Refinancing with Earnest
Refinancing rates from 2.46% APR. Checking your rates won’t affect your credit score.
Now, more than ever, various private lenders are helping student loan borrowers refinance at lower rates and save thousands of dollars in interest — that is, borrowers with good credit.
Whether you are thinking about refinancing or in the process of doing so, you may wonder how your credit impacts your options. How important is credit, really? And how will refinancing affect your credit?
Read on to learn five things you need to know about credit and refinancing your student loans.
1. You probably need good credit to qualify.
Refinancing companies vet their borrowers to ensure they can take on the financial commitment of paying back a new loan.
In general, refinancing companies tend to have more stringent requirements than that of federal loans. One of the major ways lenders determine if you are an eligible candidate for refinancing is your credit score.
Your credit score is a numeric representations of how responsible of a borrower you are. Your FICO credit score, which is commonly the credit score lenders examine, is determined by a variety of factors:
- Payment history (35 percent)
- Amounts owed (30 percent)
- Length of credit history (15 percent)
- New credit (10 percent)
- Credit mix (10 percent)
FICO scores range from 300 to 850 — the higher score you have, the better. Each lender will have a different credit score requirement, but typically you’ll want to have a credit score of 700 or above.
Before refinancing, check the lender’s eligibility requirements, as some may be higher or lower than this standard. Generally, however, bad credit will make it difficult to get approved for refinancing.
2. A credit check-up can help.
Before you refinance, it’s important to do a credit check-up: audit your credit reports to make sure everything is accurate and take steps to improve your credit.
Start by getting your free credit scores on a site like Credit Karma. In addition, get your free credit reports from the three major credit bureaus at AnnualCreditReport.com and look for any errors. If there are any mistakes, you’ll want to take the necessary steps to remove those incorrect entries from your credit profile.
In addition, take a look at your credit behavior:
- Do you always make your payments on time?
- Do you carry high balances?
Being a responsible credit users means making on-time payments each and every time. Even just one late payment can seriously ding your credit score.
To make the process easier, sign up for auto payments, which deduct your monthly payments from your bank account. If you don’t think that will work for you, at least sign up for online reminders.
While payment history is very important, so is credit utilization (amount of credit available vs. used). It’s important to keep your balances low and pay them down each month to keep your credit utilization ratio low.
So if you have a $10,000 credit limit and are maxing out $10,000 each month, you will look like a risk to lenders. Typically, you should spend less than 30 percent of your credit limit. In this case, that would be $3,000. Avoid maxing out cards and strive to pay off your balance in full.
3. Your credit score is just one factor for getting approved for refinancing.
Okay, okay, you get it. Your credit score is important. But it’s not the only factor that lenders consider when approving borrowers for refinancing. Many lenders look at income, employment history, and savings as well.
So while it’s important to have a good credit score in order to refinance, it’s also just as important to maintain positive cash flow and employment status as well. For better or worse, your credit score is just one facet of your eligibility.
4. Find out your estimated interest rate without affecting your credit score.
You could save money through refinancing, but how do you know how much you will really save until you know your potential rate? Good news: Some lenders, like SoFi and Earnest allow you to check your potential rate, without it affecting your credit score.
This is typically referred to as a “soft” credit pull, which will not harm your credit. So once you check out your interest rate, you can make an informed decision to move forward (or not) while your credit score remains intact.
5. Refinancing could affect your credit score.
Once you do decide to apply for refinancing, you will have a hard pull on your credit. Hard pulls temporarily knock your credit score down by a few points.
In addition, refinancing means that your old loans will be paid off — resulting in a closed account and potentially higher utilization ratio if you have other debts. However, it’s unlikely your score will drop dramatically and the benefits of significant savings could far outweigh the costs.
Your credit score plays an important part in the refinancing process. Stay on top of your payments, keep your balances low, and periodically check out your credit scores and reports. Doing so can help you get approved for financial opportunities like refinancing, which can ultimately help you save money.
Photo credit: GotCredit
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 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% 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
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
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.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). 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 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.46% – 6.97%1||Undergrad & Graduate|
|2.57% – 8.44%4||Undergrad & Graduate|
|3.05% – 6.47%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|