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Compare Student Loan Lenders 2022

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Student Loan Basics

Statistics show that 47.9 million people in the USA have student loan debt with an average of $35,000 each. Your student debt can have a massive impact on your overall financial health, affecting your day to day finances and potential to obtain credit. Fortunately, you don’t need to be stuck with your original finance deal. Here we’ll explore student loan refinancing options and how to compare packages.

What is Student Loan Refinancing?

Student loan refinancing involves replacing your existing loan with a new loan that typically offers better terms. You can take advantage of refinancing deals when the interest rates have dropped or there are other circumstances, such as improvements in your creditworthiness that could provide a better deal.

A new loan has the potential to save thousands of dollars in interest payments. You’ll also have a new repayment term. Essentially, refinancing resets your repayment period, which is usually a minimum of five years. This can be an advantage, since you can reduce your monthly payments by opting for a longer repayment term.

The actual refinancing process is quite straightforward. You’ll need to choose the individual student loans you would like to refinance. You can then check what rates and terms lenders are offering. Refinancing is only available with private lenders, so if you want to refinance federal student loans, you will lose the federal protections and potential loan forgiveness.

Many student loan refinancing lenders offer prequalification, so you can obtain a quote for yourself and your existing loans. Unlike a formal application, this will not impact your credit score, but allows you to compare rates.

Once you have loan approval, you will use the funds to pay off the existing loans. You’ll then start making payments for your new loan.

Refinancing Your Student Loan: What are Your Options?

There are several options to refinance your student loan. Each of these options is different and will be best suited to particular circumstances.

  • Federal Loan Consolidation

This is offered by the government and is only available for federal student loans. When you use this option, you will combine your existing federal loans into a new loan with a different rate. This rate is determined as a weighted average of your old loan rates.

While this option will not save you a great deal of money, it will make it easier to keep track of your monthly payments. You can switch out various old variable rates for a new fixed rate loan. This could provide protection from future rate increases. Just be aware that if you’re offered lower monthly payments, this is usually accomplished by lengthening the repayment term, so you could pay more interest overall.

  • Private Loan Consolidation

As with federal consolidation, private loan consolidation allows you to combine several loans into a new loan deal. The primary difference between federal and private loan consolidation is that your new rate is not a weighted average of the old loan rates.

Instead, the lender will assess your credit history of managing debt and some of your other personal financial information to decide whether to offer a new interest rate on a new consolidation loan.

Consolidating through a private lender is a refinance of your loans. Remember that if you consolidate federal student loans with a private loan, you may lose access to a number of benefits including forbearance, income driven repayment and deferment options. You will also lose Public Service Loan Forgiveness.

  • Refinancing

This is obtaining a new loan to pay off some or all of your existing student loans. This is a great option if your finances have improved since you signed up for your original loans. You may be able to refinance at a lower rate or different terms to lower your monthly payments, reducing your overall interest costs or shortening the term to clear your loan sooner.

Student loan refinancing is only available through private lenders. However, you can finance both federal and private student loans. If you’re a well qualified borrower, you can consolidate your loans into one loan with terms that will work better for you.

What to Look for When Refinancing a Student Loan?

As with any financial product, each student loan refinancing package is different. So, it is crucial that you know what to look for to determine if it is the right option for you. Some of the important considerations include:

  • The Repayment Options: This is the way you will repay your loan. Your biggest decision when refinancing a student loan is whether you want to extend the term of your loan. You can bring the cost of your monthly repayments down by taking your loan over a longer term. However, this will mean that you pay more in the long term.
  • Type of Interest: There are two types of interest; variable and fixed. Most student loan lenders offer both, but you will need to think about which one best fits your needs. Variable rates allow you to benefit from falling interest rates, but you can also get stung if the base rate increases. Fixed interest rates allow you to benefit from knowing exactly how much you will need to pay each month with no changes.
  • The Interest Rate: The actual rate is what is usually advertised, but your rate may vary according to your financial circumstances. The combination of rate and term will determine how much interest you will pay across the entire loan.
  • A Reputable Lender: Since there are so many lenders on the market, choosing a lender can be overwhelming. However, it is important that you choose a reputable lender. You can check lender reviews and feedback on sites such as Trustpilot to see how previous customers rate their interactions.
  • Customer Support: While you may hope that once you have loan approval, you won’t need to get in touch with your lender, it is important that your lender offers decent customer support. Whether you prefer online chat or phone support, you need to know that your questions will be answered promptly.

5 Tips for Comparing Student Loan Refinance Lenders

Once you’ve determined you want to refinance your student loans, you need to compare lenders and ask the right questions to find the right one for you. Fortunately, there are some tips that can help you make comparisons to source the best deal.

1. Look for the Best Interest Rate

This is the most obvious tip, but many people overlook this important consideration. Aim to go with the lender offering the lowest interest rate, but not all lenders advertise their best rates. Some lenders may advertise a 1.8% rate, but have no incentives. On the other hand, a lender may offer a base rate of 2.25%, but offer 0.50% rebate when you sign up for auto payments. This makes the overall rate better than the first lender.

2. Consider the Current Rate Trends 

You’ll find deals for both fixed and variable loans, so you need to think about which one is best for you. To put this into context, consider the current trends. For example, when there is economic uncertainty, you may prefer to have the reassurance of a fixed rate. However, if the base interest rates are currently high, it is a good idea to choose a variable rate that will drop in accordance to base rate reductions.

3. Check the Overall Cost

While the monthly payment will impact your day to day finances, you need to consider the overall cost of your loan. Even if you choose a loan with a lower rate, if you take it over a longer term, you will pay more in the long term.

4. Do You Need a Cosigner?

There are a lot of factors that influence if you can gain approval for your student loan refinancing. Some lenders require that you have excellent credit or you will need to provide a cosigner. A cosigner may allow you to access the best rates, but some people prefer to keep their finances separate from their family members. 

5. Understand Fees

Finally, be sure to verify what fees may apply to your loan. If the lender has strict payment policies and you will get stung with a massive fee if you’re a day late on your payment, you may prefer to choose another lender.

How to Refinance a Student Loan?

Refinancing a student loan may appear daunting, but it can be accomplished with some basic steps. Once you have decided that you want to refinance, you can start the process.

  • Research the Lenders: While many student loan refinance lenders may appear similar, they all offer different benefits and have different lending criteria. So, it is important that you take some time to conduct research to find the right lender for you. As we touched on above, some lenders require that you graduated with a bachelor’s degree, so if you didn’t you’ll need to find a lender that doesn’t require that you have a college degree.
  • Get Multiple Quotes: As with any loan, it is important to get several quotes, so you can compare them and find the best deal. Fortunately, there are some platforms that allow you to compare rates on one site. However, if you prefer, you can visit each individual website.
  • Choose Your Lender and Your Loan Terms: Once you find a deal you like, you will need to decide your preferred loan terms. This will include choosing your repayment period and whether you want a variable or fixed rate. Aim to choose the shortest repayment period, to keep the overall cost of the loan as low as possible.
  • Complete Your Application: To move forward with the loan, you will need to submit a full application. This will involve providing details about your financial situation. You will also need to provide supporting documentation such as proof of graduation, proof of employment, government issued ID and proof of residency. The lender will then complete a hard credit search to finalize your rate.
  • Sign Your Documents: Once the lender approves your loan, you will need to sign the final documents to confirm you accept the loan. There is typically a three day window from signing the document, where you can cancel the loan if you decide you don’t want to go ahead.
  • Wait for the Loan Funds: After the three day rescission period, your new lender will pay off the outstanding balance on your old loan. You will need to continue making payments on your existing loan until you receive confirmation the process has completed. After this point, you will make monthly payments to your new lender. If the process is delayed and you overpay on your existing loan, you will get a refund.

Benefits and Risks of Student Loan Refinancing

As with any finance product, there are both benefits and risks of student loan refinancing. It is important to be aware of both before you make your final decision.

The Benefits:

  • You can Amend Your Payment Plan: Refinancing allows you to choose a new loan term. This allows you to decide how quickly you want to pay off the debt. A shorter loan term wil mean larger payments each month, but you’ll clear the loan quickly. However, if you want to reduce your monthly outgoings, you can opt for a longer term, but you’ll pay more overall.
  • Group Payments Together: Rather than maintaining several different loans, you can group your loans together into one refinance package. This means that you will only need to make one payment to one lender each month.
  • You Can Improve Your Financial Picture: Refinancing, particularly with a lower rate will make it easier to avoid missing any payments. This will help you to improve your credit score and improve your overall financial picture. This is crucial for qualifying for credit cards, loans and even a mortgage.
  • It is Possible to Apply With a Co-signer: Student loan refinancing lenders typically require a good credit score to approve applications. However, it is quite common for lenders to allow a co-signer. This can not only help you to qualify, but you can then work on your credit score.

The Risks:

  • You May Lose Federal Protections: Federal student loans offer certain protections that do not apply to loans from private lenders. This means that you may lose interest freezes, loan forgiveness and other protections.
  • Not Everyone is Eligible: As with other types of loans, there is eligibility criteria, and not everyone will meet these requirements. To qualify, you will not only need a good credit score, but also a low debt to income ratio. Additionally, there may be other requirements that prevent you getting approval.
  • You May Not Get a Lower Rate: Your credit score will help to determine your new rate, but there are no guarantees it will be lower than your current rate. So, it is important that you do your research and compare what rates you may be offered before starting the process.
  • You May Pay More in the Long Term: While it may be convenient now to lower your monthly repayment, taking on a loan with a longer term will mean that you may pay more in the long term. Always check the overall cost of the loan and make sure that you’re happy with the terms before signing your loan documents.

What Credit Score do I Need to Refinance Student Loans?

As with other types of finance, having a higher credit score will make it easier to qualify for student loan refinancing. Typically lenders prefer applicants who have a good FICO score, which is 670 to 739 or more. However, there are some lenders that offer decent refinance packages for scores of 600 or less.

Lenders typically make lending decisions based on a number of factors. So, your qualification will depend on more than your credit score. This will include your current income, your debt to income ratio and other financial details.

If you don’t have a good credit score, but need to refinance, you may be able to increase your chances of approval by adding a co-signer to your loan. There are lots of private lenders who accept co-signers and their good credit history can help you secure a loan.

However, you need to be aware that if you miss a payment or are late with your payments, you could hurt your credit score and your co-signer’s credit.

When You Shouldn’t Refinance Your Student Loan?

As we’ve touched on above, refinancing isn’t always a good idea and there are some circumstances when you should leave your current student loans in place.

The Fees Will Wipe Out Savings: Some lenders charge significant origination or application fees, so these need to be considered against your potential savings. Even if you can obtain an attractive rate, if those fees are too high, they could wipe out any savings, making it pointless to go through refinancing.

You’re Offered a Higher Rate: If lenders are only offering higher rates that you’re currently paying, it is not a good idea to refinance. Even if your monthly payment is lower, you will be paying more in the long term and staying in debt for longer.

It’s For a Longer Repayment Period: Unless you are in serious financial difficulty and need to drop your monthly repayments down to a more manageable level, you should not refinance for a longer repayment period. Most lenders allow you to specify your preferred term, but think carefully about the repercussions of carrying the debt for longer than you originally planned.

You’ve Declared Bankruptcy: Many lenders are unwilling to offer student loan refinancing after you’ve declared bankruptcy. Those lenders that do, will typically charge far higher rates, so you will need to think very carefully before going down this route.

You Must Have a Co-signer: While there are some circumstances where using a co-signer may be a good idea, it can impact both you and your co-signer. If a lender insists you must have a co-signer, it may not be the best time to refinance.

When is the Best Time to Refinance Student Loans?

Your personal circumstances aside, there are occasions when it is the best time to refinance your student loans. This is when the base rate is particularly low and you can lock in a fixed rate now. This means that even if the base rate goes back up again, you will remain paying the same each month.

You can usually spot these occasions, because it is when lenders are advertising very low rates for all types of finance. Whether you’re seeing adverts for low cost car loans, cheap personal loans or other finance offers, if the rates are low, it could be the best time to refinance.

If you time it right, you could see a massive drop in your interest rate, which could save you substantial interest charges. If you want to maximize this saving potential, you could keep your monthly payment the same and take your loan over a shorter period. This will not only save you money, but you’ll be out of debt sooner.

How to Choose the Right Refinancing Lender for My Needs?

When you start shopping for a refinancing lender, you may be surprised at the vast number of choices. Fortunately, whether you’re looking for a mortgage, a car loan or even student loan refinancing, there are some things to look for that can highlight the company is the right lender for you.

  • They Offer Pre-approval: If you want to find out what rates you can qualify for, pre-approval can be a great tool. This allows you to start the refinancing process, to assess your options before deciding to move forward.
  • Provide Different Products: Whether you’re interested in a fixed rate, variable rate or different terms, it is nice to have a lender that can provide you with details of different products. This will allow you to compare the payments and cost before deciding which is the best option for you.
  • Offering Attractive Terms and Rates: Every lender provides different terms and rates, but not all of these will be a good fit for your circumstances. So, it is important that your lender offers attractive terms and rates.
  • Realistic Lenders: While you may find it great that a lender will appear to give you immediate approval, it could be a red flag. There are disreputable companies who try to attract people with unrealistic borrowing. So, it is important to look for lenders that are realistic about their lending limitations.
  • Reasonable Fee Structure: Many lenders charge origination fees, which are a percentage of the loan amount. There may also be other fees, such as late fees, document fees, etc. Fees can add up and eliminate all your potential savings. So, look for lenders that have a reasonable fee structure.

Know Your Student Loan Refinancing Cost and Fees

As we touched on above, there is more to a student refinancing than the basic interest rate. So, it is crucial that you know the refinancing cost and fees.

All lenders will provide a summary with their quote. This will not only document the rate, but also the overall cost of your refinancing. These figures are based on your total payments for the full duration of the loan.

When you’re comparing quotes, be sure to check the total costs. This will provide you with a realistic idea of which quote represents the best deal.

Additionally, you should check what fees may apply to your new account. While you may have every intention of making your payments on time every month, you don’t want to be stung by a massive fee if you slip up.