if you’ve been in the same position for a while and get good feedback from your employer, you might ask for a pay raise.

Don’t get sidetracked by your debt-to-income numbers.

Even if you’re not concerned about your student loan refinancing debt-to-income ratio right now, it’s a good indicator of your financial health.

You may also like: 3 Solutions To Refinance Student Loans with Bad Credit

How to Calculate Your Debt-to-Income Ratio

Add up your minimum monthly bill payments, including credit cards, student loans, or any other sort of debt.

To find your DTI, divide the total by your monthly income.

If you make $4,000 per month and must pay off $1,000 in debt each month, your DTI percentage is simply $1,000 divided by $4,000 ($1000 divided by $4,000 then multiplied by 100 to get the percentage). The DTI is 44%.

(Total monthly payments ÷ monthly income) x 100 = DTI

You may also like: 5 Solutions If Your Student Loan Refinancing Denied

How Does Refinancing your Student Loans Influence Your Overall Debt to Income Ratio?

Student loan payments are included in your DTI, just like automobile payments or personal loans.

Your DTI can go up or down as a result of refinancing.

If you refinance to get a greater monthly payment, your DTI will increase. While this may be bad for future loans, it isn’t always a negative thing in the long run.

Keep in mind: A higher monthly payment might help you pay off your loan faster and save money on interest. This is a financial gain in general.

Your DTI will go down After you refinance with lower monthly installments.

A lower monthly payment might indicate that it will take you longer to repay your student loans and result in more total interest paid.

While you shouldn’t make a refinancing choice based on only one change in DTI, it is one of the variables to consider.

Frequently Asked Questions