Refinancing student loans can be a great strategy to make monthly payments more manageable and cut overall interest costs. In recent years, the number of lenders offering refinancing has increased, creating a competitive environment with lots of innovation and new options. But picking a lender can be daunting. Which student loan refinance company is the best? What should you consider besides the interest rate? Which lender should you trust with your money?
10 tips to help you find the right student loan refinance company
Choosing a lender to refinance your student loans is a big decision. Fortunately, it’s easier than ever for people to explore rate options and find the best deal. With most lenders, it takes less than 15 minutes to see how much you could save by refinancing.
1. When comparing interest rates, make sure it’s “apples to apples.”
For side-by-side comparison, it’s important to compare different lenders’ offerings for the same loan balance, time frame, and type of interest. For example, is the rate you’re being shown fixed or variable? Variable rates are the lowest, but they can increase significantly over the next four to six years. Don’t compare one lender’s fixed rate with another’s variable rate.
2. What term length options does each company offer?
Most lenders offer a variety of term lengths between 5 and 20 years. But some have more choices than others.
3. What type of borrowers do they want to work with?
Eligibility requirements vary among lenders, but most of them want you to have a steady job and credit score of 650 or higher. Be sure to find out the lenders’ credit score requirements, debt-to-income ratio requirements, and degree requirements. What are the minimum and maximum amounts for refinancing? It’s also important to note that some lenders will only work with graduates of certain schools. Ask if your institution is eligible.
4. What types of loans do they refinance?
Not all companies refinance both private and federal loans. If you have a variety of loans and are eager to consolidate them into a single payment, be sure the company you choose accepts all of your loans. And note that while refinancing federal loans can get you a lower interest rate, it can also make you ineligible for income-based repayment or loan forgiveness programs. Be sure to weigh the benefits against the trade offs before you refinance federal student loans.
5. What are the lenders’ payment options and borrower protections?
Refinancing student loans is all about making your debt repayment strategy fit your lifestyle and goals. When choosing a company, ask if you can pick your monthly due date. What happens if you lose your job or change careers? Are there grace periods, deferment, or forbearance options? Some private lenders offer a two-year interest-only option for recent grads, and let you pause payments if you go back to school.
6. Do they offer other types of loans?
Some lenders specialize exclusively in student loans, but others with diverse offerings want to build long-term relationships with upwardly mobile college grads. If you have different types of loans – a car loan, mortgage, small business loan, etc. – you might be able to negotiate a better deal by having all of them with the same lender.
7. What’s the lender’s reputation?
It’s smart to research a company before you take out a loan with them. Read reviews and media coverage. Check their Facebook or Twitter accounts to see how engaged they are with their customers. How long have they been in business? What is their mission and founding principles? Is the company financially sound? How committed are they to customer service?
8. What are the lender’s co-signer policies?
Many lenders publicly disclose the percentage of their borrowers who have co-signers. Are you likely to need a co-signer to get approved? And does the lender have a program for releasing a co-signer after a certain number of on-time payments?
9. Does the lender charge any fees or offer any discounts?
In an increasingly competitive lending environment, most companies have done away with application fees, origination fees, disbursement fees, and prepayment penalties, but it’s important to check to be sure. Also be sure to ask if you can get discounts for autopay, having other accounts, or referring friends. Many lenders will knock .25 percentage points off of the interest rate if you enroll in automatic billing.
10. Does the lender offer any perks?
Some lenders offer career counseling services, happy hours, networking events, entrepreneurial support, and more on the theory that everyone benefits when their borrowers are more successful and make more money. At least one lender donates to an education nonprofit for each loan they close.
How to get the best deal on student loan refinancing
There are many banks that offer student loan refinancing, but based on our research and reviews, we consider the ones below to be the best in terms of interest rates, transparency, product offerings, track records, ease of applying, and customer service....