Refinancing with Earnest
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Borrowers who want to more effectively manage their debt or get better loan terms could be interested in consolidating loans. They might even wonder if it could be a good idea to consolidate student loans and credit card debt together.
Can you consolidate student loans and credit card debt? It’s possible, but might not work the way you’d expect. Here’s what you need to know if you’re hoping to combine student loans with other debts.
Can you consolidate student loans and credit card debt?
If you’re hoping to consolidate student loans and other debts into the same loan, don’t expect to pay lower interest on the new loan.
Federal student loans have interest rates that usually beat out personal loan rates. Some private lenders can refinance student loans to lower than their current rates, but 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,” says Phil DeGisi, CMO of lender CommonBond, which offers student loan refinancing.
Because the new loan is still a student loan, the borrower can’t use it to pay off debts besides existing college debts. This means your student debts cannot be combined with credit cards or other debts 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 combining student debts with credit card debts, it can be done.
The closest you could come to accomplish this is to “take out a personal loan and use that personal loan for each of those debts,” DeGisi says. This would allow you to replace your existing debts with a single, new loan.
Usually, however, this won’t be a cost-efficient way to manage debts. “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.
The new loan could provide savings by offering a lower interest rate than you’re paying on credit card debts, but 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 adds.
Refinance student loans separately instead of consolidating
The bottom line is that consolidating student loans and credit card debt together likely isn’t the most cost-effective way to restructure debt. Instead, look at each type of debt separately.
Refinancing student loans, for instance, could get your a lower rate. This could help you pay off debts faster, or lower your monthly payment.
“When refinancing student loans, you can choose which loans to refinance,” DeGisi explains. “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.
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 balance. 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’ll save money, and the installment payments will 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 debts at the same time, there are some things to watch out for.
Applying for multiple loans or credit cards at the same time, for instance, can hurt your credit.
“When you apply for the student loan refinance and apply for their personal loan — those are two separate functions and you’ll get two hard credit pulls that will go on your credit,” DeGisi points out. “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 says.
Whatever your debt management goals, look at how different refinancing options can help you achieve them. You probably won’t be able to consolidate student loans and credit card debts together in a cost-effective way, but there could be another debt solution perfect for what you’re trying to accomplish.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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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 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% 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 Month/Day/Year, 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 08/21/18. 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@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 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
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|