How Often Can You Refinance Student Loans?

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This article first appeared on the Credible blog.

If you’ve already refinanced your student loans or are considering doing so, you know what an impact refinancing can make. Refinancing your student loans could help you save thousands over the life of your loan.

Even better, that statistic is only from people who refinance once; doing it again could help you save even more. But how often can you refinance student loans? The answer might surprise you.

Whether you’re refinancing for the first time or fifth, Credible makes it easy to compare student loan refinance rates from multiple lenders.

Refinancing your student loans

When you refinance your student loans, you work with a private lender to take out a new loan for the amount of some or all of your current federal student loans or private student loans. The new loan typically has totally different terms than your previous loans, including loan term and interest rate. If you qualify for a lower rate on your refinancing loan, you could save a significant amount of money.

For example, say you had $35,000 in student loans at 7% interest and had 10 years left to repay that student debt. If you refinanced and qualified for a 10-year loan at 5.5% interest, you’d save $3,185 over the length of your repayment plan. That’s a dramatic difference, and that’s with a relatively modest reduction in interest rate.

Tip: You can use Credible’s student loan refinancing calculator to find out just how much you can save through student loan refinancing.

How often can you refinance student loans?

While many people do a student loan refinance just once, there’s no limit to how often you can refinance your student loans. If you want to refinance twice or even more, you can certainly do so. And in some cases, refinancing again can help you save even more money than you did when you originally refinanced your student loan debt.

Let’s say you waited two years until your income increased before deciding to refinance the above loan a second time. For the new loan, you qualified for a five-year loan at a new interest rate of just 4.5%. With a shorter loan term and a lower rate, you would save an additional $4,191. That means you’ll have saved over $7,000 by refinancing your loans twice.

4 things to do before refinancing again

Before refinancing your loans for a second or third time, though, there are some actions you should take.

1. Review your interest rate

Refinancing can help lower your interest rate, but there are limits to how low you can get it. Review your interest rate — and get quotes online — to see what rate you can qualify for before submitting your application.

Credible makes it easy to compare prequalified rates from multiple lenders. You will only have to fill out one simple form and checking prequalified rates won’t affect your credit score.

2. Check your credit report

Before applying for another refinancing loan, review your credit history and report for free at AnnualCreditReport.com. If your account is in good standing — meaning you haven’t missed a monthly payment, and you’ve paid down debt since you last refinanced — you’re more likely to qualify for a loan with a much lower interest rate.

3. Think about your finances

If your income has gone up, you’re more likely to qualify for a low-interest refinancing loan than you were before. A jump in salary, for example, could help you score a lower rate and save even more money than you did previously.

Another thing to consider is any credit card debt you may have. Before refinancing, it’s best to pay off your credit card debt since it typically comes with higher interest rates than your student loans. Plus, this will help reduce your debt-to-income (DTI) ratio which, in turn, could reduce your refinancing interest rates.

4. Read the fine print

You have the legal right to pay off your federal or private student loans ahead of schedule, without being charged a prepayment penalty. While many lenders don’t have origination fees, some do. And those fees could negate your savings from refinancing. Do your research and make sure your new refinancing lender doesn’t charge an origination fee.

Get a refinancing quote

Now that you know how often you can refinance federal loans or private loans, you can start planning your next steps.

If you’ve refinanced before or are considering taking out a refinancing loan for the first time, it’s a good idea to get quotes from multiple lenders to ensure you get the lowest rates.

It takes just two minutes to get quotes with Credible, and doing so can help you save money over the life of your student loan repayment plan. If you work on improving your income and getting a good credit score, you can increase your refinancing savings.

About the author: Kat Tretina is an authority on student loans. After dealing with student loans and medical debt herself, Kat Tretina is focused on helping people conquer their debt and boost their incomes. Her work has been featured in The Huffington Post, Entrepreneur, MarketWatch, and more.