How to Refinance Your Canara Bank Student Loan in the U.S.
The terms of student loans can be particularly unfavorable. Student loans have relatively high interest rates, and lenders can also cost you more in hidden fees, penalties, and inefficiencies.
Refinancing your student debt lets you obtain better terms, and often a better interest rate, but only if you refinance with a reliable and responsible lender. This article discusses student loan refinancing and explores the process of refinancing with Canara Bank, an Indian bank popular with international students.
What is Student Loan Refinancing?
Students often must take out multiple student loans to cover the cost of their education. Student loan refinancing is the process of taking out another loan with better terms and rates and paying off all your other outstanding student debt with it.
Interest rates on student loans are initially very high because, when they are first disbursed, you are four-years away from graduating and earning a steady income. When you refinance, you have likely graduated, and thus your immediate earning potential is much higher. In turn, lenders offer better interest rates and terms on refinancing.
Why You Might Want to Refinance Your Canara Bank Student Loan
Canara Bank is a bank owned by the Government of India which provides student loans for many international students. However, Canara has become known for suspicious and predatory business practices. Read on for a few reasons why you may benefit from Canara Bank student loan refinancing in the U.S.
Only Variable Interest Rates are Offered
Like all Indian banks, Canara only offers variable interest rates on their student loans. While this can mean your interest rate may be lower than the rate your loan was originally taken at, often times it is not. This means, more times than not, your monthly payment is making even less of a dent in your principal balance. You’re essentially paying the bank to continue owing it money.
Your Interest Rates are Killing You
One of the hardest thing about paying back student loans is seeing how little of your payment actually goes toward the principle. The average interest rate with Canara is more than 10.00%, with most loans exceeding this rate.
Customer Service is Non-Existent
The sad truth is, with most Indian banks, once you’ve gotten your loan, their need to communicate all but disappears. They’ve gotten what they need from you. This means that you’ll spend hours on the phone trying to speak a representative if you have questions and, possibly, weeks waiting for answers to your financial inquiries. In any other industry, this standard would be unacceptable, but sadly, it’s the reality when it comes to Indian banks.
The Exchange Rate is Costing You More
One last unfortunate truth about having a student loan in India while being in the U.S. on a visa is that they exchange rate is actually increasing the cost of your loans. The American dollar is (and historically has been) stronger than the Indian rupee. This means your paying the difference every time your transfer money to India to pay your loan. And over the life of a loan, those costs could potentially add hundreds or thousands of dollars to your loan costs.
3 Signs You Need to Refinance Your Student Loans
While refinancing isn’t necessary for everyone, many people can benefit and get improved terms and rates. The following section provides some signs that you can look for to determine if refinancing will benefit you.
1. Your Repayment Terms Make Repayment Difficult
Some borrowers benefit from having lower monthly payments since this makes repayment more manageable in the short-term. Others can afford more and would benefit from higher monthly payments so that they can pay off their debt quicker and pay less interest.
Whether your payments are too high and you cannot afford them or your payments are too low and will cost you excessively in interest, refinancing can help you get the ideal terms. With refinancing, the lender will choose terms that are more suited to your financial circumstances.
2. You’ve Improved Your Credit Score
Lenders use credit score as the most important metric for determining interest rates. One reason interest rates on student loans are relatively high is that new students typically have little credit history or income. If your credit score has improved since you took out a personal loan, then you will likely get better rates upon refinancing.
3. You Need a Lower Interest Rate
Perhaps the biggest benefit of refinancing is that you can get lower interest rates. If the interest payments on your loan are too high or too costly in the long-term, refinancing can save you a huge amount.
Can You Refinance Canara Bank Student Loans in the U.S.?
Loans with international banks like Canara can be refinanced with American lenders. The process of refinancing will likely be the same as with a domestic bank, though processing times may be slightly longer as lenders coordinate with their international counterparts. However, the criteria for eligibility may be much different for American lenders, and international students and immigrants can have difficulty refinancing.
Why It’s So Hard for Visa Holder to Refinance with American Banks
International students and visa holders are deemed as particularly high-risk by American banks because of their temporary status. Student loans are typically substantial and will take the borrower many years to repay, meanwhile, borrowers on visas may have to leave the country at any time.
Also, international students may have a limited credit history and income. These are important factors that lenders use to judge an application for refinancing, leaving noncitizens at a disadvantage.
What is Stilt?
Stilt is an American online lender that provides financial services for underserved immigrant and noncitizen communities. Immigrants are often excluded from the credit system and denied loans, but Stilt has shaped its eligibility criteria to be as inclusive as possible towards immigrants. Stilt offers a range of services, including personal loans, student loans, and loan refinancing.
How to Refinance Your Student Loan with Stilt
Refinancing student loans with Stilt is extremely simple, and the entire process can be completed in just days. There are three steps in the process:
- Fill out an application: completing an application with Stilt takes only a couple minutes. You will be asked for financial information, as well as information on education and employment. Upon submitting the application, Stilt will complete a soft credit-check as well.
- Get a decision: Stilt will respond to your application within 24 hours. If your income, employment, education, and credit history meet the eligibility requirements, then your application will be accepted. Your profile will qualify you for a certain range of amounts and an interest rate. Then, you can choose a repayment schedule.
- Receive the funds: Once your application is approved, you only have to sign a promissory note agreeing to the terms of the loan. After submitting the promissory note, the funds will be transferred immediately into your account.
5 Tips for Refinancing Student Loans
As with other types of debts, there are strategies that you can employ that will expedite paying off your loans and save you money in the long run. See the following list for a few examples.
Tackle Your Other Debts First
Lenders determine interest rates for refinancing partly by assessing your outstanding debt. The more debt you have, the higher your interest rate will be upon refinancing. By paying off as much debt as possible before you refinance, you will improve your financial profile and get better terms from the lender.
Find a Job or Be Employed
Income is another central consideration for lenders. Borrowers who are not employed will likely not qualify for refinancing unless they have a cosigner. By getting a job, you have a better chance of meeting the income and employment requirements for refinancing. You will also reduce risk in the eyes of the lender by maintaining employment, and are thus likely to obtain a better interest rate.
Make Sure You Understand Debt-to-Income Ratio
Debt-to-income ratio is an important metric in determining the interest rates you get upon refinancing. You get your debt-to-income ratio by dividing your monthly recurring debt (rent/mortgage, insurance, house, and car payments) by your monthly income.
Essentially, debt-to-income ratio sets your earnings against what you spend and gives lenders an idea of your spending habits and financial profile. With this understanding, you can work on bringing your debt-to-income ratio down, which will help you obtain lower interest rates.
Check Your Credit Score
A credit score is another very important metric that lenders look at. You should know your credit score because your credit score will help determine whether or not you are eligible for refinancing and what rates you will get. Lenders typically have a minimum credit score for eligibility, so investigate lenders as well for an idea of the score that you need.
Have Steady Income
Interest rates and eligibility for loans are determined by the risk the lender takes, and the more consistent your income is, the lower the risk in lending to you. The inherently unreliable nature of contracting or freelance work is less appealing to lenders than a salaried, full-time position because freelancers have a more difficult time estimating future income.
If possible, you should secure a job with a stable income, so lenders can determine what your earnings will be in the future as well.
Refinancing can help significantly improve on the unfavorable terms and inefficient processing of Canara Bank loans. The refinancing process is quick and simple, so you can obtain better rates and start saving money within days. A lender like Stilt that targets underserved communities can make refinancing possible for immigrants and noncitizens who otherwise would not have the opportunity.