When you apply for refinancing, lenders will calculate a customized rate for you based on your financial history. The customized rate calculation will take into account your credit score, debt-to-income ratio and a few other factors. This is good news for you because it means there are things you can do to score a lower interest rate.

Each one of these seven strategies will help chip away at the published interest rate so you earn the lowest possible rate on your refinanced student loan.

Improving Your Credit Score

Your credit score has the biggest impact on the interest rate lenders offer you for refinancing student loans. To earn a lower interest rate, start working on improving your credit.

Here some things you can do:

• Pay off all debt in full before the deadline every month. This includes credit card bills, student loan payments, and mortgage payments. Even one delayed payment can hurt your credit score. Delinquent payments can show up on your credit history for up to seven years.
• Try as much as possible to never carry credit card debt over from one month to the next.
• Use less than 30% of the available credit on your credit cart. Try not to use more than that.
• Do not close any existing credit cards, especially those that you’ve had for a long time. Your credit age matters. If you have older cards, it’s worth keeping them. This is provided of course that they aren’t costing you more than they’re worth by way of annual fees.
• Limit new credit applications if you’re planning on refinancing. Every time you apply for credit, a hard inquiry gets triggered, which hurts your credit score by about three to five points. Submitting multiple credit applications could lower your credit score several points.
• Check your credit report before you apply for refinancing. If you find any errors that are impacting your score negatively, report them and get your credit score corrected. A small drop in your credit score may prevent you from qualifying for a lower interest rate.

Lower Your Debt-to-Income Ratio

Debt-to-income ratio is the second most important factor that determines interest rates on refinanced loan. Debt-to-income ratio compares your outgoing expenses to your income. Outgoing expenses include monthly rent or house payments, credit card payments, student loan payments, alimony or child support, and vehicle loan payments. Income includes your earnings from all sources before taxes. The difference between the two is your debt-to-income ratio.

A low debt-to-income ratio indicates that your earnings are sufficient to pay off all debts comfortably. This tells the lender that you won’t have any problems with your loan payments. They will reward you by offering you a lower rate of interest.

To lower your debt-to-income ratio look for ways to reduce your monthly debt payments and increase your monthly income. You may not be able to lower your loan payments but you can cut back on your credit card expenses.

Apply With a Creditworthy Cosigner

If your credit score and debt-to-income ratio don’t qualify you for lower rates, applying with a creditworthy cosigner can help. A creditworthy cosigner is someone with great credit who meets all the lender’s refinancing requirements. When you apply with a cosigner, lenders will calculate your rate based on their credentials. The cosigner in turn shares responsibility of the loan with you.

Keep in mind that asking someone to cosign your loan is a big ask. If you delay or default on your payments, the lender will hold them responsible for making the payment. Any delays or defaults on payments will damage your credit score as well as your cosigner’s credit score.

Compare Multiple Lenders

There are hundreds of lenders that offer student loan refinancing. Every lender sets their own terms and rates of interest. Comparing lenders may take time but it’s the best way to discover lenders offering the best rates. There is one thing you should look out for when comparing interest rates between lenders.

Some lenders offer unusually low rates, which they then make up for by charging various administration fees. These fees are often buried in the small print. Before signing any agreement, read through the terms and conditions carefully, and also ask the lender outright about administration fees. Most lenders do not charge any fee for refinancing student loans.

Set Up Automatic Payments

Setting up automatic payments is an easy way to lower your interest rate. It involves requesting your bank to transfer the payments directly from your savings or checking account on a specific day every month. Setting up automatic payments reduces the risk of falling behind on your payments. As an incentive for punctual payments, most lenders offer a 0.25% interest rate discount when you sign up for auto-pay. It may seem like an insignificant amount but the savings do add up over the life of the loan.

Consider Variable Interest Rate

Lenders will offer you the option of fixed or variable interest rates on your refinanced student loan. In most cases, variable interest rates are lower than the fixed rates. The rates may fluctuate depending on prevailing market conditions and yes, there is a risk that the rates may increase. But you can benefit from the lower rate if you are planning on paying off your loans quickly. Make sure you can afford the higher monthly payments if you choose this option. .

Ask the Lender About Other Rate Discounts

Some lenders may offer additional incentives if you meet certain criteria. Some may offer a rate discount if you make consecutive on-time payments for a specific period. Every little discount matters and will add to your savings over the life of the loan. Ask the lender about other rate discounts.