Why Do Banks Want to Refinance Your Student Loan DebtOctober 26, 2018
Millennials have been accused of killing everything from napkins to mail, but we still get a lot of mail! Mixed in among the pizza coupons and carpet cleaning flyers (who has carpet anymore?), you’ll usually find banks advertising for refinancing or consolidation services. What is that? If you’ve ever puzzled at the adverts or banners popping up asking you to refinance your student loan debt, we can shed some light on the subject. Why do banks want to refinance your student loan? Here are five reasons!
Business for the Bank
Banks make money off of the upfront costs of refinancing. You usually have fees associated with the process of refinancing, from administrative fees to application fees and so on. This pays the bank to employ people who work on your accounts. Basically, it pays the bills! So they make money from customers new or old setting up new accounts or new loans. It’s simple: refinancing pays the bank to provide a service that, in turn, helps them keep the lights on.
They Want You to Stick Around
It’s an attractive deal for some borrowers to reduce their monthly payments. Some people will happily jump on a good deal to refinance for longer terms to get lower payments because that puts more of your monthly income back in your pocket. Sure, this keeps you as a customer longer, but it’s beneficial to the bank to have you as a customer for a longer term even if you’re paying less each month. And if you’re happy and making payments no problem, they’re very happy.
You’re a Good Borrower (On Paper!)
If you’ve got a good credit score and income, you look good on paper. A bank will want you to stay with them or change to them instead of shopping around where they may be one of countless competitors vying for your business. Banks know that web-savvy searchers like yourself can hop on the ol’ internets and get quotes for new financial products in a matter of minutes. If you look good on paper and have all the markers of a responsible borrower, they want to offer services to you that keep you as a customer. It’s worth their advertising dollars to attract and retain good loaners
They’re Making Your Debt Easy to Sell
Banks regularly sell debt to other institutions. If you have a mortgage or student loan for several years, you may have seen this at least once already. You get a notice in the mail saying something is changing with your servicers because your debt has been acquired by another company. It’s beneficial for both financial institutions and it doesn’t mean that you did or didn’t do anything in particular—you might be one of many people your bank has targeted as a current customer whose debt would be easier to sell if it were refinanced.
Those are the main reasons that you might be seeing advertising for your bank or any other bank trying to get you to refinance your loans. If you start thinking about refinancing your student loans, check out the help we can offer navigating the process.