Refinancing with Earnest
Refinancing rates from 2.47% APR. Checking your rates won’t affect your credit score.
When I refinanced my student loans, I almost added two years onto my repayment plan. Luckily, I realized my mistake just in time.
This mistake could have been avoided if I’d learned more about refinancing beforehand. By understanding how the process works, you can avoid potential pitfalls.
Refinancing can be a savvy way to save money on your student loans. But before signing the dotted line on a new loan, make sure you’re not making any of these student loan refinancing mistakes.
1. Checking your rates with only one lender
When it comes to student loan refinancing, every lender might offer you a different deal. That’s why it’s important to shop around before choosing one. Fortunately, you can apply for a rate quote with multiple lenders in a matter of minutes.
All you need to do is enter a few basic pieces of information. Most lenders ask for your name, total student debt, income, and education level. Then, they run a soft credit check to get a sense of your financial history.
This soft check won’t hurt your credit score. Plus, it takes less than a minute before you see your refinancing offers. You can compare fixed and variable rates, as well as different repayment terms. Most lenders offer terms between five and 20 years.
Once you’ve reviewed offers, you simply choose the lender with the best terms. A lower interest rate means more money in your pocket. You might also consider other factors like good customer service and flexible repayment options.
Whatever your criteria for choosing a lender, make sure to shop around. That way, you can find the best deal for refinancing your student loans.
2. Thinking you have to refinance all of your loans
When it comes to refinancing, everyone’s situation is different. Some people should refinance all of their student loans into one new loan. Others should refinance one or two loans and leave the rest alone.
For example, I chose to refinance just one of my three student loans. On my refinanced loan, I lowered the interest rate from 5.96% to 4.74%. But the interest rates on my remaining two loans were already so low that refinancing wouldn’t have helped.
Another borrower might benefit from refinancing their private student loans but not their federal ones. When you refinance federal student loans, you lose access to federal programs like income-driven repayment (IDR) and Public Service Loan Forgiveness (PSLF).
Still, you might benefit from refinancing all of your student loans. Maybe you’d lower the interest rate on your loans, saving you money over the life of the loan. Or, you could consolidate your monthly payments into one. That way, you would only need to worry about making one student loan payment each month.
When it comes to refinancing, be strategic about which loans you choose. Depending on your situation, it might make sense to refinance one or more of your student loans.
3. Not comparing different repayment plans
Do you have a calculator handy? Before choosing a new repayment plan, it’s important to run the numbers. Compare your old term and interest rate with the new ones you’ll get through refinancing.
That way, you can see exactly how much you’ll save on a lower interest rate or shorter repayment term. Or, if you need lower monthly payments, you’ll see how your new loan will affect your budget.
For example, let’s say you have eight years remaining on your old student loans of $30,000. Altogether, they have a weighted average interest rate of 6.80%. When you apply for refinancing, you qualify for a 4.75% interest rate.
On a seven-year repayment plan, you’ll pay about the same amount each month but save $3,657 on interest. With a five-year repayment plan, you’ll pay about $150 more per month but save $5,217 on interest. Plus, you’ll get out of debt three years ahead of schedule.
By crunching the numbers with our student loan refinancing calculator, you can see how refinancing your loans for a lower interest rate or different term will affect your payments.
4. Giving up federal student loan protections
Giving up federal loan protections is another common student loan refinancing mistake. When you refinance federal loans, you turn them into private loans. As a result, you lose access to benefits like IDR plans and loan forgiveness programs.
If you’re working toward federal loan forgiveness, you shouldn’t refinance your loans. If you suspect you might lose your income in the future, it might be wise to maintain access to IDR plans so you can lower your monthly payments.
However, some private lenders offer flexible repayment terms or forbearance in the case of financial hardship. If you’re concerned that you’ll struggle with loan payments in the future, speak with potential lenders about your options.
5. Prematurely stopping payments on your old student loans
Here’s one refinancing mistake you don’t want to make: stopping payments on your old loans too soon.
From start to finish, the process of refinancing your student loans usually takes a few weeks. In the meantime, you have to continue making payments.
If you miss a payment, your loan could become delinquent or go into default. You might not realize you missed a payment and end up paying penalties in the future. Plus, a missed payment could seriously dent your credit score.
Before you stop paying your student loan, make sure your new one is all set up and ready to go. You’ll get approval from your new lender and set up your first payment. Afterward, log into your old loan account to make sure the balance has dropped to $0.
Halting payments on your old student loan too soon would be a big mistake. So, make sure you get the green light from your new lender before you stop checking in with your old lender.
Avoid these student loan refinancing mistakes
Before making changes to your student loans, do your research. Thoroughly understanding how refinancing works can help you avoid these mistakes.
As long as you’ve thought through your options, refinancing can be a smart financial move. You could simplify your monthly payments and save thousands of dollars in interest over the life of your student loans.
For more debt payoff inspiration, here are some of the best tips for paying off your student loans faster.
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 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% 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|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|