Student loan refinancing seems to good to be true. I mean how can anyone legitimately slash your interest rate and save you thousands of dollars?! It has to be a scam… right? Nope, it’s not a scam you can refinance with reputable companies and save yourself thousands of dollars, but how do you make sure you don’t goof up? Read on for four traps to avoid and four ways to get the best refinance.
*All Earnest links are my personal link. If you refinance with Earnest using the link we both get $200. I didn’t choose Earnest for the $200 referral. I chose them because they met my personal standards and gave me the best interest rate.
1. Avoid refinancing if you’re hoping to take advantage of loan forgiveness options.
A refinanced loan is a private loan. Existing loan forgiveness options are for federal loans so you would eliminate your eligibility.
2. Avoid extending your repayment period when you refinance.
Refinancing student loans is a way to repay your debt faster and more efficiently by decreasing your interest rate. Don’t use it to stretch out your repayment period or your mitigating those benefits.
3. Avoid any company with application fees, loan transfer fees, or fees for early repayment.
There are many good companies that don’t have these so don’t settle for any company that does. Your money is yours, keep it.
4. Avoid losing the borrower benefits you still need.
What borrower benefits do you need? If you’re thinking about going back to school refinancing might not be the best option because it doesn’t allow the same amount of flexibility in terms of payment deferment as federal loans. Some companies will defer loans for up to 18 months.
Get the best student loan refinancing.
1. Check out the eligibility requirements of the company.
Most lenders offer refinancing for both federal and private loans. Many lenders have minimum credit score requirements, annual income requirements, and minimum lending amounts. Some have maximum lending amounts. Find at least two or three companies whose eligibility criteria you meet.
2. Compare borrower benefits.
Choose two or three companies with the borrower benefits that matter most to you. Benefits to consider include unemployment protection, entrepreneur program (SoFi), refinancing and ability to change monthly payments (Earnest has the most flexibility), and a company that doesn’t sell your loans.
3. Choose the refinancing term and monthly payment amount that are best for you.
Some companies (like Earnest) offer ultimate flexibility in choosing monthly payment amounts. Others have set terms of repayment so you’ll want to pick the term and monthly payment that make the most sense for your financial picture.
4. Submit your application & choose the company that gives you the lowest interest rate.
You already did the vetting of each company on the front end. All that’s left for you to decide is which interest rate is lowest.
That’s your quick and dirty guide to refinancing. If you avoid the four traps and follow the four steps to get the best student loan refinancing you’ve got your bases covered. Let me know what’s stopping you from refinancing in the comments below or on the Repayable Facebook Page.
Repayable is out now and has an entire chapter dedicated to refinancing that will serve as your definitive guide. Order your copy today and being the path to student loan liberation!
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