Student Loan Refinancing When You Have Bad Credit

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One of the toughest situations to be in as a borrower with student loan debt is needing or wanting to refinance your loans to save money, but not having the credit you need to be approved for the terms of refinancing your loans.

It can feel a lot like you’re trapped in an endless cycle–you can’t save enough money because you can’t get approved to refinance your loans, but you can’t get your loans refinanced because you don’t have enough money to build up your credit score.

So, what can you do?

Luckily, there are some tricks you can use as a borrower to move toward a refinancing solution, even if you don’t have a strong credit history.

Here are some tips:

1. Make sure your loans are not in default

This is absolutely critical. If your student loans are currently in default, there is not a lender on this planet that will let you refinance.

So, you may need to make some sacrifices or tough decisions, but if your ultimate goal is to refinance your student loans, then you will need to fight to make sure they don’t enter default. Or, if they are already in default, then you’ll need to work hard to get caught up and restore them to non-default status.

Consolidate and lower the interest on your student loans
Variable APR from 1.87% – 5.41%
Fixed APR from 2.30% – 5.94%

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2. Get a creditworthy cosigner

This may seem obvious, but one of the easiest things you can do to get qualified for a student loan refinance with poor credit is to have someone cosign your loan.

This can be a relative or close friend–the key is that they must have strong credit history. Having someone else with poor credit cosign won’t help you get approved.

Also keep in mind that a cosigner on your loans will become just as liable for that debt as you are. You must be diligent to keep up with your payments, otherwise you’ll put them in the tough position of having to take responsibility for your student loans.

3. Find lenders with alternative credit criteria

If you don’t have the best credit in the world, but you have a degree and strong earning potential, then many lenders are willing to consider alternative credit factors when granting student loan refinancing.

These lenders will likely still run a traditional credit check at some point–so your credit score will still matter–but they are also likely to take into account your general saving and spending habits, as well as your credit trends (i.e., improving credit history) when making their underwriting decisions.

One such lender to check out is Earnest. They offer competitive rates and terms, but provide more flexible underwriting as an independent student lender.

You may also want to explore LendKey, which is a site that connects you with local/regional not-for-profit credit unions and community banks. These institutions also generally offer competitive rates and terms, but are often more flexible in their underwriting criteria.

4. Show history of making student loan payments

Even if your overall credit history isn’t great, you may still be able to prove your creditworthiness to a student loan provider by simply having a strong track record of making on-time student loan payments.

Because student loans are a unique type of loan (e.g., they don’t require physical collateral), they are sometimes treated differently in a borrower’s history when evaluating them for a loan.

So, even if you don’t have a long track record of perfect credit, you can still show you’re a responsible borrower by at least making your current student loan payments on time.

 

Lender Rates (APR) Eligibility
Earnest company logo.
Variable APR: 1.88% - 5.64%*
Fixed APR: 2.44% - 5.79%*
Undergraduate and Graduate
VISIT EARNEST
Lendkey company logo.
Variable APR: 1.90% - 5.25%*
Fixed APR: 2.49% - 7.75%*
Undergraduate, Graduate, Parent PLUS
VISIT LENDKEY
Credible company logo.
Variable APR: 1.80% - 9.99%*
Fixed APR: 2.15% - 9.99%*
Undergraduate and Graduate
VISIT CREDIBLE
Laurel road company logo.
Variable APR: 1.64% - 5.65%*
Fixed APR: 2.25% - 5.75%*
Undergraduate and Graduate
VISIT LAUREL ROAD
Commonbond company logo.
Variable APR: 1.96% - 7.02%*
Fixed APR: 2.59% - 6.94%*
Undergraduate, Graduate, Parent PLUS
VISIT COMMONBOND
Fixed APR: 2.44% - 5.97%*
Undergraduate, Graduate, Parent PLUS
VISIT ISL Education Lending
Variable APR: 1.87% – 5.41%**
Fixed APR: 2.30% – 5.94%**
Undergraduate, Graduate, Parent PLUS
VISIT Nelnet
Variable APR: 2.94% - 4.84%*
Fixed APR: 2.99% - 4.94%*
Undergraduate and Graduate
VISIT College Ave
Variable APR: 1.86% - 6.01%*
Fixed APR: 2.47% - 5.99%*
Undergraduate and Graduate, Parent PLUS
VISIT ELFi

*APR includes a 0.25% interest rate reduction for enrollment in automatic payments.

**Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is canceled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan.

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