There are many reasons to refinance your student loans — not the least of which is saving money on rates so you can pay them off faster. But how do you know which loan company to use to refinance your loans?
Here are a few key questions to consider as you look to refinance your student loans.
How much will I save?
Student loan refinancing companies usually advertise their average customer savings up front.
When trying to determine how much you will save yourself, there are several variables to consider: the rate and terms of your current loan, what you owe, your creditworthiness, and other factors.
Companies typically allow you to get a ballpark rate based on your financial profile. You can then calculate your own savings without having to do a full application. There are also many loan savings calculators available online to test out hypothetical payments and loan terms.
Remember if you do complete a full application for a loan at multiple companies in order to gain points of comparison, that means you’re doing a “hard” credit inquiry for each application. Too many hard credit inquiries in a short amount of time can damage your credit.
Check our student loan calculator to compare your rates.
How’s the service?
Some refinancing companies service your loan in-house. This means the company that provides your new loan terms and handles your loan paperwork is the same company that actually lends you the money. Earnest is the only student loan refinancing company that handles the full life of a loan.
Other refinancing companies contract loan servicing out to a third party. That means they handle the loan terms, but the actual servicing of the loan is handled by another company.
If you not happy with the service on your current loan, check who is actually providing it. Ask if they service the loan themselves, or farm it out to another company. You could end up changing companies and being stuck with the same third-party loan servicer that you had before you refinanced. That’s a lot of hassle just to end up back at square one.
What’s the technology like?
Do you want to pick up the phone every time you have a question about your loan or need to change your payment information? Would you rather manage your loan online?
Find out what the loan provider you’re considering provides. How easy it is to keep track of payments, schedule them, or make arrangments if you need to have more flexibility with payments? You should be able to log in and easily see all your loan details in a few clicks.
How soon will I get an answer?
Time, as they say, is money. When you’re trying to refinance your loan, you don’t want to waste it. There are several steps to refinancing your student loans. You can usually get an estimate from a company within a couple of minutes.
However, if you’re ready to apply for your new loan, you can speed up the process by getting yourself organized. Here’s a checklist of what you’ll need to get started.
After that, you’ll still need to apply, get approved, sign your loan, and wait the 10-day payoff period.
What do the underwriters look at?
To get a complete and accurate picture of your financial situation, a good student loan refinancing company should look at more than your credit score. Other factors they should consider include your level of education, earning potential, amount of savings, income, and other assets.
Can you set your own monthly budget?
Some companies have a strict formula that determines how much you pay each month, and when — no wiggle room. Others let you set your own payment each month, depending on what’s comfortable for your budget.
Earnest is the only student loan refinancing company that lets you set your own budget — and then provides an APR customized for that budget through its Precision Pricing feature.
Being able to choose your own payment date — for example, based on when you get paid, or when your other bills are due — and paying the amount that works for you, will help ensure you’ll be able to make your payments in full and on time each month.