June 22, 2018

3 Best Companies to Consolidate & Refinance Student Loans in 2018

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Min. Loan Amount Varies $7,500 $7,500 $5,000
(other states can be higher)
Terms (yrs) 5, 7, 10, 15, 20 5, 7, 10, 15, 20 Varies 5, 7 ,10
Interest Rate (Variable APR) 2.57% to 8.32% 2.580% and up 3.56% and up 2.630% to 7.695%
Interest Rate (Fixed APR) 3.15% to 8.69% 3.150% and up 3.50% and up 3.400% to 7.750%
AutoPay Discount N/A
Member Rate Discount -0.125%
Checking Rates Will
NOT Affect Credit Score
No Origination Fees
No Prepayment Fees Depending on lenders
No Prepayment Penalty Depending on lenders
Interest-Only Payment Depending on lenders N/A
Loan Connecting Service
Compare Up to 11 Lenders

Compare credit unions &
Community banks
Direct Lender
Refi Federal Student Loans
Refi Private Student Loans
Refi Parent PLUS Student Loans
Refi with Spouse's Loan Depending on lenders Depending on lenders
Offer a Grace Period? N/A N/A N/A 6 months
Accepts Co-Signers?
Offer Deferments or
Forbearance?
N/A N/A
Referral Program $200 per referral $300 per referral

Understanding the basics of student loan refinancing

Student loan refinancing refers to a process of obtaining a new loan at a new and better interest rate and a repayment term to pay off your old loan. Student loan refinancing is different from consolidation though many people use these two terms interchangeably. Consolidation refers to a process of combining all of your federal loans into one loan by taking out a direct consolidation loan with one interest rate. Student loan refinancing enables the borrower to refinance both federal and private student loans.

Benefits of Student loan refinancing

Student loan refinancing is an ideal option for those borrowers with a mix of federal and private student loans or for the ones with private student loans only. Some benefits of student loan refinancing include:

  • It saves the borrowers thousands of dollars in interests over the loan term since the borrowers are able to repay their loans at lower interest rates.
  • It lets the borrower lock in lower interest rates.
  • It makes loan repayments manageable.
  • It also helps the borrowers to choose the loan that best meets their needs.
  • It helps the borrower to get rid of the debt faster.

A major factor to consider before you refinance your student loan is the fact that you are likely to lose some of your federal student loan protections some of which include:

  1. Income-driven repayment plans – After you refinance your student loan, you can no longer qualify for income-driven plans including income-based repayment, pay as you earn among others.
  1. Loan forgiveness – Federal student loans are eligible for loan forgiveness if the borrower meets certain criteria. When you refinance your student loan with a private lender, you will not have a loan forgiveness option. The loan forgiveness options include public service loan forgiveness, teachers’ loan forgiveness program, among others.
  1. Deferment and forbearance – When you refinance your student loan, you reduce your options to postpone or defer your loan repayments if you get into any financial hardships.

How to find the best loan refinancing companies

There are numerous companies offering student loan refinancing (The best place to start is to use our Student Loan Refinance comparison tool on this page as we have done most of the research for you.) There are also multiple private lenders to choose from. To choose the one that best suits you, you need to research different lenders and determine their eligibility criteria.  To help you choose the best private lender to pick, there are numerous features that you should consider including:

  • Interest rate: Check whether the lender offer loans with fixed rates, variable rates or both.
  • The lenders repayment term and how it will affect your monthly payments. Also consider how much you can afford to pay every month which depends mostly on your income
  • Whether the lender offers flexible repayment options and an option to postpone your payments if you encounter financial hardships like if you lose your job.
  • The loan amount payoff: This is the amount you owe to pay off the student loans in full which is higher than the current balance because it also takes account of any interest you still owe.
  • Whether it’s possible to combine both your federal and private student loans.
  • Perks offered for example SoFi offers unemployment protection and has an entrepreneur program etc.
  • Potential savings if you take the new loan with the new interest rate.
  • The private lenders reputation and reviews.
  • The private lenders origination fees, prepayment penalty or any other hidden fees.
  • The credit score you need to have to get approved by the lenders. The credit score helps you to determine the kind of interest rates and repayment term you can qualify for.
  • A need for a cosigner. A cosigner release option is available if you refinance your student loan in order to release a consigner from your original loan for example you could have used your parent as a cosigner to take your student loan but you now have a stable job or a good financial history, you can now remove them as a cosigner. You may also need a cosigner to refinance if your credit score or income is too low.
  • The minimum and maximum amounts of debts the lender can refinance.
  • The private lenders customer support and services.

Different lenders require the borrowers to have a good credit score usually of around 700. They also require the borrowers to give evidence of a steady income and cash flow to that they will use to service the loan. A few lenders prefer borrowers from a certain career field or certain schools. It is therefore important to understand the different eligibility criteria of different lenders.

How to prepare for student loan refinancing application

Ensure that you carry out a thorough preparation prior to doing your application. Also, make sure that you have all the necessary documents that your lender requires to prove your eligibility.

Here are some important steps to take to prepare for your loan refinancing application:

  1. List all your student loan totals that are, the total amount that you owe in student federal and/or private loans.
  2. List your interest rates next to the totals.
  3. Next, write your loan servicers information including the email address, phone numbers etc
  4. Find your most recent payslips and the after-tax monthly income.
  5. Then check how the income compares to your proposed monthly payments.
  6. Check your credit reports from all the three major credit bureaus.
  7. Check your credit score from credit karma

Perform a comparative analysis between different lenders and then choose your best (preferably) three and apply. This is because each lender has different requirements. Some lenders are also stricter than others and so you will have different chances of getting approved by the different lenders. If one approves the application and then the other two reject it, you can go with the one that has approved and if more than one approves, then you can choose the one you most prefer.

Bottom Line

Student loan refinancing is a good option with numerous benefits. However, the borrower should first do their math before taking out the loan to check if the benefits outweigh the drawbacks.

Features

Credible

  • Save time by comparing up to 11 lenders in minutes at one place
  • Save average of $18,000
  • Checking rates won’t affect your credit score
  • Choose loan terms between 5 to 20 years
  • Competitive low interest rate

LendKey

  • Rates as low as 2.58% varaible APR or 3.15% fixed APR with AutoPay
  • Refinance through credit unions and community banks
  • No origination fees
  • Consolidate both Federal and Private student loans with one single loan

PenFed Credit Union

  • Refinance through a credit union
  • Consolidate both Federal and Private student loans with one single loan
  • Combine and refinance spouse’s student loans with yours
  • Borrow between $7,500 to $300,000

SoFi

  • Rates as low as 2.63% varaible APR or 3.40% fixed APR with AutoPay
  • Receive 0.25% interest rate discount with AutoPay
  • Consolidate both Federal and Private student loans with one single loan

 

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