Refinancing with Laurel Road
Refinancing rates from 1.89% APR. Checking your rates won’t affect your credit score.
Consolidating student loans is an option for borrowers who want to manage their debt more effectively or get better terms. Some might even wonder if consolidating student loans and credit card debt together could be a good idea.
Is student loan and credit card debt consolidation even possible? Yes, you can combine the two types, but it might not work the way you’d expect. Here’s what you need to know if you’re hoping to consolidate student loans with other debts.
Consolidating student loans and credit card debt
If you’re hoping to meld your student loans and credit cards into a single loan, don’t expect to pay a lower interest rate on the new debt.
Federal student loans have interest rates that usually beat out those of personal loan rates. And although some private lenders do refinance student loans to better rates, this is usually because the new loan is still classified as a student loan.
“You can refinance student loans to a lower interest rate, and that loan will still be limited to qualified education expenses,” said Phil DeGisi, a former marketing executive with CommonBond, which offers student loan refinancing.
Because the new loan is still a student loan, the borrower can’t use it to pay off anything other than existing college debt. This means your student loans cannot be combined with credit cards or other debt under this type of loan.
There are also some other limits in place. Borrowers can usually only qualify for loans equal to their current student loan payoff amounts. Your new loan will also have other qualities of student debt, like being harder to discharge in bankruptcy.
Using personal loans to consolidate student loans and credit card debt
If you’re really set on making student loan and credit card debt consolidation happen, it can be done.
DeGisi notes that you can take out a personal loan and use the money to repay your existing debt, replacing your current loans with a single, new one. However, this usually isn’t a cost-efficient way to manage debt.
“That would be unlikely to be a great path because student debt with high interest will still beat most personal loan interest rates,” DeGisi says.
So while the new loan could provide give you a lower interest rate than what you’re paying on credit card, you’ll probably pay more on your student debts with this method.
“Generally speaking, it isn’t going to be a great strategy for someone,” DeGisi said.
Refinancing student loans separately instead of consolidating
The bottom line is that consolidating student loans and credit card debt together won’t likely be the most cost-effective way to restructure debt. Instead, look at each type of debt separately.
Refinancing student loans, for instance, could potentially get you a lower interest rate. This could help you pay off debt faster and maybe lower your monthly payment.
“When refinancing student loans, you can choose which loans to refinance,” DeGisi said. “If you have one loan at a great interest rate, it might not make sense to refinance it.”
Instead, you could pick the student loans with higher interest rates and only refinance those. (You can check how much you might save under different scenarios by using our student loan refinancing calculator.)
Options to consolidate credit card debt
If you’re interested in credit card debt consolidation, there are two common options. The first is to transfer the balances to a new credit card with a 0% introductory rate. To optimize savings, look for one without an annual fee, and pay off the balance before the 0% introductory rate ends.
The second method is to get a personal loan and use the funds from that to pay off and consolidate credit card balances. This works because personal loan rates tend to be lower than credit card rates. You could potentially save a nice sum of money, and the installment payments would give you a defined repayment schedule.
Tips for refinancing student loans and other debts
If you want to refinance student loans and consolidate credit card debt at the same time, there are some things to watch out for —
specifically, note that applying for multiple loans or credit cards at the same time can hurt your credit.
“When you apply for the student loan refinance and apply for the personal loan — those are two separate functions, and you’ll get two hard credit pulls that will go on your credit,” DeGisi said. “The first inquiry could lower your credit score, and impact your ability to get approved for the second application.”
On the other hand, consolidating credit card debt could help other factors that lenders consider when approving a student loan refinance, DeGisi said.
When CommonBond evaluates an application, for example, they look at free monthly cash flow. If consolidating credit cards or other debts results in a lower payment, this also gives you more cash flow each month.
“That could be beneficial for qualifying for other loan options, like refinancing a student loan,” DeGisi said.
If you don’t consolidate, which debt should you pay off first?
If you decide not to consolidate student loans and credit cards, you’ll need to decide which one to pay off first.
Generally speaking, Experian recommends paying off your credit card debt first, because it likely has a higher interest rate. Additionally, lowering your credit utilization ratio can boost your credit score.
If you choose to pay off the debt with the highest interest rate first, simply put any extra money you have toward that balance. Of course, you should also continue paying the minimum balance on your other obligations, so they don’t go into default. When your balance on the high-interest loan falls to zero, shift your focus to the debt with the next-highest interest rate and continue on until you’re out of debt.
Whatever your debt management goals, look at how different refinancing options can help you achieve them. You’ll probably find that student loan and credit card debt consolidation isn’t cost-effective, but there could be another debt solution perfect for what you’re trying to accomplish.
Laura Woods contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 5.64%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.09%3||Undergrad & Graduate|
|1.89% – 6.77%4||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.41%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews! |
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.
5 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.