Tuition costs for international students in the U.S. are constantly increasing. There are very few funding options available. Financial aid is fairly limited and mostly available only for students from low-income backgrounds.
Most international students studying in the U.S. have to rely on loans from their home countries. These loans have high interest rates and usually, need a collateral. Many students are not able to secure even these loans; even for students who are able to secure loans, either the amount is not enough or the interest rates are prohibitive.
After finishing school, students are always looking for a way to reduce this financial burden on their parents. One of the best ways to do that is to refinance their student loan in the U.S.
There are a few ways you can reduce your interest rate on student loan refinancing:
- Build a good credit score: This is a basic requirement for any type of refinancing. As an international student, you may not have had time to build a long credit history but make sure what you have is good. If you’ve been lucky to get an SSN and get started on a credit history, try to have zero negative marks on it. Read this article on how to build a good credit history for international students.
- No derogatory fees: Every lender would want to look into your past payment patterns to determine if you’ve been consistent. If they see that you have not had enough balance in your account, have been charged fees due to insufficient funds, overdraft etc. you will get negative marks for that. Try to be responsible in using both debit and credit accounts during school. There may be months when meeting expenses can get tough, but that’s what a potential lender is looking for. Does this borrower meet their obligations even if the going gets tough?
- No Defaults/Collections/Bankruptcies: These are all credit related negative marks that significantly drop your credit score and automatically gets your application rejected. These are important factors of credit risk. Sometimes, retail credit cards such as Macy’s, JC Penney, Kohls and others offer credit cards in store for an immediate discount, but if you forget to pay them back, they significantly lower your credit score.
- Stable job and consistent income: As you graduate and get a job offer, a lender would evaluate if your job will be stable for the term of the loan. A consistent income will be the source of payments for years to come. You may switch jobs in a few years, but it is still important to have a verifiable source of consistent income.
- Reduce loan term: It may be tempting to apply for a long-term loan to lower your monthly payment but interest rates increase as you increase the loan term. If you want to lower your rates, choose the shortest term possible. Keep in mind that you’ll have to make the same payment every month. So keep a little cushion in case of emergencies.
- Lower Loan Amount: Borrowing a higher amount is usually risky from a bank’s point of view. They may charge higher rates if you borrowed more than you need. Try to borrow the least amount possible. It will also help you with shortening your loan term and keeping payments manageable.
- Visa Status: This is especially important for international students. If your visa is running out soon, you’ll have a hard time refinancing your loan. It is important for you to stay in the country during the loan repayment term. If you can’t stay in the country during the repayment term, it’ll be difficult for the lender to track you back to your home country to get payments and they may not be inclined to do that. Some visa types include OPT (better if it has STEM extension), H-1B, O-1, and TN.
If you follow these 7 tips, you will not only get lower rates but will also build good credit in the U.S.
Stilt provides loans to international students and working professionals in the U.S. (F-1, OPT, H-1B, O-1, L-1, TN visa holders) at rates lower than any other lender. Stilt is committed to helping immigrants build a better financial future.
We take a holistic underwriting approach to determine your interest rates and make sure you get the lowest rate possible.
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