Considering refinancing your student loans? Finding the right student loan refinancing company can save you thousands of dollars in the long run. Here are five things to look for when choosing the right company for you.
Last Updated: October 13, 2020
2020 Best Student Loan Refinance Services in America
So you’ve decided to refinance your loans but you're not sure which student loan refinancing company is the best fit. Before you make any decisions, make sure that you have found the best company for you. Below, we list five factors of all great refinancing services.
When you are looking into a student loan refinancing service, you want to be able to find as much information on the service as possible. Due to the competitive nature of loan refinancing and the ever-changing interest rates, many companies choose not to share their rates and terms on their website even though you can always call to inquire.
However, there are a few companies that will provide you with information such as interest rates, loan terms, and loan ranges. Some companies may also supply additional information like frequently asked questions and educational blogs.
When it comes to transparency, there are a few outstanding companies, including SoFi, Credible, and Earnest.
This should be high on the list of requirements when you are looking to refinance and save money in the long run. Most student loan refinancing companies offer fixed and variable interest rates ranging from around 2.10% to 8.38%.
Reputable student loan refinancing companies often offer additional perks. For example, SoFi's extra benefits include exclusive networking events, feedback on your resume, salary negotiation tips, and career counseling. Many lenders like LendEDU even offer credit cards, personal loans, and educational blogs.
Although student loan refinancing is relatively new, longevity in this industry is a plus. SoFi was founded in 2011 and has been one of the frontrunners in the student loan refinance industry since. Other long-running competitors include Earnest in 2013 and LendEDU in 2014.
Because refinancing plays a large role in your future finances, checking reviews can help you determine if a company and their customer service are right for you. The BBB, Trustpilot, Yelp, and Google reviews are good places to find the answers to the following questions:
Picking the right refinancing company can ease the burden of paying off your student loans by saving you thousands of dollars in the long run, so be sure to take your time and do the research to find the right company for you.
Student loan refinancing allows borrowers to get a new private student loan that replaces their current student loan (or loans). These loans usually have a lower interest rate, lower monthly payment, or combine multiple loans to help you pay off the debt faster. (This is different from student loan consolidation, which combines multiple Federal loans into one loan by taking out a consolidation loan from the government; however, this doesn't lower your interest rate.)
Student loan refinancing has a variety of benefits that include:
In general, lenders will look at several factors before considering you for student loan refinancing:
Whether or not refinancing your student loans is a good idea depends on your individual needs. While refinancing your loans has many benefits -- such as lower your interest rate, reducing your monthly payments, consolidating your loans, or finding a new lender -- there may be times when it could potentially hurt you.
For example, refinancing Federal loans with benefits (like income-driven repayment and programs like Public Service Loan Forgiveness) can cause you to lose access to them if you need them in the future. In this case, you would have a better chance at finding a new loan servicer and consolidating all of your Federal loans into a Direct Consolidation Loan with one monthly payment, although this won't lower your interest rates or add any private loans to your consolidated debt.
Some private lenders may offer forbearance or other financial assistance in the case of hardship, but this varies by lender.
A good rule of thumb about refinancing is that if you can make your Federal student loan payments on the 10-year plan, you probably don't need to refinance it. However, if you are struggling with the monthly payments and interest rates, refinancing is a great option.
If you believe refinancing is your best option, there are a few other factors to consider before you refinance your loan:
If you are still on the fence, at the very least it won't hurt to do some shopping around and receive quotes before making a decision.
If you have trouble qualifying for a low-interest loan, you have a few options:
Submitting an application for loan refinancing will generate a hard inquiry, which causes a small and temporary drop in your credit score. Loan refinancing may also impact your credit since your original loan will be paid off early and replaced by a new loan, thus reducing the age of your accounts.
In case you're on the fence about taking out a credit card to lower your utilization, there are other alternatives to improve your credit and financial situation: