Refinancing with Earnest
Refinancing rates from 2.49% APR. Checking your rates won’t affect your credit score.
Why can’t I refinance my student loans? Why was I rejected? If you’re eager to get your hands on the benefits of refinancing but can’t get approved, you’re probably looking for answers.
After all, under the right conditions, refinancing your college debt can be a complete game-changer. You can combine your loans — private, federal or both — and maybe get a better interest rate as well, which could potentially save you thousands of dollars over the life of your loan.
But unfortunately, refinancing isn’t guaranteed. You need to be approved by a private lender first. And if you don’t meet the eligibility requirements, the lender could reject your application.
Here are some of the most common reasons you might get rejected for refinancing your student debt, along with tips on how to improve your chances.
1. Your income was too low or unstable
One reason a refinancing lender might reject you is your income. Lenders want to know you’ll pay back your debt, and one of the greatest indicators they have is how much you earn.
They look for a decent, steady income. Being unemployed, having a low-paying job or an income that varies greatly from month to month could be the reason why you can’t refinance your student loans.
But even if a lender thinks your income is too low, there’s still hope. If you need to boost your application, you could apply with a cosigner. Cosigners are usually someone with which you have a close relationship, such as a parent or spouse.
If you miss payments or are otherwise unable to repay your debt, your cosigner will be legally responsible for doing so. But if you make consistent on-time payments, the lender might eventually allow you to release your cosigner from the loan.
In the meantime, you could also try to boost your income. Whether you search for a new job or set up a side hustle, increasing your earnings could boost your chances of approval.
2. Your debt-to-income ratio was too high
Beyond your salary and wages, lenders also look at your debt-to-income (DTI) ratio. To calculate your DTI, add up all your monthly debt payments (such as those for a car loan, mortgage or student loan) and divide that sum by your gross monthly income (your income before taxes and deductions). If your debt payments add up to $1,000 a month, for example, and your gross monthly income is $4,000, then your DTI would be 25%.
Lenders are looking for a low debt-to-income ratio for student loan refinance candidates — typically around 40% or less, but each lender will have its own specific requirements. Even if you’re making six figures, it’s possible you may not qualify for refinancing if much of that money goes to debt payments.
Again, applying with a cosigner could make your application stronger. If a creditworthy cosigner has your back, you won’t seem like such a risky candidate for refinancing.
You should also strive to pay down your debts as quickly as possible. If you have credit card debt, for instance, consider switching to a card with a lower interest rate. The quicker you lower your DTI, the sooner you’ll get approved for refinancing.
3. Your employment history was too short
You’re so much more than your job, but on paper your job and employment history play a big role in whether you get approved for refinancing. Most lenders ask for proof of employment or a job offer letter. They want to see that you have a stable job now and that you’ll continue to have one in the future.
If you don’t have steady work yet, hold off on applying until you do. Make the job search a priority over refinancing. Once you’ve established a steady source of income, you can try applying for student loan refinancing again.
That’s not to say those with variable incomes, such as freelancers or other self-employed workers, can’t refinance. If that describes you, you’ll need to provide sufficient paperwork to show you’re bringing in money every month. That way, the lender will see that you make enough to pay back the loan, even if your earnings fluctuate from time to time.
4. Your repayment history showed missed payments
Have you ever missed a payment on any of your loans? No matter how careful we are, we all make mistakes. Unfortunately, that late payment will likely show up on your credit report.
It has been said that the past is the greatest indicator of the future, and prospective lenders adhere to this theory. Even a one-time mistake could blemish your repayment record.
Some lenders are more forgiving than others, but most look for borrowers who can manage their payments and make them on time. So if you’ve missed payments in the past, you’ll be more likely to get rejected for refinancing.
But even though late payments typically stay on your record for seven years, you can take steps to improve your credit during this time. Paying down debt and making on-time payments can help your credit bounce back.
5. Your credit score wasn’t strong enough
Your credit score is essentially the GPA of your creditworthiness — it’s a numerical value that lenders use to evaluate your risk as a borrower.
Your payment history, your credit utilization (how much you use out of your available credit), the length of your credit history, your credit mix and new credit all affect your score. If you missed a few payments or consistently charge your credit cards up to the limit each month, you might be considered a risk.
To qualify for student loan refinancing, you need a good credit score. But what credit score is needed to refinance student loans? Most lenders want to see a score of 680 or above. Popular refinancing lender SoFi will consider applicants with a score of 650 or higher.
You can monitor your credit score with a free service such as My LendingTree (note: LendingTree is the owner of Student Loan Hero.) You can also go to AnnualCreditReport.com and request one free credit report a year from each of the three major reporting agencies. If you spot any errors, make sure to dispute them and get them removed from your report.
If you continue to make on-time payments toward your debt, your credit score will increase over time. By building up to the credit score needed to refinance your loans, you’ll have a better shot at being approved for refinancing.
Why can’t I refinance my student loans? Find the problem so you can fix it over time
So, why can’t you refinance your student loans? Low income, weak credit and a high DTI ratio are among the most common reasons why you’d get rejected for refinancing. But by being proactive about your finances, you can improve your chances for approval.
If a lender rejects your refinancing application, try applying with other lenders. Each lender sets its own requirements, so even though you get a “no” from one, another could say “yes.”
If you’ve been rejected for student loan refinancing, try to pinpoint the specific reason. Then do what you can to fix the problem, whether that involves pursuing a new job or getting back on track with debt payments. In the meantime, continue to research student loan refinancing lenders to find one that’s the best fit for you.
Rebecca Safier contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 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 3.50% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.49% APR (with Auto Pay) to 7.27% 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 April 17, 2019, 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 04/17/2019. 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 firstname.lastname@example.org, or call 888-601-2801 for more information on our student 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.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed 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.
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.
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.
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 2.48% effective April 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.49% – 7.27%1||Undergrad & Graduate|
|2.49% – 6.65%3||Undergrad & Graduate|
|2.49% – 7.41%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.49% – 7.11%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|