At Earnest, there is no difference between the Interest Rate and the APR of your loan. Why is that remarkable? Simply put, it means we are going back to the basics.
Several decades ago, the federal government began requiring that lenders disclose an Annual Percentage Rate, or APR, as a simple way to compare loans of the same type. It essentially prevents banks and lenders from quoting you an interest rate that seems low, but does not include additional fees. For example, a lender may charge you an origination fee to create your loan, transaction fees to process each of your payments, or teaser rates that jump up if you miss payments, causing your effective interest rate to be much higher.
You could receive an offer for a 9% loan with an origination fee of 3%, and another loan at 10% with no origination fee. The lower interest rate loan has an APR of 12% when you factor in the extra fee, while the higher interest loan with no added fee has the lower APR of 10%. In this case, the “higher” interest loan is actually a better choice than the “lower” interest rate loan.
So what happens when a lender charges no additional fees?
Interest rates and APRs become the same.
Take Earnest, for example. We don’t believe in charging extra fees simply because we evaluated your creditworthiness. With an Earnest loan, you pay back nothing but the principal and interest.
We believe fairness and transparency are values that are fundamental to finance. By equating APR with the true interest rate, we can express and share these values in a way that benefits our clients.
At Earnest, we recognize that few aspects of life are more personal than finance. And on the Client Happiness team, we embrace that. We hear your stories day in and day out, and each piece of feedback and each story we hear reminds us how lucky we are to do what we do, and adds to the larger story of what we want our impact to be. Our stories affect each other and we wouldn’t have it any other way. To us, that is the real future of our company: the story of our clients.
Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.
Let us do the math
Use our calculators to aggregate multiple student loans or preview your potential savings from refinancing with Earnest.
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Explanation of $30,939 Average Client Savings
Average savings calculation is based on all Earnest clients who refinanced student loans owned and serviced by Navient between 03/06/2017 and 03/31/2018. The savings figure of a particular client is calculated by subtracting the projected lifetime cost of their Earnest refinancing from the projected total cost of their original student loans.
How we calculate the figures:
For the original student loans, the projected lifetime costs are calculated using the weighted average term of the original loans and the weighted average interest rate in effect in the month prior to the refinance event, including borrower benefits (e.g. automatic payment discounts).
For the refinanced loans, projected lifetime costs are calculated using the selected Earnest term and interest rate, also including borrower benefits.
Projected lifetime costs assume a principal balance of $75,000.
Projected monthly savings is derived by using the “projected lifetime savings” divided by the selected Earnest term
In order to calculate our average client savings, we excluded:
Savings from any client that selected an Earnest loan with a longer term than their Navient student loan terms
Loans resulting from a client refinancing the same Earnest loan with Earnest
Average client savings amount is not predictive or indicative of your individual cost savings. For example, your individual savings may differ based on your loan term and rate type selections, if you change your repayment options, or if you pay off your student loans early.
Explanation of Rates "With Autopay"
Rates shown include 0.25% APR reduction when client agrees to make monthly principal and interest payments by automatic electronic payment. Use of autopay is not required to receive an Earnest loan.
Explanation of Precision Pricing™ Savings
Savings calculations are based on refinancing $121,825 in student loans at an existing loan servicer’s interest rate of 7.5% fixed APR with 10 years, 6 months remaining on the loan term. The other lender’s savings and APR (light green line) represent what would happen if those loans were refinanced at the other lender’s best fixed APRs. The Earnest savings and APR (white line) represent refinancing those loans at Earnest’s best fixed APRs.
Savings is computed as the difference between the future scheduled payments on the existing loans and payments on new Earnest and “other lender” loans. The calculation assumes on-time loan payments, no change in interest rates, and no prepayment of loans.
Individuals portrayed as Earnest clients on this site are actual clients and were compensated for their participation.