How to Compare Student Loan Refinancing LendersMarch 13, 2020
If you’re like most college students, you may have graduated from school with student loans. According to The College Institute for College Access and Success, graduates left college with $29,200 in student loan debt, on average.
By Kat Tretina
Kat Tretina is a freelance writer based in Orlando, Florida. Her work has been featured in publications like The Huffington Post, Entrepreneur, and more. She is focused on helping people pay down their debt and boost their income.
Even if you took out federal student loans, interest rates can be high, causing your loan balances to grow over time.
If you want to save money and pay off your debt as quickly as possible, student loan refinancing may be a smart strategy for you. However, there are literally dozens of refinancing companies out there, so how can you find the right one for you?
What is student loan refinancing?
When you refinance federal or private student loans — or even parent student loans — you take out a loan from a company like ELFI for the amount of your existing education debt. The loan you take out has different terms than your old ones, including interest rate, length of repayment, and minimum monthly payment.
When you refinance your debt, you can opt for a new loan term. You can extend your repayment term to up to 20 years to reduce your monthly payment and make it more affordable. Or, you can qualify for a lower interest rate and save money over the course of your repayment. You can even pay off your loans months or years ahead of schedule, freeing yourself from your debt.
Just how effective is student loan refinancing? ELFI customers reported that they save $272 per month, on average, and should see an average of $13,940 in total savings after refinancing their student loans.1
How to find the best student loan refinance companies
When you’re shopping around for a lender, there are five steps you should follow before selecting a loan:
1. Assess your loan eligibility
Because refinancing loans are offered by private lenders, eligibility criteria can vary from lender to lender.
You may qualify for a loan from one lender, but not another. At ELFI, borrowers must meet the following criteria:
- You must be a U.S. citizen or permanent resident
- You must have at least $15,000 in student loan debt
- You must have a bachelor’s degree or higher
- Your income is at least $35,000
- Your credit score is 680 or higher
- Your credit history is 36 months old or older
- Your degree is from an approved post-secondary institution and program of study
If you don’t meet the minimum lending requirements on your own, you may need a co-signer to apply for a loan with you. A co-signer is usually a parent, relative, or friend with good to excellent credit and steady income. The co-signer is responsible for making payments on the loan if you fall behind.
2. Get instant rate quotes to compare interest rates
Before submitting your loan application, it’s a good idea to compare offers from different lenders so you get the lowest student loan refinance rates. Some lenders — like Education Loan Finance — allow you to get a rate quote online in minutes without affecting your credit score.*
With the prequalification tool, you can explore your options and choose what repayment terms and interest rate types work best for you before applying for a loan.
3. Look at what borrower protections lenders offer
When you refinance federal student loans, you lose federal benefits like access to income-driven repayment plans and federal forbearance programs, so it’s important to pay attention to what benefits the refinancing lender offers.
Not all refinancing lenders have borrow protections, so make sure you read the fine print before selecting a lender. Otherwise, you could end up in a tough spot if you can’t afford your payments.
For example, if you’re unable to pay your loan because of a financial hardship or medical issue, you may be eligible for a temporary forbearance with ELFI. You could postpone your payments for up to 12 months, giving you up to a year to get back on your feet without worrying about your loans.
4. Compare repayment terms
When comparing loan offers, there are a few key factors you should consider:
- Interest rate types: Some lenders offer fixed and variable-rate loans. Fixed-rate loans have the same interest rate — and monthly payment — for the entire life of the loan. Variable-rate loans have lower interest rates at first than fixed-rate loans, but they can fluctuate over time, causing your payment to change, too. Variable-rate loans make sense if you want to pay off your student loans as quickly as possible because you can take advantage of the initial lower rate.
- Interest rate: The rate you receive will affect how much interest accrues on your loan during your repayment.
- Length of repayment: A longer loan term will give you a more affordable monthly payment, but you’ll pay more in interest over time. A shorter loan term will have higher monthly payments, but you’ll pay less in interest charges. And, shorter loan terms tend to have lower interest rates than loans with longer terms.
5. Research the lenders
Refinancing lenders vary widely in terms of customer satisfaction and accessibility. Before choosing a lender, research reviews online to get an idea of what to expect as a borrower.
For example, ELFI has over 800 reviews on TrustPilot, and a 4.9 out of 5 TrustScore.
You can contact ELFI for help by emailing answers@ELFI.com or by calling or texting 1-844-601-3534.*
Tackling your student loan debt
Refinancing your student loans is a great way to save money, lower your payments, or pay off your debt early. But choosing the right lender is key.
If you’re not sure if refinancing is right for you, use the student loan refinancing calculator to find out how much you can save and how it would affect your monthly payments.*
1Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 2/7/2020 and 2/21/2020. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors.
*Subject to credit approval. Terms and conditions apply.
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