No one enjoys debts, much less student loan debts. While paying a debt is unpleasant, some things can make it easier. One popular option with most people in dealing with their education loan finance issues is refinancing their loan.
Refinancing your loan can help you save on your loan payments by helping you get a lower interest rate and also pay in a shorter time, depending on your deal.
The myth that self-employed people have a hard time refinancing their loans, however, isn’t true. The fact is, it depends on where you’re looking. Considering that around 30% of the entire workforce in the US is either self-employed or employed by a self-employed person, they form an integral part of the market and can access loans as easily as any other job owner.
In fact, most lenders have nothing against refinancing loans for self-employed people. There are, however, a couple of things to keep in mind when applying for refinancing of your student loan as an entrepreneur.
Federal student loan holders have access to programs like income-driven repayment plans, which may be more beneficial to a self-employed person. If the loan is refinanced with a private lender, however, you lose access to that benefit.
One of the issues with refinancing a loan for a self-employed people is that unlike folks with regular jobs, you may not have a steady paycheck. This is especially important if you’re going to be making monthly payments of fixed amounts to avoid defaulting on your loan. However, there are quite a number of lenders who are willing to grant loans to self-employed borrowers.
Another peculiarity facing most self-employed people is that they have to take out loans to get their businesses off the ground. Hence, most of them already have multiple loans running. However, this makes a case for you to consolidating your loans into one and refinancing them for a better interest rate.
The most significant determinant for whether you’ll get a loan or not as a self-employed person is your credit history. Most lenders will use your credit history to determine the interest rate and terms for your loan. You can increase your chances of getting a favorable refinancing package by boosting your credit score. Paying your bills on time and reducing your overall debt goes a long way towards doing just that.
Because your entire credit and financial history will be considered before you’re given a loan, having a successful business also helps convince lenders to give you a favorable loan deal. Interestingly, the nature of your business seems to have significantly less of an effect on your loan deal than your credit history.
Even if your credit score isn’t good enough to get the loan refinances, you can get a co-signer (relative or friend) with good credit to help you get the loan.
Other things that lenders may look at when considering whether to refinance your student loans or not are:
- Highest completed level of education
- Schools attended
- Debt to income ratio
- Loan size
All in all, it’s safe to say that self-employed entrepreneurs shouldn’t have much of an issue when it comes to refinancing their loans.
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