If you’re looking for, and more appropriately, can qualify for the lowest student loan refinancing rates, then you have options at your disposal. This is especially true if you are seeking out the lowest of the lowest interest rates that the market has to offer. This likely involves excellent credit, or at least clean credit, and a cosigner with excellent credit scores as well.
If you have good to really good credit and a cosigner with good credit and above then you should definitely read on as well as you are likely still eligible for excellent rates on your student loan refinancing needs. What we are going to do is take a look at the factors involved, what the funding sources are and where and how to shop for the best interest rates online and with an easy loan application system.
Credit scores factor a number of items such as payment history, credit mix, average age of credit, credit utilization… etc. Lenders rely on credit scores to determine a borrower’s likely ability to repay a loan according to the terms of the loan agreement. The higher the score, the lower the risk and the lower the score, the higher the risk. This is how they quantify risk using the 3 major credit reporting agencies/bureaus, and many lenders will rely on your FICO score, which factors information from the 3 major credit bureaus in determining your credit score… those bureaus being Experian, Equifax and TransUnion.
Let me just be a normal human for a moment – well, normal for me at least. The people who need the most help are generally people with tougher credit score challenges. If you fall into that category, I don’t want to discourage you from applying for student loan refinancing as there are lenders who will consider your application as well. That said, private lender loans and loan refinancing works differently than the underlying federal student loans you may have taken, as those are not credit-driven.
And look, I didn’t always have top credit scores and I worked my way out of debt, on the personal loan side, incrementally and in stages with several refinancing. As I have 3 degrees, 1 undergraduate and 2 law degrees (yes, I’m a dumb schmuck with 2 law degrees), I have successfully dealt with multiple federal student loans and private student loans and loan refinancing in my own life, so I do feel your pain but there’s no way around the big ass elephant in the room.
If you want the lowest student loan refinancing rates, your credit scores, or more accurately, the credit scores presented in your application will need to be really strong. So what’s a really strong credit score and how does that translate here? Glad someone asked so here’s the Daddy Poorbucks credit score breakdown, in groups, and how I classify each – in my own way:
830 – 850: You are the absolute cat’s meow and your rates will be unbeatable.
800 – 829: You are the bomb-digity and your rates will show it.
775 – 799: You are doing great and your scores will yield you great rates.
750 – 774: You are a strong borrower and your rates will be really competitive.
725 – 749: You have good credit and will get good rates.
700 – 724: Your credit is considered pretty good and you can expect some offers which are also competitive.
675 – 699: You are fair to good and your rates will be better towards the top end.
640 – 674: You are in the higher echelon of fair credit at the top of the range and barely fair at the bottom of the range.
350 – 639: You might get a ReFi towards the top of the range but loans become more challenging below that.
I said this is how I see it because every lender is different and they all have variations. Look man – it’s a lot of sh-t out here that I need to sum up from a zillion sources, so just go with it. As it relates to the difference between variable and fixed rate loans, rates are lower for variable interest rate loans and higher for fixed rate interest rate loans. Fixed are locked in for the life of the loan whereas variable rate loans can change. If you want to read up on that decision-making challenge, my article entitled Private Student Loan Refinance Options – Choosing Between Fixed & Variable Interest Rate Loans should help explain it.
The lowest rates right now are as low as roughly 1.81% – 1.90% variable APR or 3.49% fixed APR. On the higher end, rates can easily go from 9-12% approximately. The average rates on student loan refinancing for variable rate loans are in the 5.5%-6% range. You can look at the range of rates I gave you and look at the credit score groupings and this will give you a quick idea. There is no way to tell exactly where you will fit in on the credit score/interest rate student loan refinancing scale without checking your rates, which you can do here at Loan camel without impacting your credit scores on our Student Loan Refinancing page.
A big challenge people have coming out of school is not having much credit built up which is why I advocate in my article entitled Private Student College Loans – Bridging the Gap Between School Costs & Federal Loans, Grants & Scholarships, in favor of taking supplemental private student loans, when needed, with minimal payments from the start, in order to start building credit ahead of schedule. To overcome that, private lenders will lower your rates with a qualified cosigner. And that all ties into the next question…
So when you are fresh out of school, or not so fresh out of school, and looking for student loan refinancing, because you may not have an established credit history and solid income history, a cosigner can help you get the lower rates by agreeing to be responsible for payment should you not make your Payments.
They are, in essence, a guarantor of your debt. This automatically makes your loan less risky because now the lender has recourse against another party should you fail to pay as agreed. If you do not have a cosigner, you may not qualify for the loan, let alone qualify for a better rate. It’s a risk though for your cosigner so often that person is someone close to you like a relative or family friend.
Your cosigner is not stuck on your loan forever. The lenders we work through here at Loan Camel have different options for releasing your cosigner from the loan after successful on-time payments running from 12-36 months from the start of your loan. Not only do all of your payments have to be made on time but you will now likely need to qualify for the loan on your own credit and income.
One other option is to do another refinancing on your own, if you can get better rates, and lose your cosigner all together when your new loan pays off the existing loan. You can check those rates without impacting your credit on Loan Camel at anytime here, as previously mentioned. While 90% of borrowers on private student loans need a cosigner, the number is much lower for refinancing, especially when out of school for some time. But if you are trying to get the LOWEST student loan refinancing rates, even though you may qualify on your own, a cosigner may be needed for the very lowest rates.
And listen up – try not to feel badly for needing a cosigner or asking for cosigner assistance, especially if you are fresh out of school. It’s not easy to get a first job and live on that income saddled with school debt and new-found responsibilities. Do the best you can. The longer you are out of school, the less likely you are to need a cosigner which is why I advocate for people paying minimum monthly payments on private student loans while in school, as opposed to deferment, to get your credit up faster.
So monster banks is just another Daddy Poorbucks term for the type of big banks whose first preference for business is targeting the largest corporations. Community lenders are local community banks and credit unions that offer some of the lowest rates out there based on providing a service to a community or a member group.
By supporting community lenders, not only are you getting some of the lowest rates out there, but you are supporting entities which are founded on giving back to communities and service to their clients. The good news is that here at Loan Camel we are able to match you up with community lenders for all of our student loans and student loan refinancing as that is who we work through. And you can do it all here on our site starting with the ability to simply check your rates without impacting your credit. For more detail on community lenders, my article entitled Best Student Loan Lenders – Low Interest Rate Credit Unions & Community Banks at Your Fingertips, goes into the differences between the big banks and the different community lenders, in greater detail.
OK, I better stop my 1986 Eric B & Rakim “Paid in Full” flashback. I mean, I’m old, “peoples over here to the peoples over there.” so I go Old School like that on an ADHD tangent but there’s absolutely no need to contemplate sticking up anyone.
Here comes the lawyer and neurotic Jewish parent in me: It’s wrong, illegal and dangerous, so there’s that too, and there are proper ways of funding your ReFi with some of, if not, the lowest student loan refinancing rates out there. Here’s how it works and what it looks like:
Existing Student Loan Example:
Loan Amount: $50,000.00
Loan Term: 10 Years (120 Months – No payments made prior to graduation)
Interest Rate: 9.65% (Variable/Average Credit)
Monthly Payment: $933.84
Fixed Rate Loan Example:
Loan Amount: $50,000.00
Loan Term: 10 Years (120 Months)
Interest Rate: 3.46% (Fixed/Excellent Credit)
Monthly Payment: $493.00
Variable Rate Loan Example:
Loan Amount: $50,000.00
Loan Term: 10 Years (120 Months)
Interest Rate: 1.81% (Variable/Excellent Credit)
Monthly Payment: $456.00
Check out your rates here on Loan Camel with our nationwide community lenders whom you can apply for loans and be matched up with online right here. No more walking into every local bank or credit union you can find. You can use our loan calculators to further consider your options and then apply for the loan and terms you want with fast approval processes in place, all right here through the Camel.
If you are ready and would like to see how much you could potentially save while not impacting your credit – at least not until you apply – please check out your options for Student Loan Refinancing on Loan Camel here. If you need any assistance, please feel free to ask. Either the Camel (yeah, he talks) or Daddy Poorbucks will respond. We’re simply helping people over the hump.
If you are looking to consolidate only federal student loans, in order to maintain the federal loan benefits on those loans only, please see the Federal Student Aid Office of the U.S Department of Education’s Direct Consolidation Loan Application page.