1. Decide When to Refinance
Medical students have the option to refinance their loans during or after their residency. If you choose to refinance while in residence, some lenders will limit your payments to $100 a month in recognition of your lower starting salary. But if you have federal loans, you might pay even less if you choose an income-based repayment program; therefore, explore options with your student loan administrator.
You may also qualify for a medical residency allowance on your federal loans, but interest will accrue during that time, increasing your total balance.
2. Identify which loans to refinance
Take a look at the interest rates and features of your various loans. Make sure you understand whether they are federal or private and what protections you may be giving up if you refinance them.
3. Check your credit report and credit score
Lenders will view your credit report during the application process. You are subject to one free credit report per year from each of the three major credit bureaus via AnnualCreditReport.com. Pull up your report to ensure all information is accurate.
You can check your credit score for free from a variety of sources, including your bank, credit card issuer, or current student loan provider if they offer this service. If your score is not in the good to excellent range, you may benefit from using a co-signer on your refinance application.
4. Compare Prequalified Rates
You’ll get the lowest possible rate on your newly refinanced loan if you compare options from multiple lenders before officially applying. Many lenders allow you to do this using pre-qualification tools on their websites, which allow you to see if you are likely to be approved for a loan and at what rate.
In addition to interest rates, make sure you understand each lender’s qualifications, fees, payment deferral options, and standard provisions, including what happens if you’re late or miss a payment.
5. Choose a fixed or variable interest rate
Once you’ve chosen a lender, you’ll submit a complete application, including more detailed financial, loan, income, and education information. If you’re approved, you’ll choose a repayment term – the length of time to pay off the loan – and a fixed or variable interest rate.
Fixed rates do not change over time, while variable rates can go up or down according to market conditions. While fixed rates are generally better if you plan to take longer to pay off, variable rates can make sense if you can lock in a low rate and pay off your loan quickly.
6. Keep making payments until the refinance is complete
Once you sign a new loan agreement, your lender will pay off the old loans you decided to refinance. To avoid a late or missed payment, continue making payments on your old debt until you confirm with both your previous and new creditors that your balance has been transferred.
If possible, sign up for autopay with your new lender to take advantage of interest rate discounts and ensure you never skip a payment.