5 Signs A Student Loan Refinance Company Is Right For You
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.
Pricing And Fees
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.
Time In Business
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.
Customer Service and Reviews
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:
- Is this student loan refinance company easy to contact through phone, email, or live chat 24/7?
- Do they respond quickly to any questions or concerns I may have?
- Will they keep me updated if any changes occur during the refinancing process?
- Do they have additional tools like educational blogs and resources to assist me in the future?
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.
Frequently Asked Questions
What do I need to know about student loan refinancing?
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:
- Saving money -- sometimes up to thousands of dollars -- with a lower interest rate
- Lower your monthly payments to make them more affordable
- Combine multiple loans into one for easier repayment
- Release a cosigner
How do I qualify for student loan refinancing?
In general, lenders will look at several factors before considering you for student loan refinancing:
- Your credit score (most lenders look for a minimum credit score of 650 or higher).
- Your annual income or your potential income
- Employment history, proof of employment, or proof of a job offer
- Your savings
- Your college degree (or proof of enrollment if you have not graduated)
- Other debt such as your credit card or mortgage
- Your debt-to-income ratio -- the lower, the better
Is student loan refinancing right for me?
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:
- Unique benefits you would receive from your new lender, such as unemployment benefits
- Whether you will receive fixed rates (which will remain the same over the duration of your loan) or variable rates (which will change over time, depending on the economy)
- Your interest rate
- Your loan term
- Your loan amount
- Any fees, such as late fees, origination fees, prepayment penalties
- Your credit score (the better your credit, the lower your interest)
- Cosigner release
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.
What if I am rejected by a lender?
If you have trouble qualifying for a low-interest loan, you have a few options:
- Ask a trusted friend or family member with good credit to cosign your loan. If your cosigner has good credit history, you are more likely to be approved for a loan with lower interest rates.
- Apply to multiple lenders to see your refinancing offers and increase your chance of approval. Multiple applications made within 30 days is only treated as a single inquiry and will not cause much damage to your credit.
- Consider working on improving your credit. You can check your credit report for any errors and dispute them either on your own or through a reputable credit repair service.
You can obtain a free copy of your credit reports from the three bureaus (Experian, Equifax, and TransUnion) through AnnualCreditReport.com.
- Lower your credit utilization by increasing the amount of available credit you have. This means paying off credit card debt to an amount that is ideally under 30%.
Does refinancing a loan hurt my credit?
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.
What are some ways I can improve my credit and manage the weight of student loans?
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:
Take out a credit builder loan. These loans allow you to make monthly payments on a secured savings account to help you build credit. Once the loan is completely paid off, the funds are released to you.
Consider student loan refinancing. Refinancing your loans can help you reduce your debt and save money by replacing your student loans with new terms (like a lower interest rate and term length) and releasing any cosigners. For more information on student loan refinancing, read our comprehensive guide.