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Bankruptcy leaves a lingering black mark on your credit history, with the financial effects lasting for several years. In most cases, you’ll still be left with your student loan debt, too. If still you find your payments unmanageable and want to refinance your student loans after bankruptcy, it can be challenging.
Most student loan lenders won’t consider refinancing after bankruptcy. Other lenders put significant hurdles in place to make it much more difficult.
If you are thinking about filing for bankruptcy, you might want to consider your student loan refinancing options first. Although high student loan debt isn’t always the reason for financial distress, it is often a contributing factor. For graduates carrying around multiple loans, or student loans with challenging terms, refinancing can provide significant financial relief.
Refinancing combines all loans into one easy-to-manage monthly payment. It can also provide significant savings – often thousands of dollars – over the life of the loan.
But what happens if you have declared bankruptcy but still carry some or all of your previous student loan debt? Can you refinance? While it’s not entirely off the table, there are higher restrictions in place and fewer options available to you.
Lending Requirements After Bankruptcy
You can try shopping around for a lender that will take on post-bankruptcy refinances. You’ll find some variation among the lenders. For example, Earnest Student Loans and CommonBond Student Loans are among the lenders that do not consider refinancing student loans until the bankruptcy has been wiped from the borrower’s credit report. Under their eligibility requirements, it means waiting at least seven years in most cases.
College Ave Student Loans might consider refinancing on a case-by-case basis – if the borrower has a strong record of financial responsibility in the immediate years following a bankruptcy. Try using the prequalification tool before you apply. Using this tool will not affect your credit score.
Laurel Road Student Loan Refinancing might consider applicants, case-by-case, who have a strong record of financial responsibility in the immediate years following a bankruptcy. In the time following your bankruptcy, it can help to have a solid employment history and to have worked to rebuild your credit.
If it’s been a few years since your bankruptcy, consider checking with Massachusetts Educational Financing Authority. It requires at least 60 months post-bankruptcy before considering applicants for refinance loans.
Why is It So Difficult to Refinance After Bankruptcy?
No matter the circumstances that led to your bankruptcy, it does make it more difficult to refinance later. For lenders, a bankruptcy demonstrates financial irresponsibility and classifies you as a high credit risk.
Despite a terrible accident, a divorce, or downturn in the markets, lenders don’t take this into consideration alongside your history of bankruptcy. Nor are the specific personal circumstances that led to the bankruptcy included in your credit history.
How to Refinance Student Loans After Bankruptcy
If you find yourself interested in refinancing student loans after bankruptcy, first shop around with multiple lenders. It never hurts to ask, especially as most lenders have clear policies regarding this issue. The lender’s customer service representatives can outline the eligibility requirements before you apply, which can save a hard credit pull on your already-sensitive credit history.
Another option is to seek out a cosigner to come onboard. Some banks will require the cosigner to become the primary borrower; others simply need a cosigner in the more conventional sense. This is often a much more difficult route because it requires another person to take on full responsibility for your student loan debt. However, not every bank is willing to consider a cosigner option, so be sure to check.
The final option for refinancing after bankruptcy requires patience and time. It might not be possible for you to refinance your student loans immediately. You may need to wait four, five, or more years to meet the eligibility requirements of even the most lenient lenders.
In the meantime, focus on improving your overall credit history. Every little bit helps as you rebuild your credit from bankruptcy.
Author: Jeff Gitlen
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