Refinancing with Earnest
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Are you thinking about refinancing your student loans? There are many good reasons to look into this option. It’s important to note that though it can provide benefits, this action doesn’t make sense for all borrowers.
If you refinance federal loans, you will no longer be able to take advantage of federal repayment programs or loan forgiveness. And refinancing means getting an entirely new loan, which means your loan servicer may change — and any benefits you have with the current servicer could change, too.
That shouldn’t stop you from considering the option. Refinancing your student loans could be the right move if doing so will save you money by getting a lower interest rate. It also gives you the opportunity to change your loan terms, and that could be a huge financial benefit for you if your current term doesn’t work for you.
What student loan terms are available?
Your student loan term refers to how long the lender expects it will take you to repay your debt. Student loan terms range from relatively short to almost as long as a traditional mortgage. You could get a loan with a term of 5 years or your could repay your loan over 20 years.
That’s a big difference, and it’s hard to know what the right option for you is when there’s so much to choose from.
And it does matter, because whether you choose a shorter or longer term, they’ll both make a financial impact now and into the future. To choose what’s best, you need to understand exactly what those impacts look like and how they differ from one another.
How a shorter loan term impacts your financial situation
The term on your student loans affects a few things. The first could be the interest rate on the loan itself. A shorter loan term, such as 5 to 10 years, may allow you to refinance at a lower rate.
That’s not a guarantee, and you’ll still need to have a great credit score in order to secure the best interest rate available. But it’s worth asking your lender about, because a lower interest rate means a cheaper loan.
A shorter loan term also means you’ll pay back your debt faster. Pretty obvious, right? That’s good because it’s another way to save money on your debt. The faster you pay back the loan, the faster you can stop paying interest.
What might not be so obvious is the potential downside. Shorter student loan terms mean higher monthly payments. Instead of being stretched out over decades, your payments are compressed into 5 or 10 years, requiring you to pay more each month.
That might not be a bad thing for you if your monthly cash flow is healthy and you feel comfortable taking on a bigger payment. In fact, this is the financially savvy way to go because, again, the faster you pay off your debt, the less money you have to devote to interest.
Debt is a major financial burden. The sooner you can rid yourself of it, the sooner you can feel more secure and free up cash to put toward other goals, like an emergency fund, investments, or your retirement savings.
What about longer student loan terms?
None of the above reasoning means that longer loan terms are bad, and they may be the exact right option for you if you’re already feeling financially stressed. A loan term of 10 to 20 years can provide you the breathing room you need as you establish yourself, work to increase your income, and manage your cash flow wisely.
Debt is like a tool to use. You can use your loans as leverage, and getting a longer loan term is a great way to do this. You’ll secure a lower monthly payment, which can help free up your cash right now — not just in the future when the loan is completely paid off.
This allows you to save and invest today instead of funneling all your money straight to a fat student loan debt repayment each month. You’ll pay more in the long run due to interest, but if you’re disciplined and invest the money you’re not putting toward your loans, that could allow you to build up a higher net worth over the years.
Where to look when you want to change your student loan terms
If you’ve decided you’re ready to refinance and want to look at changing your loan term while you’re at it, these services provide a good place to start. They all provide various loan terms with both fixed and variable interest rates, can refinance both federal and private loans, and accept undergrad and graduate student debt.
Check out these companies and the terms they offer:
- SoFi: Offers 5, 7, 10, 15, 20 year terms with interest rates from 2.47% – 7.80%
- Laurel Road: Offers 5, 7, 10, 15, 20 year terms with interest rates from 2.95% – 7.02%
- CommonBond: Offers 5, 7, 10, 15, 20 year terms with interest rates from 2.48% – 6.25%
- LendKey: Offers 5, 7, 10, 15, 20 year terms with interest rates from 2.47% – 8.72%
- Citizens: Offers 5, 10, 15, 20 year terms with interest rates from 2.72% – 8.69%
- College Ave: Offers 5 to 15 year terms with interest rates from 2.88% – 8.00%
Learn more about these lenders here.
Choosing a loan term requires you to understand how the different repayment period impacts your financial situation.
Longer loan terms mean lower monthly payments, which could benefit you today if your budget is already tight. But you’ll pay more out of pocket over the life of the loan, since you’re stretching out how long you make payments (and pay interest).
A shorter loan term means saving money, since you’ll pay less in interest and may even get to refinance to a lower-interest rate loan. But the tight timeframe could put a heavy burden on your cash flow right now, so make sure you can handle high monthly payments for a little while.
There’s no one right answer for everyone. Take a look at your own situation today as well as your future financial goals to determine what loan term is right for you.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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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|