How To Refinance Student Loans With Bad Credit

By Mentor Staff | Edited By Mentor Staff

Updated On October 29, 2021

Editorial Note: This content is based solely on the author's opinions and is not provided, approved, endorsed or reviewed by any financial institution or partner.

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Refinancing student loans is an excellent option to lower your interest rate, save money and pay off student loans faster. Student loan refinancing lenders prefer borrowers with good credit. What if you have bad credit? Can you refinance student loans with bad credit? If you want to know how to refinance student loans with bad credit, this guide can help. In this guide, we will discuss how to refinance student loans with bad credit and some helpful alternatives:

If you want to know how to refinance student loans with bad credit, you have options. Apply with a co-signer. Raise your credit score. Consolidate student loans—and much more.

Top Picks For Student Loan Refinancing

December 2022

Variable APR ?APR, or Annual Percentage Rate, is the price you pay to borrow money. Variable APR means that your interest rate can fluctuate over time, which can increase or decrease your monthly student loan payment. Typically, a variable-rate loan has a lower introductory rate than a fixed-loan rate loan. Variable APR includes a 0.25% discount when you enroll in autopay.
Fixed APR ?APR, or Annual Percentage Rate, is the price you pay to borrow money. Fixed APR means that your interest rate will always stay the same. Even if interest rates change, your interest rate or monthly payment will not. Fixed APR includes a 0.25% discount when you enroll in autopay.
APR
4.49% - 8.99%
4.49% - 8.99%
4.49% - 8.99%

View Details

on SoFi's website

Overview

Variable APR:
4.49% - 8.99%
Fixed APR:
4.49% - 8.99%
Minimum Credit Score:
650
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000 ($10,000 in CA)

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All states
Hardship Deferment:
Yes
Co-signer Option:
Yes
3.99% - 8.29%
4.39% - 8.99%
3.99% - 8.99%

View Details

on Earnest's website

Overview

Variable APR:
3.99% - 8.29%
Fixed APR:
4.39% - 8.99%
Minimum Credit Score:
650
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5-20 years
Borrower Residency:
All States except NV
Hardship Deferment:
Yes
Co-signer Option:
No
3.99% - 8.29%
4.39% - 8.99%
3.99% - 8.99%

View Details

on NaviRefi's website

Overview

Variable APR:
3.99% - 8.29%
Fixed APR:
4.39% - 8.99%
Minimum Credit Score:
650
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,001 ($10,001 in CA)

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5-20 years
Borrower Residency:
All States except NV
Hardship Deferment:
Yes
Co-signer Option:
No
3.53% - 7.24%
4.83% - 7.64%
3.53% - 7.64%

View Details

on ELFI's website

Overview

Variable APR:
3.53% - 7.24%
Fixed APR:
4.83% - 7.64%
Minimum Credit Score:
680
Minimum Income:
$35,000
Fees:
None
Minimum Loan Amount:
$10,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All States
Hardship Deferment:
Yes
Co-signer Option:
Yes
2.50% - 8.65%
3.99% - 8.49%
2.50% - 8.65%

View Details

on Splash's website

Overview

Variable APR:
2.50% - 8.65%
Fixed APR:
3.99% - 8.49%
Minimum Credit Score:
640
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5 – 25 years
Borrower Residency:
All states
Hardship Deferment:
Varies
Co-signer Option:
No
5.09% - 11.67%
5.39% - 11.87%
5.09% - 11.87%

View Details

on Citizens' website

Overview

Variable APR:
5.09% - 11.67%
Fixed APR:
5.39% - 11.87%
Minimum Credit Score:
Not disclosed
Minimum Income:
$24,000
Fees:
No prepayment or origination fees
Minimum Loan Amount:
$10,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All states
Hardship Deferment:
Yes
Co-signer Option:
Yes
2.50% - 6.80%
4.49% - 6.90%
2.50% - 6.90%

View Details

on Laurel Road's website

Overview

Variable APR:
2.50% - 6.80%
Fixed APR:
4.49% - 6.90%
Minimum Credit Score:
660
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All States
Hardship Deferment:
Yes
Co-signer Option:
Yes
3.27% - 6.87%
3.99% - 10.68%
3.27% - 10.68%

View Details

on LendKey's website

Overview

Variable APR:
3.27% - 6.87%
Fixed APR:
3.99% - 10.68%
Minimum Credit Score:
680
Minimum Income:
$24,000
Fees:
None
Minimum Loan Amount:
$5,000

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All states, except ME, ND, NV, RI, WV
Hardship Deferment:
Yes
Co-signer Option:
Yes
-
3.94% - 9.08%
3.94% - 9.08%

View Details

on ISL's website

Overview

Variable APR:
-
Fixed APR:
3.94% - 9.08%
Minimum Credit Score:
670
Minimum Income:
None
Fees:
None
Minimum Loan Amount:
$5,000 ($10,000 in CA)

Details

Eligible Loans:
Private & Federal
Eligible Degrees:
Undergraduate & Graduate
Loan Terms:
5, 7, 10, 15, 20 years
Borrower Residency:
All states, except OR and ME
Hardship Deferment:
Yes
Co-signer Option:
Yes

How to Refinance Student Loans With a Co-Signer

Generally, it is difficult to refinance student loans with bad credit. Student loan refinancing lenders prefer borrowers who have good to strong credit, with a minimum score of 650. Many borrowers who are approved for student loan refinancing have at a credit score of at least 700.

If you have bad credit, the best solution is to apply with a co-signer. A co-signer can be a family member or relative, for example, who can help you get approved for student loan refinancing and even help you get a lower interest rate. To qualify, your co-signer must meet the qualifications for student loan refinancing, which may include, among others:

  • A credit score of at least 650
  • Stable and recurring monthly income
  • Low debt-to-income ratio
  • Strong monthly cash flow
  • History of financial responsibility

Once you refinance student loans, a co-signer has equal financial responsibility for your student loan. The good news is that many lenders offer a co-signer release option. A co-signer release enables you to remove your co-signer once you meet certain requirements, which may include a minimum number of monthly student loan payments, improved credit and other requirements.

Raise Your Credit Score

A strong credit score is one factor that can help increase your chances of being approved for student loan refinancing. If you do not have a co-signer, you can focus on improving your credit score. Your FICO credit score can range from 350 (low end) to 850 (high end). Generally, a credit score of less than 550 is considered bad credit. To get approved for student loan refinancing, you need a minimum credit score of 650. Many borrowers who refinance student loans have credit scores of 700 or higher. If you want to raise your credit score, focus on the underlying components of credit.

Credit score is determined by these major factors:

Payment History

Pay your bills on-time. Don’t skip payments. If you can do these two things well, you can develop a strong payment history and demonstrate strong financial responsibility.

Credit Utilization

Credit utilization is how much money you have borrowed as a percentage of your available credit. For example, if your credit card limit is $10,000 and you have charged $9,000 on your credit card, your credit utilization would be $9,0000 divided by $10,000, or 90%. Generally, you want to maintain a low credit utilization.

Length of credit history

A long credit history shows that you have been a responsible borrower and have a history of financial responsibility. Lenders prefer that borrowers have more information about their credit history.One way to raise your credit score is to have credit card accounts open for a long period of time so you can increase the average age of your credit accounts. If you don’t have a long credit history, you can still have a strong credit score by making on-time monthly payments and low credit utilization.

New credit

Lenders will evaluate how often you open new credit. You should only open a new credit account when you need one. When you open new credit, your average account age decreases, which can adversely impact your credit score if you don’t have a history on on-time payments.

Credit mix

Lenders prefer to work with borrowers who have a diverse credit mix. For example, you could have various types of credit, including installment loans such as a student loan and revolving credit such as a credit card. If you can demonstrate your ability to borrow different types of credit and repay responsibly, lenders view you with less risk.

Improve Your Debt-To-Income Ratio

To be approved for student loan refinancing, lenders will evaluate your total debt and income. This includes all your existing debt such as student loans, credit card debt, personal loans and a mortgage. Then, they will compare your monthly debt payments to your monthly income in the form of a ratio. This ratio is called a debt-to-income ratio, which is your total monthly debt payment as a percentage of your monthly income.

For example, if your monthly debt payment is $1,000 and your monthly income is $10,000, your debt-to-income is $1,000 divided by $10,000, or 10%. Ideally, lenders prefer a debt-to-income ratio below 30% so that you can repay your debt obligations and have money for living expenses.

How can you improve your debt-to-income ratio? The best way to improve your debt-to-income ratio is to increase your income, lower your debt or both. When you increase income, you have more resources to pay off debt, which can improve your monthly cash flow. Lenders like borrowers with higher monthly cash flow because these are lower risk borrowers who can repay debt and afford living expenses.

For example, you can lower debt expenses by paying off an outstanding credit card balance.You could also consolidate credit card debt with a person loan, which can lower your interest rate. You can increase your income with a side hustle, consulting or asking for a raise.

Consolidate Student Loans

If you are unable to qualify for student loan refinancing, one step to help you organize your student loans is federal student loan consolidation. When you consolidate student loans, you combine your existing federal student loans into a new Direct Consolidation Loan. Student loan consolidation is a helpful tool to organize your federal student loans into a single loan with one monthly payment, interest rate and student loan servicer. Unfortunately, private student loans not eligible for federal student loan consolidation. When you consolidate federal student loans, you do not receive a lower interest rate. Rather, your new interest rate is equal to a weighted average of the interest rates on your current federal student loans. Therefore, while federal student loan consolidation does not save you money, it can help you stay organized and better manage your monthly student loan payments.

Enroll in an Income-Driven Repayment Plan

If you have federal student loans and are unable to afford your monthly payments, you could consider enrolling in an income-driven repayment plan. Income-driven repayment plans allow you to lower your monthly student loan payment based on your income, family size and other factors. Unlike student loan refinancing, income-driven repayment plans do not lower your interest rate. While you can make lower monthly student loan payments, interest will still accrue on your federal student loans. However, you could be eligible for student loan forgiveness after 20 years for undergraduate federal student loans or 25 years for graduate federal student loans.

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