Refinancing with Earnest
Refinancing rates from 2.57% APR. Checking your rates won’t affect your credit score.
From December 2015 until now, the Federal Reserve’s target interest rate has increased eight times. Although rate hikes tend to be a sign of a strong economy, they’re not so fun if you’ve got a variable rate on your student loans.
Unlike fixed rates, variable rates fluctuate over time, typically in accordance with the London Interbank Offered Rate (LIBOR), a popular benchmark for interest rates. So even though your rate might have started out low, it could rise over the life of your loans.
If you’ve got a variable rate on one or more of your loans, here are four tips on what to do if it keeps going up.
1. Remember that a rising rate might not cost you more overall
When borrowing or refinancing a private student loan, note that variable rates currently tend to start lower than fixed rates. As a result, choosing a variable rate could mean you pay less interest at the beginning of repayment, when your student loan balance is at its highest.
Even if your variable rate rises over time, you probably won’t see a drastic increase all at once. Since 1994, for example, the Federal Reserve’s benchmark rate target has never risen by more than two percentage points in a year. So if you’re planning to pay off your student loans within a few years, you probably shouldn’t stress too much about a rising rate.
Even if you see a few hikes throughout the life of your loans, you could still end up spending less than you would if you’d chosen a higher fixed rate at the beginning.
2. Find ways to pay off your variable rate loans faster
With rates currently forecast to keep rising, consider paying off your student loan ahead of schedule. By throwing extra payments at your loan, you could shave years off your repayment plan. Most lenders don’t charge any penalty for prepaying your loan, so the main challenge is coming up with the extra money each month.
You might create a budget and find ways to reduce your spending. You could apply to jobs that offer a higher income, or even set up a side hustle to supplement your earnings. Whatever changes you can make to free up more of your money could mean getting out of debt ahead of schedule.
And if you’ve got both fixed-rate and variable-rate loans, consider using those extra payments to target the variable-rate ones first. That way, you can pay off those debts before rates rise too much and feel confident that your fixed-rate loan payments will stay the same in the years to come.
3. Refinance to a fixed-rate student loan
If you can’t pay off your variable rate loans quickly, you might instead consider switching to a fixed rate through student loan refinancing.
When you refinance, you get a new loan from a bank or other lender and use it to pay off one or more of your old loans. Just as you choose your rate type when you borrow private student loans, you also choose between a fixed and variable rate when you refinance.
You can also select new repayment terms, typically between five and 20 years. A shorter term could increase your monthly payment, while a longer term will reduce it. Before choosing, student loan refinancing calculator to crunch the numbers and find a repayment plan that works with your budget.
Not only can refinancing switch you from a variable to a fixed rate, but you might also qualify for a lower interest rate than what you have now. If you have strong credit and a stable income, or can apply with a cosigner who does, you could get competitive rates on your refinanced student loans.
What’s more, there’s no limit to the number of times you can refinance. If rates go down or your credit score goes up, it might be to your benefit to refinance for even better terms. With this strategy, you could eliminate the risk of a variable rate and get one step closer to achieving your debt payoff goals.
4. Speak with your lender about lowering your rate
Along with switching to a fixed rate through refinancing, you might check to see if your lender can help you reduce your rate.
Most lenders, for instance, offer a 0.25% rate discount if you set up autopay on your student loans. Some also offer an additional discount after a few years of on-time repayment (though this perk has become rare in recent years.)
And although it’s not guaranteed, you could try negotiating with your lender for a lower rate. At the very least, you can find out if your lender offers any special discounts or flexibility when it comes to repayment.
Reaching out to your lender or loan servicer is especially important if you’re struggling to pay your bills. Rather than going into default, alert your loan servicer to your situation and see what they can do.
That way, you should be able to adjust your payments, avoid default and save your credit score.
Don’t panic if your variable interest rate rises over time
Although variable rates can — and likely will — rise over time, that doesn’t mean choosing one over a fixed rate is necessarily a bad idea. For example, if you can pay off your debt quickly, then a variable rate might be the better choice.
And if you can’t, don’t stress if your rate increases every once in a while, as it might still save you money in the long run. To make sure, crunch the numbers on your debt to see how much a rate hike will cost you.
And if a fixed rate looks like a much better deal than your current variable rate, consider refinancing for new terms. Rather than feeling stuck, check in with your student loans every once in a while. Your circumstances are sure to change in the years after graduation, so your approach to paying off debt should, too.
By staying on top of your debt, you can find the repayment strategies that work best for you.
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 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
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|