Refinancing a student loan can be a great way to lower your monthly payments and lower the amount of interest you pay over the life of your student loan. However, not everyone should refinance – only about 10-20% of all student loan borrowers should consider refinancing their loans.
These borrowers include those who already have private student loans and federal loan borrowers who are on the standard 10-year repayment plan and plan to repay their loans within 5-7 years.
The reason that refinancing a student loan can make sense is that it has the potential to save significantly on interest charges. The best interest rates for refinancing student loans hover around 1.95% APR. It can be a huge saving if you are currently paying 5% or more.
But one of the secrets most lenders don’t want you to know – you can negotiate your refinance deal. Here’s how to do it!
Step 1 – Take the Tour
If you are thinking about refinancing your student loan, you need to shop around. This means getting quotes and comparing rates from at least three to five lenders before making a decision.
It doesn’t take long to shop. You can easily get quotes from most lenders in five to ten minutes. Just go to a comparison list of top lenders, check out some of the top lenders, and submit a request. Since there are around 12 major lenders, it is not difficult to get a few quotes fairly quickly.
Most applications simply require your name and personal information, the school you attended, and your loan information. This will give you a quote with a rate and terms that will allow you to compare with other lenders.
Step 2 – Put lenders in competition with each other
Once you have three to five quotes, it’s time to put the lenders against each other.
The trick here is to take a PDF of your offer (either a screenshot or an email) and send it to customer service at the other companies and see if they can beat it.
A simple script is “I would really love to work with your company, but having the best rate is what will really make the difference. Is there a way to beat the rate offered by company XXXXX? I have attached it here so you can see. “
In many cases, you will see the other company competing for your company. Various Redditors have reported saving over 1% APR on their loans by shopping around and pitting lenders against each other.
Step 3 – Don’t forget to check the bonus offers
Another important aspect to consider is a refinance bonus offer. Many lenders will not only match the rates but also add an extra bonus to using their business.
Right now, the best student loan bonus offers can be $ 1,000. Last year there were reports of bonus offers of up to $ 2,000.
Most of the higher bonus offers require high loan balances (like at least $ 100,000), but it’s not uncommon to see $ 200 or $ 300 for lower balances – even as low as $ 25,000. .
But this is another area that has the potential to be negotiated. You should never redeem a bonus offer for a higher interest rate unless you know the savings don’t outweigh the cost. But it’s rare.
It is surprising to many student loan borrowers to learn that student loan refinance rates can be negotiated. But given the tough competition in the market, lenders will work to win your business.
For some lenders, refinancing a student loan is a gateway to creating lifelong customers for other products (such as banking or investments), so for them, negotiating a little on your interest rate might help. pave the way for working with them for a long time. .