Refinancing with Earnest
Refinancing rates from 2.47% APR. Checking your rates won’t affect your credit score.Check out Earnest
About 40 percent of borrowers who included student loan debt in their bankruptcy proceedings got some or all of it discharged, according to a study published in the American Bankruptcy Law Journal.
But what if you’re among the borrowers still on the hook for student loan payments? You may be wondering if you are eligible to refinance after bankruptcy.
Here is the answer to that question, plus how you can present yourself in the best light to wary lenders.
How lenders look at a bankruptcy
Refinancing after bankruptcy is possible. It’s just not as simple as the application process for almost everyone else.
Like evaluating applicants with foreclosures on their records, lenders’ underwriting teams will take a hard look at you. In their eyes, a bankruptcy shows a history of failing to pay off debt. It makes you a riskier borrower, sure, but not all lenders will deny you because of this.
Lenders care most about how much time has passed since your bankruptcy. At SoFi, Laurel Road, and LendKey, for example, you’re ineligible to refinance if you had a bankruptcy or foreclosure in the past five years. Citizens Bank draws the line at four years.
Other refinancing banks don’t have the same low-tolerance policy, but they may require a cosigner.
CommonBond, for example, mandates that someone endorses your application if you went bankrupt within the past seven years. Your endorser must have a credit score of at least 660, solid income, and meet additional standards that CommonBond doesn’t publicize.
The good news is that having a creditworthy cosigner may also lower the rate you receive on your new loan.
The lenders who look past a bankruptcy are, more specifically, considering it in the context of your overall profile. They are checking boxes about what makes you eligible to refinance, plus what makes you likely to benefit from refinancing.
Eligibility requirements to refinance your student loans may include:
- Minimum credit score
- Minimum income
- Bachelor’s or advanced degree from a Title IV school
Traits of a creditworthy borrower include:
- Strong credit history
- Positive income-to-debt ratio
- Growing career
- Creditworthy cosigner (if necessary)
Bankruptcy affects all of these variables. A Chapter 13 bankruptcy, for example, will live on a credit report for seven years, according to myFICO. Chapter 11 and 7 bankruptcies remain on your credit report for as long as a decade.
Bankruptcy will also significantly lower your credit score. Your FICO score, which is used by credit reporting agencies like Equifax to measure consumer risk, puts the most weight on a borrower’s payment history. Bankruptcy is included in your payment history.
According to myFICO, people with credit scores of 680 and 780 would likely see their scores drop to the 530 to 550 and 540 to 560 ranges, respectively, upon going through bankruptcy. In other words, bankruptcy lowers borrowers to nearly the same credit score.
It is what you do after bankruptcy that helps lenders trust you with their money.
What to consider when you want to refinance after bankruptcy
There’s a reason the first step of a refinancing application takes three minutes or less. When you enter in your information and submit to a soft credit check, you likely won’t be asked about your bankruptcy status.
But you can be certain that if there’s a bankruptcy in your past, it will be found. So instead of trying to hide it, control what you can.
This is easier to do if some time has passed since you were in court. Perhaps you’ve had time to recover, find steady income and rebuild your credit from the ground up. If that’s the case, find a lender that will reward you for this progress.
If your bankruptcy is more recent, the path to refinancing can be harder. Start working on your credit score. Seesaw your income-to-debt ratio by making timely credit card payments and earning that promotion at work. Keep in mind, however, that refinancing is not your only option for managing student loans.
Federal loan borrowers can consolidate their student loans and apply for an income-driven repayment plan (IDR). Borrowers who combine their federal student loans into one could lower their monthly payments by extending the loan term or tying it to a percentage of their income.
Consolidating and switching to an IDR plan won’t save you money the way refinancing with a private lender would. But if a lower monthly payment helps you stay current on your loans, you may later qualify for refinancing.
Talk to lenders about your refinancing options
You may be reluctant to talk about your bankruptcy and student loan debt. But addressing these topics may help you overcome them.
If you are struggling with student loan payments, you may still be able to refinance after bankruptcy. But you have to talk to potential lenders and review their lending requirements.
Don’t wait for your bankruptcy to fall off your credit report. Even if you don’t qualify now for refinancing, you can work on your credit score. That way, you may qualify later.
Whether you’re looking to refinance, consolidate, or simply live a healthier financial life, check out our student loan consolidation and refinancing calculator. It can you better understand the value in refinancing and consolidating.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|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 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
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
|2.57% – 6.98%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.80% – 6.22%2||Undergrad & Graduate||Visit Laurel Road|
|2.51% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.57% – 8.17%6||Undergrad & Graduate||Visit Citizens|