Refinance Student Loan With Bad Credit: Is It Possible?
While it is no fun stepping out of school and taking out a loan straight away to fund a university degree, this is a path many people choose to take. After all, in the long run, you should be able to pay off this debt with the money made once you find a job in your industry thanks to your completed university degree.
But what happens if you don’t land that dream job straight away? Or if you don’t manage to get a job at all? Is there a way you can refinance your loan and get yourself back on track?
We take a look at whether you are able to refinance a student loan with bad credit. And if so, is this a good option to take?
A student loan is a loan that is taken out to cover the costs of your study. It is expected to be paid back over time, incurring interest charges in this period. These loans are often quite large, as they are taken out to fund a course that may span across a three to five year period. While ideally, you will be working part-time while studying and aiming to pay the loan off, this isn’t always possible, depending on the workload of your chosen degree, as well as other expenses you might have, like food, etc.
If you are eligible, Australian citizens, permanent humanitarian visa holders, and students can access a number of different Government loans, including HECS-HELP, FEE-HELP, SA-HELP and OS-HELP. These loans don’t have any interest charged, but rather after 11 months indexation is added to make sure it is on par with the cost of living. Loan repayments are then made through the Australian taxation system, or you can make voluntary repayments at any time.
Refinancing Your Loan
People choose to refinance loans for a number of reasons. Most commonly, if your loan is too risky or too expensive, refinancing your loan allows you to find a better deal. Things may have changed from when you first took out a loan, with more options now available to you that you want to take advantage of.
Here are some reasons to consider refinancing your student loan:
- Save money: you may look into better interest costs and refinance your loan with one that has cheaper interest rates.
- Shorten the loan: instead of a long-term loan, you can refinance it into a short-term loan with a lower interest rate.
- Change loan type: you may want to change from a variable-rate loan to a fixed-rate loan.
Refinancing Your Student Loan With Bad Credit
If you have a private student loan, the refinancing that loan is your best option, as it will allow you to shop around for a better interest rate, saving you thousands in the process.
While it’s not entirely easy, it is possible to refinance your student loan with bad credit. There are so many different reasons you may find yourself with bad credit:
- Large loan you have been unable to repay.
- Missed repayments.
- You have graduated from university with a large student debt but haven’t managed to get a job.
- You have no other credit, other than your student loan.
- Unforeseen circumstances.
While it may feel like you will never get on top again, there are ways to get out of debt – it just takes time and dedication.
What lenders are looking for is that you have taken out loans in the past and been able to repay them consistently on time. If you don’t have this history to your name, it can make it trickier to take out a loan.
How To Go About It?
Many financial institutions won’t even look at you unless you have a credit score of over 650. At Bad Credit Loans, we look at other variables when assessing your ability to pay back a loan. To find out more, enquire online and we’ll get back to you with hassle-free advice.
At the same time, you can consider a cosigner. Having a co-signer can help you get approved for student loan refinancing to help you secure a lower interest rate. Essentially, they will be equally responsible for your student loan, taking away any of the risks on the lender’s behalf. Some lenders will allow the co-signer to be released from these obligations down the track if you build up your credit score and prove you are able to pay your loan back, on time.
In the meantime, it’s important to work on your credit score. Make sure you are meeting all the schedule repayments and ask for help if you need it. While you may not get your dream job right after university, just getting your foot in the door of your industry is the best start and you can build up from there.