Tag: Refinance

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College Students and Recent Grads, Pay Down My Debt

7 Best Options to Refinance Student Loans – Get Your Lowest Rate

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Updated: December 1, 2017

Are you tired of paying a high interest rate on your student loan debt? You may be looking for ways to refinance your student loans at a lower interest rate, but don’t know where to turn. We have created the most complete list of lenders currently willing to refinance student loan debt. We recommend you start here and check rates from the top 7 national lenders offering the best student loan refinance products. All of these lenders (except Discover) also allow you to check your rate without impacting your score (using a soft credit pull), and offer the best rates of 2017:

LenderTransparency ScoreMax TermFixed APRVariable APRMax Loan Amount 
SoFiA+

20


Years

3.25% - 7.50%


Fixed Rate*

2.75% - 6.84%


Variable Rate*

No Max


Undergrad/Grad
Max Loan
Learn more Secured
earnestA+

20


Years

3.25% - 6.39%


Fixed Rate

2.57% - 6.19%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more 
commonbond A+

20


Years

3.18% - 7.24%


Fixed Rate

2.57% - 6.84%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more 
lendkey A+

20


Years

3.15% - 7.26%


Fixed Rate

2.74% - 6.48%


Variable Rate

$125k / $175k


Undergrad/Grad
Max Loan
Learn more 
A+

20


Years

3.95% - 6.99%


Fixed Rate

2.99% - 6.42%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more 
A+

20


Years

3.35% - 8.33%


Fixed Rate

2.89% - 8.24%


Variable Rate

$90k / $350k


Undergraduate /
Graduate
Learn more 
A+

20


Years

5.24%-8.24%


Fixed Rate

3.87%-7.12%


Variable Rate

$150k


Undergraduate /
Graduate
Learn more 

You should always shop around for the best rate. Don’t worry about the impact on your credit score of applying to multiple lenders: so long as you complete all of your applications within 14 days, it will only count as one inquiry on your credit score.

We have also created:

But before you refinance, read on to see if you are ready to refinance your student loans.

Can I Get Approved?

Loan approval rules vary by lender. However, all of the lenders will want:

  • Proof that you can afford your payments. That means you have a job with income that is sufficient to cover your student loans and all of your other expenses.
  • Proof that you are a responsible borrower, with a demonstrated record of on-time payments. For some lenders, that means that they use the traditional FICO, requiring a good score. For other lenders, they may just have some basic rules, like no missed payments, or a certain number of on-time payments required to prove that you are responsible.
LenderMinimum credit scoreEligible degreesEligible loansAnnual income
requirements
Employment
requirement
 
SoFi

Good or Excellent
score needed

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured
earnest

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more 
commonbond

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more 

680

Undergraduate
& Graduate

Private & Federal

$24K

Yes

Learn more 

Not published

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more 

680

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

$24K

Yes

Learn more 

Not published

Undergraduate
& Graduate

Private & Federal

None

Yes

Learn more 

If you are in financial difficulty and can’t afford your monthly payments, a refinance is not the solution. Instead, you should look at options to avoid a default on student loan debt.

This is particularly important if you have Federal loans.

Don’t refinance Federal loans unless you are very comfortable with your ability to repay. Think hard about the chances you won’t be able to make payments for a few months. Once you refinance, you may lose flexible Federal payment options that can help you if you genuinely can’t afford the payments you have today. Check the Federal loan repayment estimator to make sure you see all the Federal options you have right now.

If you can afford your monthly payment, but you have been a sloppy payer, then you will likely need to demonstrate responsibility before applying for a refinance.

But, if you can afford your current monthly payment and have been responsible with those payments, then a refinance could be possible and help you pay the debt off sooner.

Is It Worth It?

Like any form of debt, your goal with a student loan should be to pay as low an interest rate as possible. Other than a mortgage, you will likely never have a debt as large as your student loan.

If you are able to reduce the interest rate by re-financing, then you should consider the transaction. However, make sure you include the following in any decision:

Is there an origination fee?

Many lenders have no fee, which is great news. If there is an origination fee, you need to make sure that it is worth paying. If you plan on paying off your loan very quickly, then you may not want to pay a fee. But, if you are going to be paying your loan for a long time, a fee may be worth paying.

Is the interest rate fixed or variable?

Variable interest rates will almost always be lower than fixed interest rates. But there is a reason: you end up taking all of the interest rate risk. We are currently at all-time low interest rates. So, we know that interest rates will go up, we just don’t know when.

This is a judgment call. Just remember, when rates go up, so do your payments. And, in a higher rate environment, you will not be able to refinance to a better option (because all rates will be going up).

We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period. If you think it will take you 20 years to pay off your loan, you don’t want to bet on the next 20 years of interest rates. But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk.

Diving Deeper: The Best Places to Consider a Refinance

If you go to other sites they may claim to compare several student loan offers in one step. Just beware that they might only show you deals that pay them a referral fee, so you could miss out on lenders ready to give you better terms. Below is what we believe is the most comprehensive list of current student loan refinancing lenders.

You should take the time to shop around. FICO says there is little to no impact on your credit score for rate shopping as many providers as you’d like in a single shopping period (which can be between 14-30 days, depending upon the version of FICO). So set aside a day and apply to as many as you feel comfortable with to get a sense of who is ready to give you the best terms.

Here are more details on the 7 lenders offering the lowest interest rates:

1. SoFi: Variable Rates from 2.75% and Fixed Rates from 3.25% (with AutoPay)*

SoFi

SoFi (read our full SoFi review) was one of the first lenders to start offering student loan refinancing products. More MagnifyMoney readers have chosen SoFi than any other lender. Although SoFi initially targeted a very select group of universities (it started with Stanford), now almost anyone can apply, including if you graduated from a trade school. The only requirement is that you graduated from a Title IV school. You need to have a degree, a good job and good income in order to qualify. SoFi wants to be more than just a lender. If you lose your job, SoFi will help you find a new one. If you need a mortgage for a first home, they are there to help. And, surprisingly, they also want to get you a date. SoFi is famous for hosting parties for customers across the country, and creating a dating app to match borrowers with each other.

GO TO SITE Secured

on SoFi’s secure website

2. Earnest: Variable Rates from 2.57% and Fixed Rates from 3.25% (with AutoPay)

Earnest

Earnest (read our full Earnest review) offers fixed interest rates starting at 3.25% and variable rates starting at 2.57%. Unlike any of the other lenders, you can switch between fixed and variable rates throughout the life of your loan. You can do that one time every six months until the loan is paid off. That means you can take advantage of the low variable interest rates now, and then lock in a higher fixed rate later. You can choose your own monthly payment, based upon what you can afford (to the penny). Earnest also offers bi-weekly payments and “skip a payment” if you run into difficulty.

3. CommonBond: Variable Rates from 2.57% and Fixed Rates from 3.18% (with AutoPay)

CommonBond

CommonBond (read our full review) started out lending exclusively to graduate students. They initially targeted doctors with more than $100,000 of debt. Over time, CommonBond has expanded and now offers student loan refinancing options to graduates of almost any university (graduate and undergraduate). In addition (and we think this is pretty cool), CommonBond will fund the education of someone in need in an emerging market for every loan that closes. So not only will you save money, but someone in need will get access to an education.

4. LendKey: Variable Rates from 2.74% and Fixed Rates from 3.15% (with AutoPay)

Lendkey

LendKey (read our full LendKey review) works with community banks and credit unions across the country. Although you apply with LendKey, your loan will be with a community bank. If you like the idea of working with a credit union or community bank, LendKey could be a great option. Over the past year, LendKey has become increasingly competitive on pricing, and frequently has a better rate than some of the more famous marketplace lenders.

5. Laurel Road: Variable Rates from 2.99% and Fixed Rates from 3.95% (with AutoPay)

Laurel Road

Laurel Road is a division of Darien Rowayton Bank that offers a highly competitive product when it comes to student loan refinancing.  As a lender, Laurel Road prides itself on offering personalized service while leveraging technology to make the student loan refinancing process a quick and simple one. Consider checking out their low-rate student loan refinancing product, which is offered in all 50 states.

6. Citizens Bank: Variable Rates from 2.89% and Fixed Rates from 3.35% (with AutoPay)

Citizens Bank

Citizens Bank offers student loan refinancing for both private and federal loans through its Education Refinance Loan. The Education Refinance Loan is a good one to consider, especially if you are looking to stick with a traditional banking option. Consider looking into the competitive rates that Citizens Bank has to offer.

7. Discover Student Loans: Variable Rates from 3.87% and Fixed Rates from 5.24% (with AutoPay)

Discover Bank

Discover, with an array of competitive financial products, offers student loan refinancing for both private and federal loans through their private consolidation loan product. If you’re looking for a well-established bank to refinance your student loans, Discover may be the way to go. Just keep in mind that if you apply for a student loan refinance with Discover, they will do a hard pull on your credit.

Additional Student Loan Refinance Companies

In addition to the Top 7, there are many more lenders offering to refinance student loans. Below is a listing of all providers we have found so far. This list includes credit unions that may have limited membership. We will continue to update this list as we find more lenders:

Traditional Banks

  • First Republic Eagle Gold. The interest rates are great, but this option is not for everyone. Fixed rates range from 1.95% – 2.95% APR. You need to visit a branch and open a checking account (which has a $3,500 minimum balance to avoid fees). Branches are located in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich or New York City. Loans must be $60,000 – $300,000. First Republic wants to recruit their future high net worth clients with this product.
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 4.24% and fixed rates starting at 5.2424%. You would likely get much lower interest rates from some of the new Silicon Valley lenders or the credit unions.

Credit Unions

  • Alliant Credit Union: Anyone can join this credit union. Interest rates start as low as 4.50% APR. You can borrow up to $100,000 for up to 25 years.
  • Eastman Credit Union: Credit union membership is restricted (see eligibility here). Fixed rates start at 6.50% and go up to 8% APR.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve (or have served), the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 3.55% and fixed rates start at 4.00%.
  • Thrivent: Partnered with Thrivent Federal Credit Union, Thrivent Student Loan Resources offers variable rates starting at 3.25% APR and fixed rates starting at 3.99% APR. It is important to note that in order to qualify for refinancing through Thrivent, you must be a member of the Thrivent Federal Credit Union. If not already a member, borrowers can apply for membership during the student refinance application process.
  • UW Credit Union: This credit union has limited membership (you can find out who can join here, but you had better be in Wisconsin). You can borrow from $5,000 to $150,000 and rates start as low as 2.87% (variable) and 3.99% APR (fixed).

Online Lending Institutions

  • College Ave : If you have a medical degree, you can borrow up to $250,000. Otherwise, you can borrow up to $150,000. Fixed rates range from 3.35% – 7.50% APR. Variable rates range from 2.75% – 7.25% APR.
  • EdVest: This company is the non-profit student loan program of the state of New Hampshire which has become available more broadly. Rates are very competitive, ranging from 4.29% – 7.89% (fixed) and 3.18% – 6.78% APR (variable).
  • IHelp : This service will find a community bank. Unfortunately, these community banks don’t have the best interest rates. Fixed rates range from 4.75% to 9.00% APR (for loans up to 15 years). If you want to get a loan from a community bank or credit union, we recommend trying LendKey instead.
  • Purefy: Purefy lenders offer variable rates ranging from 2.81%-9.56% APR and fixed interest rates ranging from 3.35% – 10.65% APR. You can borrow up to $150,000 for up to 15 years. Just answer a few questions on their site, and you can get an indication of the rate.
  • RISLA: Just like New Hampshire, the state of Rhode Island wants to help you save. You can get fixed rates starting as low as 3.49%. And you do not need to have lived or studied in Rhode Island to benefit.

You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance. You can also email us with any questions at info@magnifymoney.com.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Personal Loans

Is it Possible to Refinance a Personal Loan?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

refinance a personal loan
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Trapped in a personal loan with a high interest rate or a massive monthly payment? It is possible to refinance to a loan that better suits your financial needs. We’ll explain how to refinance a personal loan and pitfalls to avoid when refinancing unsecured debt.

Is it possible to refinance a personal loan?

Refinancing a personal loan involves taking out a new loan to pay off an existing personal loan. Some people will refinance by negotiating new loan terms with their existing lender. However, many people refinance by taking out a new loan from a different lender. They use the proceeds of the loan to payoff their current loan.

It’s important to note that many lenders don’t advertise personal loan refinancing. However, you shouldn’t necessarily exclude them from your loan refinance search.

For example, a company spokesperson from SoFi (one of our top-rated personal loan issuers) explains that it treats all personal loans like incremental debt. If the company believes you can handle the payments on both your existing loan and your new loan, you may qualify for the new personal loan. On the other hand, Lightstream, a division of SunTrust Bank, specifically offers personal loan refinancing. Lightstream prices loans differently based on their intended use. Either company could be a great option to refinance your personal loan.

Depending on your income, your credit score, and your credit usage you may find a great rate at any number of personal loan companies.

When does it make sense to refinance a personal loan?

Refinancing your personal loan generally makes sense when the new loan comes with better terms or you need to refinance in order to remove a cosigner.

For example, your credit may have improved or your income increased significantly enough that you may qualify for a loan with a better APR. On the other hand, you may be struggling to meet your monthly payments and want to take out a new personal loan with lower monthly payments and a longer loan term.

“It could make sense to refinance almost any time if you can get better terms,” says Todd Nelson, business development officer for Lightstream, a division of SunTrust Bank. “Less interest is always a good thing.”

How to refinance a personal loan

No matter your goal, you’ll want to take a few steps to make sure that you get the best possible deal on your new loan.

Understand your existing loan

Before you pay off an old loan, check whether your loan has prepayment penalties, so you can factor any penalties into your loan analysis. Most banks do not charge prepayment penalties for personal loans, but those that do will typically charge a set fee for paying off a loan early. The terms and conditions of your loan will outline whether or not you have to pay a prepayment penalty. If you don’t understand the terms, you can talk to your lender to clarify the rules.

In addition to understanding your prepayment penalties, you’ll want to know your interest rate, the time remaining on your loan, and the required monthly payment. Refinancing your loan may affect all three of these numbers.

Get your credit in order

Once you understand your existing loan, you’ll want to check your credit score. You may need to make some efforts to clean up your credit before applying for a loan refinance. In particular, removing errors from your credit report and paying down credit card debt may help to improve your odds of approval. If possible, avoid applying for additional loans for three to six months before you refinance your personal loan. Applying for multiple lines of credit in a short time period makes you look like a worse credit risk according to the Fair Isaac Corporation, which creates the FICO® scores that are widely used in lending decisions.

Although your credit score matters, it’s not the only factor lenders will consider when setting your loan rate. “A great credit score doesn’t mean you’ll get the best rate,” Nelson cautions. Lenders will also consider your existing debt load, your income and how you’ve used debt in the past.

Prepare a budget

Refinancing a debt means your monthly payment will change. You’ll want to be sure that you can handle the change by preparing a budget. You need to know how much you can realistically pay each month, so you can continue to make timely payments every month.

Start shopping around for a new loan

Once you have your finances in order, you’ll want to start shopping for new loans. A great place to start is with LendingTree, where you can fill out a short online form and potentially get quotes from several lenders at once. LendingTree is the parent company of MagnifyMoney.

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If you don’t see banks offering better terms, you may want to stick with your current loan until you pay it off.

Apply for multiple loans

When you see the potential for savings, start applying for new personal loans. When you apply for a new personal loan, you will see a hard credit inquiry on your credit report. The more places you apply, the more credit inquiries you’ll see.

However, multiple credit inquiries won’t destroy your credit if you apply within a few weeks.
According to the credit reporting bureau Experian, “Generally, credit scoring models will count multiple hard inquiries for the same type of credit product as a single event as long as they occur in a short window of a few weeks.”

When you apply for a personal loan refinance, you’ll need all your personal identification documents, and you may need proof of income (such as a pay stub, W-2 form or a tax return).

Check out our list of the best personal loans for 2017.

Choose the best offer

Once you have a few offers in hand, you’ll want to compare them to see which is the best deal for you.

You can use this calculator to compare the interest you expect to pay on your existing loan (use your current balance, current interest rate, and current monthly payment at the top) with the interest and fees you’ll pay on a new personal loan.

When you find the best offer, you can accept the loan terms with your new lender.

Pay off your old loan

The process for paying off your old loan will vary by lender. According to Nelson from Lightstream, lenders who work with high-credit-score applicants will generally deposit the funds into your checking or savings account. Then it’s up to you to pay off your existing debt.

In general, you can close your old debt by making a payment through the Bill Pay portal on your lender’s website. After you make the payment, you should see a balance of $0. You can call your lender to be sure that the final payment is processed and the loan is closed.

Lenders that work with subprime borrowers may pay off the old debt directly. In those cases, you should still call the lender to confirm that your old debt is closed.

Shopping for lower interest rates

If you’re looking for a lower interest rate, you’ll probably find a better personal loan in one of two circumstances. First, you may find a better interest rate if your credit score improved since taking out the loan. The more your credit score improved, the more likely you are to see great refinancing options.

You may also find a better interest rate if you didn’t originally shop around. In this situation, it may pay off to compare personal offers from a few different lenders. You may be surprised by how low your rate can go.

Of course, a lower interest rate doesn’t mean you’ll necessarily save money when you refinance your personal loan. You will want to do the math the following to see if you will actually save money with a refinance. If the origination fees and the total cost of interest are lower than the remaining interest on your loan, it makes sense to refinance the loan.

Finding lower monthly payments

Anyone looking to lower their monthly payments will usually want to refinance to a longer loan. While credit score improvements may lower your monthly payment a little, spreading the payments over a longer period lowers the payments even more.

If you’re facing a pinched cash flow, refinancing to a longer loan may make sense (especially if you can combine it with a better interest rate). The problem with refinancing to a longer loan is that you’ll generally pay more interest in the long run. Use this personal loan calculator to see how much more you’ll pay over time.

Taking out a larger loan

Some people consider refinancing a personal loan when they want to take on a bigger loan for an upcoming expense, or to consolidate additional debt. Refinancing makes sense if the new loan has a lower interest rate. In general, you want to keep your loan at the lowest interest rate possible, even if that means having two payments. If you want to take on more debt, be sure your budget can handle the added expense. Create a debt payoff plan before you take on any new debts.

When to avoid refinancing a personal loan

Even with lenders offering tantalizingly low interest rates, refinancing a personal loan doesn’t always make sense.

Refinancing isn’t cost-effective

For example, you don’t want to choose a new loan if it won’t save you money. This calculator can help you compare your current costs to the interest and fees you’ll pay if you choose to refinance. High origination fees may keep an otherwise attractive offer from being cost-effective.

Aggressive debt payoff

Refinancing a personal loan may backfire if you’re on an aggressive debt payoff plan. A loan with an origination fee may require several months of standard payments to reach a break-even point. This refinance calculator can help you determine how long it takes to reach the break-even point. (Use a tax rate of 0 percent.)

When you don’t have a debt payoff plan

Some people feel tempted to refinance a personal loan when their budget gets tight, and the monthly payments feel high. A personal loan refinance could be a smart financial move, but the refinance needs to be part of your comprehensive money management strategy. Before refinancing, create a realistic debt payoff plan.

Things to watch out for

In general, personal loans are straightforward, but you should beware of these personal loan traps (especially if you’re trying to refinance a subprime personal loan).

Prepayment penalties: Most major banks don’t charge prepayment penalties, but before you refinance, you’ll want to check your existing loan, too, to make sure one isn’t lurking in the fine print. A prepayment penalty may negate some of the savings you get from lowering your interest rate.

Credit insurance: Some lenders will try to get you to buy life insurance to cover the cost of the loan if you die. In general, this is not a good value. In fact, the Consumer Financial Protection Bureau (CFPB) has adopted measures that restrict the sale of credit insurance. However, you may still hear a pitch for the product.

It makes a lot of sense to have some level of insurance in place to cover your debts if you’re married, lose a job, etc. However, an inexpensive term life policy is a far better value than a loan specific policy. Job loss credit insurance may be a more compelling product, but it can be very expensive. Be sure to weigh the cost of the insurance before purchasing it.

Origination fees: Many personal loans come with origination fees, which can be as high as 8 percent of the loan’s value. That makes taking out a new loan an expensive proposition. Compare the remaining interest on your loan to the cost of the origination fee plus the interest cost of the new loan before deciding to refinance.

Late payment fees: Some lenders will charge you a late fee if you miss your payment date. Late fees can drive up your loan costs in a hurry. Anyone who has struggled with payments in the past will want to check this fee before refinancing.

Alternatives to refinancing a personal loan

Refinancing a personal loan to another personal loan isn’t always the cheapest option. If you’ve got great credit, or you own a home you might find cheap options to eliminate your debt.

Balance transfer credit cards

Some credit card companies will allow you to transfer a personal loan balance to a promotional 0 percent intro APR balance transfer credit card. This can be a quick way to drop your interest rate in a hurry.

Before you apply for a balance transfer credit card, you’ll want to check on a few things. First, you won’t want to apply for a credit card from a bank that holds your debt. For example, you won’t want to opt for the Citi Simplicity® credit card if a Citi Affiliate owns your debt.

It’s also important to clarify that the credit card company will allow you to transfer a personal loan balance to your credit card. For example, the Chase Slate® card does not allow you to transfer personal loan balances to your credit card.

You can generally learn more about a lender’s balance transfer policy by reading their terms and conditions page in a section entitled Balance Transfers. However, if the terms aren’t clear, you should take the time to call a bank representative before applying.

A balance transfer credit card is an appropriate solution for people who can pay down their personal loan debt before the introductory rate expires.

HELOCs

Homeowners who have equity in their house may also find that a HELOC, or home equity line of credit, offers better terms than their existing personal loan. A HELOC has tax-deductible interest, and it operates like a line of credit. You can use a HELOC to pay off higher interest debts, or to pay for other important expenses. However, you need to be careful not to treat a HELOC as free money. You still need to pay off your HELOC in time.

Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah at hannah@magnifymoney.com

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Mortgage

How to Determine If a No Closing Cost Refinance Is Right for You

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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A home mortgage refinance doesn’t come cheaply, as homebuyers typically must pay thousands of dollars in closing costs and fees to finalize a loan. These expenses can seem endless as you get bills for everything from attorney fees to an appraisal to a loan origination fee. Closing costs vary by lender, loan amount and location, but in the end, they’re usually up to 3 percent of the home’s purchase price. For a $200,000 loan, that means closing costs of roughly $6,000.

For many homebuyers, these upfront costs put refinancing out of reach.

What is a no closing cost refinance?

A no closing cost refinance means that you refinance your home mortgage without paying thousands of dollars in upfront closing costs and fees to close the loan. But that “no” in the name can be confusing, because you’re not really avoiding that expense. While this process can save homebuyers money upfront, lenders work in closing costs elsewhere either by slightly raising interest rates or adding the closing costs to the balance of the loan.

How do I get one?

You can refinance your mortgage with no closing costs at banks, credit unions or other lenders. Standard qualifications for refinancing will apply, including a property value that exceeds the amount of the refinance and a credit score that is greater than lender minimums (usually more than 620). Lenders also typically expect your refinance payment and other debt payments to total less than 43 percent of your gross income.

Savings analysis: No closing cost refinance vs. regular refinance

No closing cost refinance doesn’t always result in savings. Homeowners who have a good idea how long they will stay in the house will be in the best position to decide whether refinancing without closing costs is a good idea.

Here is a comparison between a standard refinance and a no closing cost refinance where the lender slightly raises the interest rate to compensate for the lost closing costs. Loan officers will raise your interest rate based on daily market rates.

Regular refinance

No closing cost refinance

Mortgage balance

$200,000

$200,000

Closing costs

$4,800

None at loan closing

Refinance interest rate

3.5%

4.1%

Term

30 years

30 years

Monthly payment

$898

$966

Total cost of mortgage*

$323,312

$347,903

In this example, a homeowner who stays in his home for at least 30 years will save $68 per monthly payment and more than $24,500 over the life of the loan with a lower interest rate. The additional interest that comes with the no closing cost refinance loan far exceeds the $4,800 of closing costs with a regular refinance.

Another common way lenders will refinance a mortgage with no closing costs is to roll the costs into the balance of the loan. Here’s the same mortgage using this option.

Regular refinance

No closing cost refinance

Mortgage balance

$200,000

$204,800

Closing costs

$4,800

None at loan closing

Refinance interest rate

3.5%

3.5%

Term

30 years

30 years

Monthly payment

$898

$920

Total cost of mortgage*

$323,312

$331,072

The no closing cost refinance costs an extra $22 per month. If you stay in your home for the duration of the loan, the no closing cost refinance would add an additional $2,960 to your mortgage expenses (after accounting for the $4,800 you’d pay upfront for the regular refinance).

For homeowners who only plan to stay in their homes five years or fewer, however, refinancing with no closing costs could help them break even or come out ahead on closing costs. Here’s a breakdown.

Regular refinance

No closing cost refinance

Mortgage balance

$200,000

$200,000

Closing costs

$4,800

None at loan closing

Refinance interest rate

3.5%

4.1%

Terms

30 years

30 years

Remaining balance after five years

$179,394.15

$181,185.57

With a no closing cost refinance, you would pay about $1,790 more on a $200,000 mortgage if you got a regular refinance; however, you would have paid the $4,800 in closing costs upfront, meaning you’d save money in the long run with a no closing cost refinance (assuming you sell the house after five years).

Is a no closing cost refinance a good idea?

The upside

The biggest advantage of a no closing cost refinance is you do not have to come up with several thousand dollars in cash to close on your refinanced mortgage. Closing costs can add up quickly as you factor in an appraisal, loan origination fee, and other charges, and many buyers simply can’t afford them. A no-cost refinance doesn’t eliminate those costs, but it does spread them out into monthly payments, allowing you to pay for them over time.

The downside

Over the life of a loan, a refinance with no upfront closing costs can add up to a significantly more expensive choice than a traditional refinance. You can use a refinance calculator to help you figure out whether a no-cost refinance is worth it.

Is a no closing cost refinance right for you?

As you are thinking through whether a refinance with no closing costs is right for you, here are some questions to consider.

Will you qualify to refinance your mortgage?

Before applying, make sure your credit score is high enough to be approved for a refinance loan. You’ll also need to have sufficient equity in your home and a debt-to-income ratio of less than 43 percent, in most cases.

Will refinancing lower your monthly payment?

If your goal is to get a lower monthly mortgage payment through refinancing, a traditional refinance will likely be your best bet. A no closing cost refinance could also lower your monthly payment, though. Don’t forget to calculate in either the higher balance or higher interest rate you’ll have after the lender factors in closing costs. Before you agree to the refinance terms, be sure they will lower your monthly payment enough to be worthwhile.

How long do you plan to stay in your house?

If you are planning on selling your house in less than five years, a refinance with no closing costs almost always will save you money. You may have a higher monthly payment than a regular refinance, but if you get out of the mortgage after a few years, you likely will have spent less than if you had taken out a traditional refinance and paid closing costs.

If you plan to stay in your house indefinitely or longer than several years, a no closing cost refinance may be much more costly in the long run.

How to shop for mortgage refinance loans

To compare no closing cost refinance offers, visit financial institutions and talk with loan officers. They will look at current interest rates and your financial information to help you determine whether refinancing with no closing costs will work for you.

One advantage of no closing cost refinances is that they eliminate the closing costs and fees that can make loan-offer comparisons complicated. With quotes for no closing cost refinance mortgages in hand, you can easily compare interest rates. This allows mortgage shoppers to more effectively shop around and find the best deal.

What to look out for

As you should before agreeing to any loan terms, make sure you understand all costs involved. While a lender may not be charging closing costs when the loan is signed, there may be other fees and expenses that aren’t waived. Ask about fees and what they include. These could be:

  • Government transfer taxes
  • Homeowners insurance
  • Escrow funds

Some no closing cost refinance loans come with prepayment penalties to steer borrowers away from refinancing the loan quickly for a lower interest rate. Check the rules of the loan to make sure there are no prepayment penalties.

Where to shop for no closing cost loans

Traditional lenders, such as banks and credit unions, as well as other private lenders, may offer a refinance mortgage with no closing costs. You can compare current refinance rates with the online comparison tool by LendingTree, our parent company, but you’ll need to talk to a mortgage loan officer to determine what your refinance with no closing costs would look like.

If you have kept up with your mortgage payments but have little or no equity in your home to qualify for refinancing your mortgage, the federal Home Affordable Refinance Program (HARP) can help. If you qualify, you could refinance with a low interest rate and favorable terms. HARP also does not require a minimum credit score and will roll closing costs into the new loan.

Beware of closing cost scams

While refinancing your mortgage, you may receive emails that appear to be from your lender asking you to wire them closing costs. Do not respond, the Federal Trade Commission (FTC) warns, as this is a phishing scam trying to get your personal information and empty your bank account. This scam begins when hackers break into homebuyers’ or real estate professionals’ email accounts and steal information about real estate transactions they are working on.

You should never send financial information by email, the FTC warns.

How to save on closing costs

If you’re worried upfront closing costs will make refinancing your mortgage too expensive, shop around. Closing costs can vary widely by lender and location, and remember that they’re negotiable. The more options you research, the better you will be able to choose the deal that allows you to pay the least for closing costs.

Marty Minchin
Marty Minchin |

Marty Minchin is a writer at MagnifyMoney. You can email Marty here

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Mortgage

Refinancing With Your Current Mortgage Lender: Is It a Good Idea?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Should you refinance with your current lender?
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Recently, you hopped online to make your mortgage payment. On the front page of your financial institution’s website, you saw refinancing advertised at a much lower interest rate than the one you currently carry.

Your gut instinct may be to fill out an application for a refi. Who doesn’t want a lower interest rate on their mortgage?

But before you jump at the offer to refinance with your current lender, you should shop around. There may be better deals out there.

Pros And Cons Of Refinancing A Mortgage With Your Current Lender

Pros:

  • They have all of your personal information on hand, which may help the approval process go marginally faster.
  • You may be able to use your continued patronage as a bargaining chip for lowering closing costs and other fees.
  • If you like your current financial institution, there’s nothing wrong with staying with them out of brand loyalty — as long as it’s not costing you money.

Cons:

  • You will still have to provide documentation such as bank statements and W-2s, and your lender will still have to pull your credit report.
  • They may not have the best rates on the market. You’ll need to shop around to find out.
  • They may have more or higher fees than their competitors.
  • If you’re a customer service nightmare, your current institution may offer you higher rates

How to shop for a refi loan

That advertised rate you saw may not be the best option on the market. Even if it is, there’s no guarantee you’ll qualify for it.

Step 1: Compare rates from multiple lenders

Before you fall in love with the benefits of refinancing with your current lender, check to see what you can find elsewhere. A great way to do this is to use a site like LendingTree, which is MagnifyMoney’s parent company and one of the biggest online marketplaces for loans.

Without performing a hard credit pull (which saves you from dinging your score), LendingTree will ask you some basic underwriting questions via an online form. They can then match you with potential lenders who participate in its marketplace. The lenders will contact you via email or phone with quotes, which you can compare.

Of course, you can always work directly with lenders in your area as well.

Armed with this information, you can go back to your current lender to see if they can meet or beat the lowest rate you’ve been offered.

Step 2: Get all quotes the same day

“It is important to get all the quotes at the same time on the same day,” says Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage,” “because at that moment, everyone is looking at the same data, and their wholesale cost for that loan is identical.”

That’s because of the way mortgage lenders set their rates. When you take out a mortgage, your financial institution actually owns it for a very short period of time. But not for long. Eventually, they will bundle your loan together with a bunch of other loans and sell it to investors, and they continue to service your loan for a small fee.

They offer standard, wholesale interest rates to investors daily. Your financial institution needs to charge you more than that wholesale interest rate if they want to make a profit on the sale. You should apply to all financial institutions on the same day to ensure they’re all basing your quotes off of the same wholesale rate.

Step 3: Go to your lender to negotiate

When you find the best offer, use it as leverage with another lender. If they’re eager for your business, they may be willing to outdo their competitor. Remember that you’re not just negotiating interest rates but also origination fees, closing costs and appraisal report costs.

After you are offered a quote you are happy with, the lender locks it for a specified period of time before it is rescinded. Better rates merit shorter lock periods, the shortest being 15 days.

What if I find a better deal and they won’t match it?

If your current lender won’t match the outside quote, it likely makes sense to go with the outside lender. You’ll have a limited window in which to lock in your new refi rate, called a rate lock period. Be sure you know how long your rate lock period lasts so you can decide before you lose your rate.

A great rate isn’t all you should look at when comparing the costs of remaining with your lender versus choosing a new lender. Ask about origination fees, balloon payments and prepayment penalties — all of which could potentially make it more expensive to refinance.

After you have applied for the loan, you will be issued a Loan Estimate form, which outlines the proposed terms. At this point, a home appraisal will be performed to determine the value of your home.

Once final approval is issued, you will receive a Closing Disclosure form, which will tell you exactly how much you will need for closing costs. At this point you are still able to walk away from the table. After three days have passed, you’re finally allowed to sign the documentation agreeing to the loan.

How do I know it’s time to refinance my mortgage?

Whether you decide to refinance with your current lender or not, before taking the plunge you want to figure out if doing so will actually save you money.

Fleming says, to make a fair judgment, you need to look at interest and other costs over the same holding period.

“Very few people hold their mortgage until it’s paid off,” he explains. “Comparing the two for a period longer than [a few years] makes no sense, since your savings on the proposed loan will stop once you sell the house or refinance.”

For example, let’s say you currently have a mortgage with a balance of $284,020 with a 5% interest rate. You are considering refinancing to a 4% interest rate. In order to refinance you’d have to pay $4,100 in fees, including closing costs and origination fees.

Let’s look at how each of these options would pan out over an 84-month holding period:

Your current mortgage

Potential refi

Rate: 5%

Rate: 4%

Fees and closing costs: N/A

Fees and closing costs: $4,100

Total interest charges over 7 years: $92,385

Total interest charges over 7 years: $77,207

Total savings: $15,178

The refinance will, indeed, save you money even with the closing costs and fees. It’s time to refinance.

How to negotiate a refinance with your current lender

Like we mentioned before, when financial institutions issue a mortgage or refinance, they don’t typically keep it. They usually sell it off, and then continue servicing your loan for a kickback from the buyer. And they know that in order to keep getting paid that servicing fee, they’ll have to keep servicing your loan. That gives you a bit of leverage.

If you have other offers on the table, your current lender may be willing to meet or beat them.

“Call [your lender], and one of your options will be to speak with a loan officer, or mortgage adviser, or mortgage planner,” says Fleming. He notes that all of these titles are indicative of the same job description. “Tell them that you believe you can get a better rate, and that you have begun shopping and wanted to give them a shot at keeping you as a customer.”

This will only work if you can actually get a better rate elsewhere. While you can refinance with your current lender, the lender will be able to tell if you’re bluffing as they’ll have to pull your credit report and look at recent bank statements and W-2s.

“If [you] love the service of [your] existing lender, by all means ask them for a quote,” says Fleming, “but the market is very competitive today so shopping will almost certainly save you money.”

Brynne Conroy
Brynne Conroy |

Brynne Conroy is a writer at MagnifyMoney. You can email Brynne at brynne@magnifymoney.com

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College Students and Recent Grads, Pay Down My Debt, Reviews

CommonBond Student Loan Refinance Loan Review

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

CommonBond Grad Student Loan Refinance Loan Review

Updated September 7, 2017

CommonBond was founded by three Wharton MBAs who felt the sting of student loans after they graduated. The founders decided to provide a better solution for graduates, as they thought the student loan system was broken and in need of reform. As a result, they strive to make the refinance (and borrowing) process as simple and straightforward for graduates as possible.

CommonBond* began by servicing students from just one school, and has rapidly expanded. Today, CommonBond loans are available to graduates of over 2,000 schools nationwide. Although the company traditionally offered loan refinancing to undergraduate and graduate students, CommonBond recently started offering loans for current students as well (both undergraduates and graduates).

CommonBond is one of the top four lenders identified by MagnifyMoney to refinance student loans.

As you might be able to tell by the name, CommonBond thinks of its community as family. There is a network of alumni and professionals within the community that want to help borrowers. This alone sets it apart from other lenders, as members often meet for events.

While these are all great things, we know you’re more interested in how CommonBond might be able to help you make your student loans more affordable. Let’s take a look at what terms and rates they offer, eligibility requirements, and how they compare against other lenders.

Refinance Terms Offered

CommonBond offers low variable and fixed rate loans. Variable rates range from 2.57% – 6.84% APR, and fixed rates range from 3.18% – 7.24% APR.

Note that these rates take a 0.25% auto pay discount into consideration.

There is no maximum loan amount. CommonBond will lend what you can afford to repay. CommonBond offers fixed and variable rates with terms of 5, 7, 10, 15, and 20 years.

The hybrid loan is only offered on a 10 year term – the first 5 years will have a fixed rate, and the 5 years after that will have a variable rate.

CommonBond has a great chart listing repayment examples based off of borrowing $10,000, which can be found on its rates and terms page.

To pull an example from that, if you borrow $10,000 at a fixed 4.74% APR on a 10 year term, your monthly payment will be $104.80. The total amount you will pay over the 10 year period will be $12,575.90.

The Pros and Cons

CommonBond is available to graduates of 2,000 universities. While that is a very long list, not all colleges and universities are included.

One pro to consider is the hybrid loan option available. It might seem a little confusing at first – why would someone want a variable rate down the road?

If you’re confident you’ll be able to make extra payments on your loan and pay it off before the 5 years are up, you might be better off going with the hybrid option (if you can get a better interest rate on it).

This is because you’ll end up paying less over the life of the loan with a lower interest rate. If you were offered a 10 year loan with a fixed rate of 6.49% APR, and a hybrid loan with a beginning rate of 5.64%, the hybrid option would be the better deal if you’re intent on paying it off quickly.

What You Need to Qualify

CommonBond doesn’t list many eligibility requirements on its website, aside from the following:

  • You must be a U.S. citizen or permanent resident
  • You must have graduated

CommonBond doesn’t specify a minimum credit score needed, but based on the requirements of other lenders, we recommend having a score of 660+, though you should be aiming for 700+. The good news is CommonBond lets you apply with a cosigner in case your credit isn’t good enough.

Documents and Information Needed to Apply

CommonBond’s application process is very simple – it says it takes as little as 2 minutes to complete. Initially, you’ll be asked for basic information such as your name, address, and school.

Once you complete this part, CommonBond will perform a soft credit pull to estimate your rates and terms.

If you want to move forward with the rates and terms offered, you’ll be required to submit documentation and a hard credit inquiry will be conducted. CommonBond lists the following as required:

  • Pay stubs or tax returns (proof of employment)
  • Diploma or transcript (proof of graduation)
  • Student loan bank statement
  • ID, utility bills, lease agreement (proof of residency)

CommonBond also notes it can take up to 5 business days to verify documents submitted, so the loan doesn’t happen instantaneously.

Once your documents are approved, you electronically sign for the loan, and CommonBond will begin the process of paying off your previous lenders. It notes this can take up to two weeks from the time the loan is accepted.

Who Benefits the Most from Refinancing Student Loans with CommonBond?

Borrowers who are looking to refinance a large amount of student loan debt will benefit the most from refinancing with them.

Keeping an Eye on the Fine Print

CommonBond does not have a prepayment penalty, and there are no origination fees nor application fees associated with refinancing.

As with other lenders, there is a late payment fee. This is 5% of the unpaid amount of the payment due, or $10, whichever is less.

If a payment fails to go through, you’ll be charged a $15 fee.

It’s also noted that failure to make payments may result in the loss of the 0.25% interest rate deduction from auto pay.

Transparency Score

Getting in touch with a representative is simple and there is a chat and call option right on the homepage. Some lenders have this hidden at the bottom, or they don’t offer a chat option at all.

CommonBond also lets borrowers know they can shop around within a 30 day period to lessen the impact on their credit.

It does not list its late fees on its website, unlike other lenders. However, after making a chat inquiry, the question was answered promptly.

CommonBond does offer a cosigner release and is ranked with a A+ transparency score.

Alternative Student Loan Refinancing Lenders

The student loan refinancing market continues to get more competitive, and it makes sense to shop around for the best deal.

One of the market leaders is SoFi. It’s always worth taking a look to see if SoFi* offers a better interest rate.

The two lenders are very similar – CommonBond offers “CommonBridge,” a service that helps you find a new job in the event you lose yours. SoFi offers a similar service called Unemployment Protection.

SoFi’s variable rates are currently 2.75% – 6.84% APR with autopay, and its fixed rates are currently 3.25% – 7.50% APR, which is in line with what CommonBond is offering.

SoFi also doesn’t have a limit on how much you can refinance with them.

SoFi

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on SoFi’s secure website

Another lender to consider is Earnest. There is no maximum loan amount, and Earnest has a very slick application process. Interest rates start as low as 2.57% (variable) and 3.25% (fixed).

Lastly, you could check out LendKey. It offers student loan refinancing through credit unions and community banks, but only offers variable rates in most states and fixed rates in a select few. The maximum amount to refinance with an undergraduate degree is $125,000, and the maximum amount to refinance with a graduate degree is $250,000.

All three of these options provide forbearance in case of economic hardship and offer similar loan options (5, 10, 15 year terms).

Don’t Forget to Shop Around

As CommonBond initially conducts a soft pull on your credit, you’re free to continue to shop around for the best rates if you’re not happy with the rates it can provide. As the lender states on its website, if you apply for loans within a 30 day period, your credit won’t be affected as much.

Since CommonBond does have strict underwriting criteria, you should continue to shop around and don’t be discouraged if you are not approved. The market continues to get more competitive, and a number of good options are out there.

Customize Your Student Loan Offers with MagnifyMoney Comparison Tool

*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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Student Loan ReFi

Why I Refinanced My Student Loans — Twice

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

 

Refinancing your student loans can be a great way to accelerate debt repayment or free up some of your monthly budget. I recently refinanced my student loans for a second time, which was a strategic move to improve my overall financial health.

Here’s why I think this can be a smart idea, if you do it at the right time in the right way.

What Is Student Loan Refinancing?

If you’re new here and wondering what refinancing even is, allow me to explain. When you refinance your student loans, you essentially apply for a new loan so that a new lender will buy out your current student loans and give you a new loan with better terms.

“Better” terms depends on what your goal is. For many people, getting a better loan means getting a lower interest rate. If you want to save hundreds of thousands of dollars of interest over the life of your loan, refinancing is a great way to do that. You can structure your loan to pay it off faster at a lower interest rate. This might mean higher monthly payments than you’re used to but a much lower cost of your loan overall.

If you’re having trouble paying your student loans and your monthly payment is too high right now, you can also refinance your student loans to lower your monthly payment. So if you’re on a 10-year plan now, you could refinance to a 15- or 20-year plan to spread out your payments until you get on better financial footing.

Why I Refinanced Twice

About a year ago, I refinanced my federal student loans with SoFi because I wanted to get a better interest rate and pay off my loans faster. My student loans totaled $33,000 with an interest rate of 6.8% with 15 years left on the loan. My monthly payment was around $295 a month. I dropped over a half a percentage point in the interest rate to 6.25% and chose to pay off my loans in 7 years, which increased my monthly payment to about $485. Had I stayed with this loan, I would have saved almost $12,000 in interest fees over time.

I paid my monthly payments dutifully every month, but when my husband and I recently sat down to plan an aggressive debt payoff using the snowball method, we realized that I had been a bit too aggressive with my initial refinance.

Essentially, we wanted to throw as much money as possible at our high-interest debt. Our student loans were at manageable interest rates compared to our credit cards, and we wanted to restructure things a bit to free up more cash.

After receiving a refinance advertisement from College Ave in the mail, I decided to see if I could refinance my student loans and my husband’s graduate school loans with them. It had been only a year or so since my first refinance, but I was still interested. For the record, I tried twice previously to refinance my husband’s loans with SoFi, but they didn’t like his current salary as a medical resident, and they said I was not a qualified co-signer.

Well, luckily College Ave thought I was, so I was able to refinance both my student loans and my husband’s graduate school loans with College Ave. Our interest rates remained the same but I was able to customize a payoff plan that works well with our current debt snowball.

Basically, I chose a plan that allowed us to make graduated payments, so my payments for the next two years are significantly lower than they used to be. That gives me two years to knock out some of our credit card debt without worrying about having large student loan payments.

The Benefits of Student Loan Refinancing

In addition to getting longer or shorter payoff periods and better interest rates, there are other reasons why you might choose to refinance your student loans. For example, if you co-signed your student loans with your parents, sometimes student loan refinance companies will let you get a new loan entirely in your name, getting your parents off the hook.

Many people also refinance their student loans to be more organized. If you have several different student loans and bills with a mixture of interest rates, consolidating your student loans allows you to finally have one monthly bill with one interest rate in one place. This helps reduce the possibility of being late on your payments.

Things to Watch Out for Before You Refinance

While I’m obviously an advocate of refinancing, it’s important to know the downsides as well. The main downside is that if you refinance to a private company from having federal student loans, you lose a lot of the flexibility and perks of the federal student loan system.

Not all private lenders have as many repayment options as federal loans have, and most of them do not offer the perks that come with income-based repayment. For example, my husband’s medical school loans are under the income-based repayment plan called REPAYE, where the government is subsidizing his interest payments (several hundred dollars a month). This is not a perk I was willing to give up, but I was happy to refinance his private graduate school student loans to another private lender with better terms.

It’s Easier Than You Think

I know that switching student loan providers might sound like a complicated process, but with all the online financing companies available now, it’s easier than ever. The process to apply to refinance my student loans took less than 20 minutes both times.

Just make sure to have some identification documents on hand, like your driver’s license and Social Security card, to keep the process running smoothly. After my application was approved, it took about two weeks for my student loans to be completely moved over. Plus, since my new servicer paid off my own loans, that counted as a “payment,” which freed up even more cash this month.

Ultimately, student loan refinancing can be a strategic tool you can use when it comes to bettering your finances and getting out of debt faster. As long as you understand the process, ask to make sure you’re aware of any possible fees, and double-check that the process runs smoothly, you could be well on your way to financial freedom just by adjusting your interest rates and your payments on your student loans.

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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College Students and Recent Grads, Featured

(RISLA) Rhode Island Student Loan Authority Refinance Explained

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

(RISLA) Rhode Island Student Loan Authority Refinance Explained

Rhode Island is one of several states that has launched a student loan refinance program over the last few years. Refinancing your student loans is essentially paying off your current loans (federal or private) with another loan that has a better interest rate. A refinance can save you a bundle on interest. In some cases, it may even lower your monthly loan payment.

What sets the Rhode Island Student Loan Authority (RISLA) refinance program apart from some of the other state-run initiatives is that it’s open to anyone. You can qualify even if you live in a different state.

In this post we’ll cover:

  • The RISLA refinance loan terms and eligibility criteria
  • The type of student loans you can refinance
  • The implications of refinancing federal loans
  • Pros and cons

RISLA loan terms and eligibility requirements

RISLA offers loan terms of 5, 10, and 15 years. You can refinance $7,500 to $250,000. This refinance has no origination or prepayment penalty fees.

You need to apply with a co-signer to qualify for the lowest rates this program has to offer.

With a co-signer, fixed-interest rates range from 3.49% to 7.64% APR with auto-pay. If you sign up for direct deposit to make your monthly loan payment, RISLA offers an additional 0.25% interest rate reduction.

As for the RISLA eligibility requirements, you must:

  • Be refinancing loans that were used for education
  • Be refinancing loans that are in payment status
  • Have a acredit score of 680 or above
  • Earn at least $40,000 per year.
    • Borrowers that reside at the same address must make a combined annual salary of at least $40,000 per year.
    • Borrowers that reside at separate addresses, at least one of the borrowers must make $40,000 individually.

Student loans you can refinance with RISLA

You can refinance private student loans and federal student loans through RISLA.

Federal student loans you can refinance include parent PLUS loans, Stafford Loans, and both unsubsidized and subsidized Direct Loans.

Refinancing private student loans

Private student loans can be good candidates for refinancing because rates and loan terms offered by private lenders can vary widely. Some private student loans even have variable interest rates.

Keeping a variable interest loan for a long time can be risky. Variable interest rates can start off very low. The trade-off is variable rates can also increase in the future and impact your monthly payment.

Refinancing a private student loan that has high or variable interest with RISLA can stabilize your payments and save you money.

Refinancing federal student loans

Unlike private student loans, interest rates for federal student loans are set by the government.

For example, the interest rate on undergraduate subsidized and unsubsidized Direct Loans for 2016-2017 is fixed at 3.76%, which is a decent rate. If you took out undergraduate federal loans within the last few years, you may find your interest rate is already close to (or lower than) what RISLA is offering for a refinance.

Federal student loan borrowers who may benefit the most from the RISLA refinance are those with lingering undergrad loans from the early 2000s, and those with graduate or parent PLUS loans. These federal loans can carry an interest rate in the 6% to 8% range. In this case, a refinance with RISLA may be able to get you a lower interest rate.

RISLA has a calculator on its website you can use to check how much a loan refinance can save you. You can access that calculator here.

We also have a student loan refinance calculator at MagnifyMoney you can use to compare costs here.

Should you refinance federal student loans?

Savings is important, but it’s not the only factor to think about when deciding whether refinancing your federal student loans is the right move.

Refinancing your federal student loans can cause you to forfeit student loan borrower benefits like forbearance, deferment, income-based payment, and loan forgiveness.

Here’s a quick summary of these benefits and how they can help you:

  • Forbearance and deferment – Forbearance and deferment can postpone your student loan payments for a short period of time while you get back on your feet if you fall on hard times or experience an illness.
  • Income-based repayment plans – Income-based payment plans cap your monthly payment based on your income and family size. After 20 to 25 years of making payments within an income-based program, the balance of your loans can be forgiven.
  • Public Service Loan Forgiveness – The Public Service Loan Forgiveness Program is an initiative that anyone who plans to pursue a career in public service should consider. If you get an approved public service position and make 120 consecutive loan payments while serving (about 10 years), the remaining balance of your Direct Loans can be forgiven.

One thing to note is RISLA does offer some borrower benefits, including 12 months of forbearance and a payment plan program in certain circumstances. However, the extent of the borrower benefits that you get with federal student loans goes beyond what RISLA provides.

Pros and cons

Pro: The competitive interest rates. If you apply with a co-signer, the RISLA refinance offers low and fixed interest rates.

Con: The lowest rates require a co-signer. You can’t qualify for the best interest rates this program has to offer without a co-signer. We’ll discuss a few lenders below that may offer you a low rate without a co-signer.

Pro: Anyone is welcome to apply. Being a resident of Rhode Island is not required.

Con: Refinancing forfeits student loan borrower benefits. This con is irrelevant if you’re planning to refinance private student loans since they typically offer limited borrower protections anyway. But refinancing federal student loans will cause you to miss out on the protections covered above. Make sure you’re comfortable with the implications of no longer having these perks before moving forward.

Pro: No fees. The RISLA refinance has no origination fee or prepayment penalties.

Should you consider the RISLA refinance?

The RISLA refinance is open to borrowers outside of Rhode Island, so it’s yet another refinance option that students and parents across the country can consider. But it’s also important to shop around before making a decision.

The downside of the RISLA refinance is that the most competitive rates require a co-signer. If you don’t have a co-signer, here are a few other lenders you can turn to that offer low rates:

  • CommonBond – Fixed rates starting at 3.18% APR
  • Earnest – Fixed rates starting at 5.25% APR
  • LendKey – Fixed rates starting at 3.15% APR
  • SoFi – Fixed rates starting at 3.25% APR

Keep in mind, the very best rates are given to those with strong credit scores. You may need to work on strengthening your credit history first before getting approved for a low rate on your own with CommonBond, Earnest, LendKey, or SoFI.

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor at taylor@magnifymoney.com

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What To Do if a Student Loan Refinancer Rejects You

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

What To Do if a Student Loan Refinancer Rejects You

After researching the pros and cons of refinancing student loans, you might be excited to go through with the process. Perhaps you’re looking to lower your interest rate, or you want to release a co-signer from a student loan.

While you may be set on refinancing your student loans, submitting an application isn’t a guarantee of approval. When you apply, the lender will likely take your credit, income, other debts, employment status, and possibly other factors into account.

But a denial on your first application doesn’t mean you’re locked out from ever refinancing. Instead, take the time to understand what influenced the decision and determine your best next step. 

Find Out Why Your Application Was Denied

Student loan refinancers look at many aspects of an applicant’s personal and financial life when deciding whether or not to approve a loan. The process sometimes starts with prequalification, when you share information about yourself and the company performs a soft inquiry on your credit. A soft inquiry lets the company examine your credit reports, but doesn’t affect your credit score.

You could find out you won’t qualify for refinancing during the prequalification phase. For example, based on your income and debt obligations, you could be turned down because you don’t have enough free cash flow — your monthly income minus monthly debts. Usually, lenders like to see your debt-to-income ratio under 40%.

Phil DeGisi, chief marketing officer at student loan refinancer CommonBond, says the company will tell you why you were denied if you don’t meet the company’s criteria. “If the person has questions or doesn’t understand what that means, they can call customer service and we’ll answer any questions they have about their application,” DeGisi said. Taking time to figure out why your application was turned down can help guide your path toward approval in the future.

You could prequalify for refinancing but wind up getting declined during the underwriting process. It’s at this point that the lender is likely to do a hard pull on your credit, which could affect your credit score. (Check with the lender before submitting for prequalification to see if it performs a hard or soft inquiry.) Amanda Wood, director of business and product development at online lender SoFi, says that could happen if “something you shared with us initially doesn’t match up after you’ve submitted more information, like pay stubs and identity verification.” Common examples include a recent bankruptcy or insufficient free cash flow. 

Try Again with Another Lender

You could still be approved from a different lender, even if you were handed a rejection already. “Everyone looks at different factors, and we all make different judgments on eligibility,” DeGisi said. However, there are some basic rubrics, and “the type of person that’s generally going to be most successful is someone who can afford their monthly payments.”

If you have terrible credit and poor cash flow, the chances of getting approved are quite small with any lender. You could get denied even if you have a stellar credit score because of poor cash flow, or if you have great cash flow but a poor credit history. Approval isn’t everything either; in some cases you might get approved, but the interest rate is so high it doesn’t make sense to go through with the refinancing.

Wood points out that regardless of whether or not you’re approved, “it’s a good idea to check out all your options and see not only who will approve your loan, but what companies offer the best rates and terms, and have low or no fees.” You may be able to determine a company’s fees by reading the fine print before submitting an application or going through prequalification.

Be cautious when applying for refinancing with multiple companies as the resulting hard inquiries could impact your credit score. However, it makes sense to go ahead and shop around within a certain time frame. Depending on the credit-scoring system, multiple hard inquiries for student loans made within 14 to 45 days are weighted as a single inquiry for credit-scoring purposes. That means the damage to your credit score will be kept at a minimum.

Increase Your Eligibility and Try Again Later

Take steps to improve your chance of being accepted later by working on the factors that you believe, or the company told you, impacted the denial decision.

Employment is often a requirement to qualify for refinancing, and if you don’t have a job, that’s where you’ll likely want to start. In the meantime, consider alternative federal student loan repayment plans mentioned below.

If you have a job but not enough free cash flow, you’ll need to focus on decreasing your monthly payments, increasing your income, or both. Perhaps you could negotiate a raise or take on an additional part-time job. The extra income will help one side of the equation, and you could increase your cash flow even more by putting the money toward debt payments.

Picking up a contractor side gig, such as driving for a ride-sharing company, might not factor into your income unless you’ve had the job for at least two years because the lender wants to see two years’ worth of tax returns. However, paying down debt with the extra money will still help your cash flow.

Your credit history and score are often important factors as well. Learning how your actions affect your credit, and what will help your credit going forward, are valuable lessons that can help you now and in the future.

Building a strong credit history filled with on-time payments can take a long time, but a few actions can have a more immediate effect. Start by reviewing your credit reports — you can get a free copy from each bureau at AnnualCreditReport.com — and disputing errors that could be hurting your credit. If you often have a high balance on your credit cards, keeping the balance below 20% to 30% of the available credit might help your score.

Look into Alternative Federal Repayment Plans

If you’re having trouble making student loan payments, refinancing might not be your only option. Both Wood and DeGisi recommend looking into the different federal repayment plans available to borrowers with federal student loan.

There are several income-driven plans that base borrowers’ monthly payments on their income. You may also be able to put your federal loans into deferment or forbearance, which lets you temporarily halt payments — although interest may still accrue. 

The Bottom Line

Refinancing student loans can help you save money on interest, lower your monthly payments, and allow you to release a co-signer from your loan. Receiving a denial letter is disappointing, but it doesn’t mean you’re boxed out for life. Try again later after improving your financial profile. In the meantime, if you’re having trouble making federal student loan payments, consider switching to a different payment plan.

Louis DeNicola
Louis DeNicola |

Louis DeNicola is a writer at MagnifyMoney. You can email Louis at louis@magnifymoney.com

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“How I Saved Almost $18,000 in Student Loans by Refinancing”

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Student Loans by Refinancing

When Aaron LaRue, product manager for Clara Lending, graduated from the University of California, Santa Barbara in 2011, he owed more than $50,000 in student loan debt. “I didn’t qualify for any financial aid or federally subsidized loans, and I took whatever private loan I could get because I just wanted to go to school,” he said.

By the time LaRue was done financing his schooling, he had ended up with three student loans, one for each year he was in school (he even graduated in three years on purpose in the hopes of cutting down on tuition costs). “Everything got lumped together when I consolidated the first time, but the loans were about $23,000 for the first year about then $13,500 for both my second and third years,” said LaRue. “So almost $50,000 on the nose.”

Since the variable interest rates on his loans were incredibly high, LaRue knew that he’d have to work throughout college in the hopes to pay down some of that debt he owed. “I worked as a teacher’s assistant for two different classes,” he said. “I was the photo editor of our daily school newspaper, and I worked in a computer lab on campus teaching video editing. At one point I had all three jobs at the same time, and that was on top of my crazy class schedule. On top of my consistent jobs, I also always had one-off side gigs going. I shot photos for magazines, photographed a wedding and would pick up freelance video editing jobs on the side.”

Needless to say, LaRue stayed busy — but the bills kept piling up.

Finally, after a few years of checkered payment history and a brief period of deferment, he decided to refinance. “Refinancing was really difficult for me,” LaRue admits. “I graduated high school in 2008, right when the economy was in free fall. By the time I graduated [college] in 2011, I was competing in a job market against people with tons of experience who had recently been laid off. It was difficult for me to get a good paying job, so I decided to go out on my own as a consultant and try to take on multiple clients. I’ve been doing that ever since.”

While LaRue found some success in his career after graduating, he admits that what many people often don’t understand is that when you’re self-employed, it’s very difficult to qualify for loans unless you have two years of tax returns as a self-employed person. “So the first time I tried to refinance my loan, I was denied,” he said. “I started doing more research and I came across a company — Earnest — that used a merit-based qualification system. They checked my earnings and my credit score, but they also dug through my bank accounts to see if I was managing my money properly. They could tell I was responsible, and I was able to qualify. This was huge for me, because it got me into a fixed interest rate loan, and my rate was 2% lower than what I was paying at the time.”

At the time of refinancing, LaRue had about $54,775 in debt, and he’s managed to save $17,990 over the life of the loan, which works out to over $1,200 per year during the repaying period. “I’m still making payments, but I’ve cut about four years off my repayment time and I’m saving money every month,” said LaRue.

At the end of the day, LaRue has some advice for students struggling under the same weight of crushing student loan debt. “Don’t let the debt get you down,” he says. “If you understand how debt works and you can manage it, it’s really not that bad. Debt has allowed me to go to school and it’s helped me start my own business, and in both cases I’ve come out ahead. Having a monthly payment sucks, but I have definitely gotten a return on my investment.”

If you’re ready to consider saving money by refinancing your own student loans, check out this piece for 19 options to refinance and get your lowest rate.

Cheryl Lock
Cheryl Lock |

Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at cheryl@magnifymoney.com

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Pay Down My Debt

Options to Get Out of Your Timeshare

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Options to Get Out of Your Timeshare

You’ve finally escaped the stress of your commute, stacks of unfinished paperwork, and the never-ending demands of the office. You’re staying someplace warm, enjoying pina coladas on the beach or working on your tan by the pool.

The resort’s sales manager has casually mentioned an affordable way to return to this same place every year. And in your relaxed state of bliss, you start daydreaming about future vacations. You imagine making the resort an annual family destination or the spot to celebrate your wedding anniversary.

Let’s face it — buying a timeshare is often an impulsive decision. And one you may regret after the drinks have worn off, your vacation is over, and reality sets in. Because chances are, your timeshare is not the amazing deal the resort’s sales manager sold you on. If you’re stuck with buyer’s remorse or simply can’t afford your timeshare, here is how to minimize the damage to your wallet and credit score.

What is a Timeshare?

So what is a timeshare exactly? A timeshare allows you to buy the right to use a property every year for a certain period of time. And the property is usually part of a resort. A deeded timeshare means you’re purchasing a portion of the property. And a non-deeded timeshare mean you’re leasing the right to use the property for an agreed upon number of years (usually 10-50).

How Much a Timeshare Actually Costs

The cost of a timeshare varies based on the size of the unit, the resort’s location, the time of year, amenities, and more. But the National Timeshare Owners Association (NTOA) says the average timeshare sales price is $20,020.

What does typical report-based financing looks like?

  • Loan Amount – $20,000
  • Term of Loan – 6 years (72 months)
  • Interest Rate Charged – 15.9%
  • Monthly Payment – $432.74
  • Actual Cost – $31,157.28

Many resorts also offer a 1-year loan with a 0% interest rate if you’re willing to put 50% down within 30 days of purchasing the timeshare.

In addition to the cost of the timeshare itself, you’re also responsible for an annual maintenance fee. The National Timeshare Owners Association (NTOA) says the average maintenance fee for 2015 is a whopping $880. This annual maintenance fee can increase over time. And you’re responsible for paying this fee every year regardless of whether or not you visit.

Selling a Timeshare

Are you thinking about trying to sell your timeshare? Although the National Timeshare Owners Association (NTOA) lists three preferred resellers on their website, it’s not always that simple.

Resale websites operate as a subscription service. And their fees range from $14.99 to $125 per year. Plus, resellers may take a portion of the sale.

Remember, timeshares are not real estate investments. And the secondary market is oversaturated with buyers. Want to see further evidence? A quick search on eBay revealed dozens of timeshares practically being given away for $1.

Try Refinancing Your Loan

Between the high interest rates of resort-based financing and the annual maintenance fee, what was sold as an affordable vacation becomes expensive very quickly. If you’re struggling to afford monthly loan payments, you may want to try refinancing to secure a single-digit interest rate.

LightStream, a division of SunTrust bank, offers timeshare-refinancing options if you’re a U.S. citizen with good credit. They don’t charge fees to refinance. And their interest rates are fixed.

Here’s an example of what the numbers may look like for refinanced timeshare loan:

  • Loan Amount – $20,000
  • Term of Loan – 6 years (72 months)
  • Interest Rate Charged – 7.84% – 9.84% APR with Autopay
  • Monthly Payment – $349.10 – $368.91
  • Actual Cost – $25,135.20 – $26,561.52
  • Money Saved – $4,595.76 – $6,022.08

Your timeshare might be such a financial drain that you decide to sell (or give it away) and then refinance the remaining debt to pay it off quickly and with a lower interest rate.

Consider Timeshare Exchanges

Did your resort’s sales manager mention the option of timeshare exchanges? It’s a major selling point for many buyers. And who wouldn’t like the option of trading timeshares with owners in other locations? But does it make sense for you? It depends.

If you’ve paid off your debt, it may be worth the additional fees to list your timeshare on an exchange. The National Timeshare Owners Association (NTOA) lists preferred exchange companies on their website. But you need to read the fine print. Less popular destinations and off-peak season timeshares tend to be more difficult to exchange. And there may be other restrictions that weren’t mentioned at the closing table.

Try To Negotiate With Original Owner

Have you paid off your debt but you’re sick of coughing up annual maintenance fees? It’s worth reaching out to the original owner to see if they’re willing to negotiate. They may agree to let you out of your original deal if you agree to cover a few years of maintenance fees. And they’ll have the option of reselling the timeshare to another buyer. It doesn’t hurt to ask!

Can’t negotiate with the original owner? Try getting a team of experts to help you legally get out of the contract with the Time Share Exit Team.

The Truth About Timeshares

It’s cheaper than ever to find affordable places to stay on vacation. Websites like Airbnb, VRBO, and HomeAway make it easy to find affordable listings all over the world. A timeshare at a luxury resort may seem attractive today, but what happens when your tastes and lifestyle change? The truth is, timeshares don’t always get used as often as buyers originally planned.

If you have to finance a timeshare, it’s probably not worth buying. Why? Resort-based financing can incur interest rates of 15-16%. And even once you’ve paid off the loan, you’re still stuck with expensive annual maintenance fees averaging $880 or more! Plus, attempting to resell can be a nightmare. It can get costly and there’s just not a strong secondary market. And all this doesn’t even include the cost of travel to get to your timeshare in the first place.

Despite all these drawbacks, almost 400,000 timeshares were sold in 2015. And it’s easy to see how buyers get roped in. It’s not easy to make a clear-headed decisions on a white sand beach after a couple of margaritas.

If you’re regretting your choice to buy or can’t afford your timeshare, you can minimize the damage to your wallet and credit by refinancing, exchanging, or negotiating with the original owner.

Kate Dore
Kate Dore |

Kate Dore is a writer at MagnifyMoney. You can email Kate at kate@magnifymoney.com

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