Today’s post is going to share the financial criteria that make you an ideal candidate for refinancing.

Estimated read time 4 minutes.

Oh student loan refinancing you’re so sexy. You promise to slash my interest rate and save me thousands of dollars. I can see the backpacking trip across Europe I can buy with that savings now. But behind that allure I wonder What are you hiding? Where’s the catch?

Here’s the catch. Refinancing is the best option for those with substantial financial security. And I’m not just talking about the ability to pay your bills every month. I’m talking standard adult level financial security. The kind that looks at your assets (hah! what assets, my education?) and liabilities (all your other debts) and your earning power and monthly cash flow.

Read on to see if you’re financially secure enough to refinance your student loans.

 

You have a high and predictable income.

How high? That’s a tricky question but essentially the higher the better. Refinancing companies are cherry picking safe investments so the higher your income the more likely you are to repay your debt. Think about this, the average income of someone refinancing through Earnest was over $130,000.

Refinancing companies also want to see predictable income, meaning they favor people who are employed and have a steady paycheck coming in. For your own sake you also need to have predictable income because a refinanced loan is a private loan and can lose much of the payment flexibility offered by federal loans.

 

You have a good to excellent credit score.

Most refinancing companies only refinance student loans for borrowers with credit scores over 680, some go down to 660. The better your credit score the better your interest rate.

 

You have some assets.

This doesn’t just mean something like a house. This includes your savings account and investment accounts such as a 401K or IRA. The more money you have in assets, the better you look to refinancing companies.

 

You’re ready to pay off your debt.

Refinancing shouldn’t be used to stretch out the length of your repayment term. A federal loan is more flexible and forgiving when it comes to unplanned financial problems. If you feel like you need a lower monthly payment, choosing a different federal repayment plan is a better option.

If you have high interest private loans refinancing could be a good option because a lower interest rate could lower your monthly payments without extending the duration of your repayment.

 

Still interested in refinancing?

If you’ve answered these questions positively, you should start looking into refinancing. Every day you wait you’re racking up interest. Get started with these articles. If you’re not quite sure if refinancing is right for you send me an email jeni@repayable.org and we’ll talk through your student loans and find a repayment strategy that works for you.

Is Student Loan Refinancing Right For You?

How to Choose the Refinancing Benefits You Need

The Top Student Loan Refinancing Companies

How to Find the Best Refinancing Rates Fast