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When Should You Consider Bankruptcy & How to File

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Updated – November 14, 2018

If you’re drowning in debt and having trouble keeping up with your payments while still handling your living expenses, you may have at least begun to consider filing for bankruptcy.

Filing for bankruptcy is meant to give people in serious financial distress some relief and a chance to start over. By the time most people get to that point, they’ve probably tried many other methods for managing their debt.

Bankruptcy certainly has its benefits, potentially allowing you to wipe the slate clean and start anew.

But there are a lot of things to consider before making a decision, from the negative consequences of filing to whether bankruptcy would even provide relief for your specific situation.

“For most folks that come in, this is the last option,” said John Colwell, a San Diego, Calif.-based bankruptcy attorney and President of National Association of Consumer Bankruptcy. “I know I’m like the dentist. People really don’t want to be sitting in front of me.”

This is a big decision that requires a significant amount of due diligence before moving forward. While it’s important not to take bankruptcy lightly, it may be the best way for people to get back on their feet.

So how do you know if bankruptcy is the right way to relieve your debt? In this post, we’ll go over some of the key points to help you get started.

The basics of filing for bankruptcy

Bankruptcy is a legal procedure to discharge debt built up by someone who either will not be able to repay those debts or does not have the means to repay debts owed currently. There are two notable forms of bankruptcy: Chapter 7 and Chapter 13.

In a Chapter 7 bankruptcy, a debtor’s nonexempt assets are sold and the proceeds are used to pay debts. An individual must pass a means test before they can file a Chapter 7 bankruptcy to ensure that the court would not be abusing the bankruptcy law by granting one. We will talk more about the means test below!

A Chapter 13 bankruptcy is a “wage earner plan.” To qualify, an individual must have a steady income. This allows them to pay back all or part of their debts by developing a repayment plan. The plans last between three and five years.

In most cases, bankruptcy does not protect you from any future debts incurred. It also will have an effect on your credit score and remains on your credit report for 10 years with Chapter 7 and seven years with Chapter 13. In a Chapter 7 bankruptcy, you may lose assets such as your house or your car depending on how much equity, if you’re able to exempt your equity and if you’re current on your payments.

Are You Eligible?

As stated above, there are two types of bankruptcy for individuals: Chapter 7 and Chapter 13.

There are some significant differences between the two programs, but here’s a high-level summary:

  • Chapter 7 allows you to completely discharge your debts, with some exceptions (such as student loans, certain tax obligations, and child support). But you may be obligated to sell some of your property to settle some of your debt obligations.
  • Chapter 13 allows you to create a payment plan to repay some or all of your debts over a 3-5 year period. So your debts are not discharged, but you will also not be obligated to sell any property in order to make your payments.

Either one could be more or less beneficial depending on the specifics of your situation. But the very first question is whether you qualify for either one, and each has its own set of criteria.

Chapter 7 bankruptcy has what’s called the “means test”, which is meant to ensure that only people who truly can’t afford their debt payments are allowed to file. There are two different wants to pass it, and therefore qualify for Chapter 7 bankruptcy:

  1. If your monthly income is less than the median monthly income in your state for your family size, you pass. You can find current median income numbers by family size here.
  2. If you don’t pass #1, you’ll have to go through a complex calculation to see whether your disposable income after subtracting out certain expenses is enough to satisfy your debt obligations. At this stage it would probably be best to talk to a professional who could help you navigate the process.

Eligibility for Chapter 13 bankruptcy is a little more straightforward. Here’s how it works:

  1. As opposed to Chapter 7, you need to prove that your disposable income is high enough to afford a reasonable repayment plan.
  2. Your secured debt (mortgage, auto loan) can’t exceed $1,149,525, and your unsecured debt (credit cards, medical bills, etc.) can’t exceed $383,175.
  3. You must have filed both federal and state income taxes each of the last four years.

There are some other requirements for each, but those are the major ones. Assuming you qualify for at least one of them, there are a few other things to consider.

What Kinds of Assets and Liabilities Do You Have?

Depending on the specifics of your financial situation, one type of bankruptcy may be preferable to the other. Or it may be that neither would actually be particularly helpful.

As an example, neither type of bankruptcy would likely help you all that much if your primary debts are student loans. They wouldn’t be discharged in Chapter 7 bankruptcy. And while your required payments might be reduced over the 3-5 year repayment period in Chapter 13 bankruptcy, once that was over you would have to continue paying them back as usual.

The type of assets you own and their value also matters, particularly if you’re going through Chapter 7 bankruptcy. During that process, your bankruptcy trustee is allowed to sell your property in order to settle your debts, but certain property is protected.

For example, your house and car are protected up to certain limits. Employer retirement accounts like 401(k)s and 403(b)s are fully protected, while IRAs are protected up to about $1 million. But other accounts, such as checking, savings, and regular investment accounts may not have the same protections.

The rules here vary by state, and having a strong understanding of which assets you might be able to keep and which you might end up losing will help you make your decision.

When to file bankruptcy

According to Colwell, filing for bankruptcy needs to be “worth your while,” meaning it should give you relief from your debts to ensure you don’t find yourself in a similar situation in the near future. That means that if you have major expenses that you are about to incur, you should wait to file until after you have incurred them so they can be included in the bankruptcy settlement. This is especially important when it comes to filing bankruptcy due to medical bills.

However, with a Chapter 13 bankruptcy, you can seek court approval to include new debt that you’ve incurred post-filing into your payment plan.

In general, though, there are aspects of your financial situation that signal when it’s time to consider bankruptcy. If you can’t pay your bills (and you don’t see that changing anytime soon) and your debt continues to pile up, bankruptcy is probably worth considering.

Here are other red flags to look out for:

  1. Debt collectors are calling. If you’re behind on your bills to the point that you’re hearing from debt collectors, it may be time to consider bankruptcy. This is especially true if you’re being sued by debt collectors.
  2. You’re in danger of losing your home. If you’re at risk for losing your house to foreclosure, filing bankruptcy can help you get caught up on your payments and keep your home. With Chapter 13, you’re given the chance to keep your home by creating a plan to repay your outstanding debt.
  3. You’re using loans to pay your bills. Using short-term high-interest loans such as payday loans can get you in trouble. With these loans, people borrow against their next paycheck. “People get caught in the trap and it starts rolling over from paycheck to paycheck to paycheck,” said Colwell. Title loans are another form of small loan where a vehicle is used as collateral; these loans can be problematic for someone already in financial distress.
  4. You’re liquidating your retirement assets. Retirement money is exempt in a bankruptcy, meaning trustees can’t use it to repay lenders. So in most cases, it doesn’t make sense to burn through your retirement money to pay debts. “I hate that with a passion,” Colwell said. “It’s your retirement money, what are you doing?!”

How to file for bankruptcy

Most initial consultations with lawyers are free of charge. At these meetings, you’ll walk a bankruptcy attorney through your financial situation and your reasons for wanting to pursue bankruptcy.

There are also ways for individuals to file for bankruptcy on their own, known as filing pro se. Court employees and bankruptcy judges can’t give out legal advice to people in their courts, so if you go that route, you will be on your own. To file yourself, you should be familiar with the United States Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the local rules of the court.

Unless you have a strong understanding of legal issues and have the time to handle the paperwork, it’s probably best to use a lawyer — that’s because making a mistake can impact your rights, according to the U.S. Courts. You’ll also need the capacity to fill out a lot of paperwork, Colwell also noted.

If you use an attorney, they should be able to provide services including:

  • Advising you on whether to file a bankruptcy petition and under which chapter to file.
  • Telling you whether your debts can be discharged.
  • Advising you on whether or not you will be able to keep your home, car, or other property after you file.
  • Advising you of the tax consequences of filing.
  • Advising you on whether you should continue to pay creditors.
  • Helping you complete and file forms.

How to file Chapter 7 bankruptcy

A Chapter 7 bankruptcy involves the sale of all of your nonexempt assets to pay back your creditors. This is the most common kind of personal bankruptcy, accounting for more than 60 percent of all non-business bankruptcies in 2017. The process usually takes about four to five months.

Filing for Chapter 7 will wipe out your allowable debt (such as as credit card, medical and personal loan debt), but the bankruptcy will remain on your credit report for up to 10 years.

The first step is to take a mandatory credit counseling course from a government-approved organization, within 180 days of your filing date. Upon completion, you can decide if you still feel it appropriate to move forward with a bankruptcy, and move on to the next step.

At this point, you, or your attorney, would file your petition and other additional forms with the court. Along with your filing petition, the forms include a list of your creditors, a summary of your assets and liabilities, lists of property (both exempt and non-exempt) and any documentation needed for your “means test.” There are also companies that will send you a packet of all relevant documents, for a small fee.

At this point, you will be subject to the “means test.” If the debtor’s current monthly income is more than the state median, the means test is applied. Abuse is determined if the debtor’s monthly income over five years is either more than $12,850, or more than 25% of the debtor’s nonpriority unsecured debt of at least $7,700.

A trustee is then appointed to review the paperwork and take nonexempt property; you will also have to submit your most recent tax return to the trustee.

The next step in the process is a meeting of creditors, known as a “341 meeting.” At the meeting, you will answer questions about your finances and bankruptcy forms under oath. Creditors are allowed to attend the proceedings if they choose.

It is now decided if you are eligible to file for Chapter 7. At this stage, secured debts are determined: they can be repossessed by the creditor, you can redeem it by paying back what it’s worth or you can reaffirm the debt, which removes that debt from the bankruptcy filing and allows you to pay it back when the bankruptcy is over.

You will have another course to attend that will include information on developing a budget, using credit and managing money — afterward, your debt will be discharged.

Cost: A Chapter 7 bankruptcy needs to be paid for upfront by the debtor. It is generally a flat rate and may be contingent on the complexity of your debt structure as well as the market in which the attorney is operating.

How to file Chapter 13 bankruptcy

A Chapter 13 bankruptcy will last between three and five years, from start to finish. These processes are long and complex, so it’s strongly recommended that you use a lawyer. If you have a steady income, Chapter 13 bankruptcy allows you to keep property, like a house or car, that you might otherwise lose in Chapter 7. Chapter 13 develops a three-to-five year repayment plan for your debts.

The first step is to take a credit counseling course. Afterward, you or your attorney will prepare and file a bankruptcy petition and paperwork that includes a list of your creditors, a summary of your assets and liabilities and your Chapter 13 repayment plan; you will also need to provide your most recent tax returns.

The court will later appoint a trustee to administer your case and a stay on collections will take effect — this means that certain creditors won’t be able to proceed with lawsuits against you, call you for repayment or garnish your wages. You’ll begin making payments for a month after you file the paperwork. In addition, like Chapter 7, Chapter 13 also requires a 341 meeting.

You or your lawyer must attend a confirmation hearing where objections to your plan either by the trustee or the creditors will be addressed and eventually your plan for repayment will get confirmed.

Your creditors will also file proof of claim so that they can get repaid; it is at this point that you can object to the claim if you feel it is unfair.

The repayment period begins when you start to comply with your plan’s requirements and payments; this is the longest portion of the bankruptcy. If required by your plan, you may also have to submit documents to the court like income and expense statements.

Exactly as in Chapter 7, you’ll have another course to attend that goes over budgeting, using credit and managing money. Afterward, your debts may be discharged and your case closed.

Cost: There are two ways an attorney can charge you for handling your Chapter 13. It may be a “no look” fee, a flat fee set up by the district in your state, or they can bill you hourly. Your payment to your attorney can be worked into your Chapter 13 repayment plan.

Conclusion

Filing for bankruptcy is a big decision, and in the end you’re the only one who will know what’s right for you.

Bankruptcy can be not only a long process, but also a very emotional one for those seeking to discharge debts.

Do your research, evaluate all of your options, and then make the decision that most helps you reach your personal goals.

Looking into your options sooner rather than later may help you shore up your financial future and lose less in the long term.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Matt Becker
Matt Becker |

Matt Becker is a writer at MagnifyMoney. You can email Matt here

Kate Rockwood
Kate Rockwood |

Kate Rockwood is a writer at MagnifyMoney. You can email Kate here

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

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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 2019:

LenderVariable APRFixed APRMax Loan Amount 
Laurel Road Bank

2.43% - 6.65%

3.50% - 7.02%

No Max

Visit Lender Secured

on Laurel Road Bank’s secure website

Earnest

2.27% - 6.89%

3.47% - 7.59%

No Max

Visit Lender Secured

on Earnest’s secure website

SoFi

2.27% - 7.55%

3.49% - 7.94%

No Max

Visit Lender Secured

on SoFi’s secure website

CommonBond

2.37% - 7.95%

3.48% - 8.24%

No Max

Visit Lender Secured

on CommonBond’s secure website

LendKey

2.24% - 6.67%

3.49% - 7.50%

$125k / $175k

Visit Lender Secured

on LendKey’s secure website

Citizens Bank

2.46% - 9.24%

3.45% - 9.62%

$90k / $350k

Visit Lender Secured

on Citizens Bank (RI)’s secure website

Discover Student Loans

$150k

Visit Lender Secured

on Discover Bank’s secure website

*Discover’s lowest rates shown include a 0.25% interest rate reduction while enrolled in automatic payments.

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
 
Laurel Road Bank

Not published

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on Laurel Road Bank’s secure website

Earnest

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on Earnest’s secure website

SoFi

Good or Excellent
score needed

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on SoFi’s secure website

CommonBond

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on CommonBond’s secure website

LendKey

680

Undergraduate
& Graduate

Private & Federal

$24K

Yes

Learn more Secured

on LendKey’s secure website

Citizens Bank

680

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

$24K

Yes

Learn more Secured

on Citizens Bank (RI)’s secure website

Discover Student Loans

Not published

Undergraduate
& Graduate

Private & Federal

None

Yes

Learn more Secured

on Discover Bank’s secure website

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. Laurel Road

LEARN MORE Secured

on Laurel Road Bank’s secure website

Laurel Road Bank : Variable Rates from 2.43% and Fixed Rates from 3.50% (with AutoPay)

Laurel Road Bank offers a highly competitive product when it comes to student loan refinancing.

Pros Pros

  • Forgiveness in the case of death or disability: They may forgive the total student loan amount owed if the borrower dies before paying off their debt. In the case that the borrower suffers a permanent disability that results in a significant reduction to their income,Laurel Road Bank may forgive some, if not all of the amount owed.
  • Offers good perks for Residents and Fellows: Laurel Road Bank allows medical and dental students to pay only $100 per month throughout their residency or fellowship and up to six months after training. It is important for borrowers to keep in mind that the interest that accrues during this time will be added on to the total loan balance.

Cons Cons

  • Higher late fees: While many lenders charge late fees,Laurel Road Bank’s late fee can be slightly steeper than most at 5% or $28 (whichever is less) for a payment that is over 15 days late.
  • You lose certain protections if you refinance a federal loan: While not specific to Laurel Road Bank, it is important to keep in mind that you will give up certain protections when refinancing a federal loan with any private lender.

Bottom line

Bottom line

As a lender,Laurel Road Bank 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.

2. Earnest

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on Earnest’s secure website

Earnest : Variable Rates from 2.27% and Fixed Rates from 3.47% (with AutoPay)

Earnest focuses on lending to borrowers who show promise of being financially responsible borrowers. Because of this, they offer merit-based loans versus credit-based ones. 

Pros Pros

  • Flexible repayment options: Earnest offers some of the most flexible options when it comes to repayment. They allow you to choose any term length between 5-20 years. 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.
  • Ability to switch between variable and fixed rates: With Earnest, 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.
  • Loans serviced in-house: Earnest is one of just a few lenders that provides in-house loan servicing versus using a third-party servicer.

Cons Cons

  • Cannot apply with a cosigner: Unlike many of the other lenders, Earnest does not allow borrowers to apply for student loan refinancing with a cosigner.
  • No option to transfer Parent PLUS loans to Child: If you are a parent that is looking to refinance your Parent PLUS loan into your child’s name, it is important to note that this cannot be done through refinancing with Earnest.
  • You lose certain protections if you refinance a federal loan: When refinancing with any private lender, you will give up certain protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

Earnest, who was recently acquired by Navient, is making a name for themselves within the student refinancing space. With their flexible repayment options and low rates, they are definitely an option worth exploring.

3. SoFi

LEARN MORE Secured

on SoFi’s secure website

SoFi : Variable rates from 2.27% and Fixed Rates from 3.49% (with AutoPay)*

SoFiwas one of the first lenders to start offering student loan refinancing products. More MagnifyMoney readers have chosen SoFi than any other lender. The only requirement is that you graduated from a Title IV school. In order to qualify, you need to have a degree, a good job and good income.

Pros Pros

  • Borrowers can refinance private, federal and Parent PLUS loans together: Through SoFi, borrowers have the ability to combine all of their student loans (private, federal and Parent PLUS) when refinancing. Along with the ability to refinance Parent PLUS loans, parents can also transfer the PLUS loans into their child’s name.
  • Access to career coaches: SoFi offers their borrowers access to their Career Advisory Group who work one-on-one with borrowers to help plan their career paths and futures.
  • Unemployment protection: SoFi offers some help if you lose your job. During the period of unemployment they will pause your payments (for up to 12 months) and work with you to find a new job. However, just remember that any unemployment protection offered by SoFi would be weaker than the income-driven repayment options of federal loans.

Cons Cons

  • No cosigner release: While they offer you the opportunity to refinance with a cosigner, it is important to know that SoFi does not offer borrowers the opportunity to release a cosigner later on down the road.
  • You lose certain protections if you refinance a federal loan: This con is not unique to SoFi (and you will find it with all other private lenders). Federal loans come with certain protections, including robust income-driven payment protection options. You will forfeit those protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

SoFi is really the original student loan refinance company, and is now certainly the largest. SoFi has consistently offered low interest rates and has received good reviews for service. In addition, SoFi invests heavily in building a “community” – which means you can start to get other benefits once you are a SoFi member.

SoFi has taken a radical new approach when it comes to the online finance industry, not only with student loans but in the personal loan, wealth management and mortgage markets as well. With their career development programs and networking events, SoFi shows that they have a lot to offer, not only in the lending space but in other aspects of their customers lives as well.

4. CommonBond

LEARN MORE Secured

on CommonBond’s secure website

CommonBond : Variable Rates from 2.37% and Fixed Rates from 3.48% (with AutoPay)

CommonBond 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).

Pros Pros

  • Hybrid loan option: CommonBond offers a unique “Hybrid” rate option in which rates are fixed for five years and then become variable for five years. This option can be a good choice for borrowers who intend to make extra payments and plan on paying off their student loans within the first five years. If you can a better interest rate on the Hybrid loan than the Fixed-rate option, you may end up paying less over the life of the loan.
  • Social promise: 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.
  • “CommonBridge” unemployment protection program: CommonBond is here to help if you lose your job. Similar to SoFi, they will pause your payments and assist you in finding a new job.

Cons Cons

  • Does not offer refinancing in the following states: Idaho, Louisiana, Mississippi, Nevada, South Dakota and Vermont.
  • You lose certain protections if you refinance a federal loan: When refinancing with any private lender, you will give up certain protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

CommonBond not only offers low rates but is also making a social impact along the way. Consider checking out everything that CommonBond has to offer in term of student loan refinancing.

5. LendKey

LEARN MORE Secured

on LendKey’s secure website

LendKey : Variable Rates from 2.24% and Fixed Rates from 3.49% (with AutoPay)

LendKey works with community banks and credit unions across the country. Although you apply with LendKey, your loan will be with a community bank. 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.

Pros Pros

  • Opportunity to work with local banks and credit unions: LendKey is a platform of community banks and credit unions, which are known for providing a more personalized customer experience and competitive interest rates.
  • Offers interest-only payment repayment: Many of the lenders on LendKey offer the option to make interest-only payments for the first four years of repayment.

Cons Cons

  • Rates can vary depending on where you live: The rate that is advertised on LendKey is the lowest possible rate among all of its lenders, and some of these lenders are only available to residents of specific areas. So even if you have an excellent credit report, there is still a possibility that you will not receive the lowest rate, depending on geographic location.
  • No Parent PLUS refinancing available: Unlike several of the other student loan refinancing companies, borrowers do not have the ability to refinance Parent PLUS loans with LendKey.
  • You lose certain protections if you refinance a federal loan: As when refinancing federal loans with any private lender, you will give up your federal protections if you refinance your federal loan to a private one.

Bottom line

Bottom line

LendKey is a good option to keep in mind if you are looking for an alternative to big bank lending. If you prefer working with a credit union or community bank, LendKey may be the route to uncovering your best offer.

6. Citizens Bank

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on Citizens Bank (RI)’s secure website

Citizens Bank (RI) : Variable Rates from 2.46% and Fixed Rates from 3.45% (with AutoPay)

Citizens Bank offers student loan refinancing for both private and federal loans through its Education Refinance Loan.

Pros Pros

No degree is required to refinance: If you are a borrower who did not graduate, with Citizens Bank, you are still eligible to refinance the loans that you accumulated over the period you did attend. In order to do so, borrowers much no longer be enrolled in school.

Loyalty discount: Citizens Bank offers a 0.25% discount if you already have an account with Citizens.

Cons Cons

Cannot transfer Parent PLUS loans to Child: If you are looking to refinance your Parent PLUS loan into your child’s name, this cannot be done through Citizens Bank.

You lose certain protections if you refinance a federal loan: Any time that you refinance a federal loan to a private loan, you will give up the protections, forgiveness programs and repayment plans that come with the federal loan.

Bottom line

Bottom line

The Education Refinance Loan offered by Citizens Bank 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

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on Discover Student Loans’s secure website

Pros Pros

  • In-house loan servicing: When refinancing with Discover, they service their loans in-house versus using a third-party servicer.
  • Offer a variety of deferment options: Discover offers four different deferment options for borrowers. If you decide to go back to school, you may be eligible for in-school deferment as long as you are enrolled for at least half-time. In addition to in-school deferment, Discover offers deferment to borrowers on active military duty (up to 3 years), in eligible public service careers (up to 3 years) and those in a health professions residency program (up to 5 years).

Cons Cons

  • Performs a hard credit pull: While most lenders do a soft credit check, Discover does perform a hard pull on your credit.
  • No Parent PLUS refinancing available: Discover does not offer borrowers the option of refinancing their Parent PLUS loans.
  • You lose certain protections if you refinance a federal loan: Be careful when deciding to refinance your federal student loans because when doing so, you will lose access federal protections, forgiveness programs and repayment plans.

Bottom line

Bottom line

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.

1. Discover’s lowest rates shown include a 0.25% interest rate reduction while enrolled in automatic payments.

 

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% – 4.45% 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 3.75% and fixed rates starting at 3.99%. 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 3.75% 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 4.81% and fixed rates start at 4.29%.
  • Thrivent: Partnered with Thrivent Federal Credit Union, Thrivent Student Loan Resources offers variable rates starting at 4.00% 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 4.05% (variable) and 3.99% APR (fixed).

Online Lending Institutions

  • Education Loan Finance:This is a student loan refinancing option that is offered through SouthEast Bank. They have competitive rates with variable rates ranging from 2.80% – 6.01% APR and fixed rates ranging from 3.29% – 6.69% 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 4.53% – 7.20% (fixed) and 4.30% – 6.97% 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 4.00% to 8.00% 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 2.82%-8.42% APR and fixed interest rates ranging from 3.75% – 9.66% 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.

Is it worth it to refinance student loans?

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 student loans, 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.

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 refinancing, 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 your student loans 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.

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 [email protected]

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]

Advertiser Disclosure

Life Events, Pay Down My Debt

23 Ways to Get an Engagement Ring Without Going Into Debt

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

23 Ways to Get an Engagement Ring Without Debt

A marriage proposal can lead to much happiness, but it also can mean having to purchase an expensive engagement ring and, subsequently, getting into debt. If the diamond industry has anything to say about your engagement ring purchase, you’ll spend anywhere from one to three months’ salary on a diamond engagement ring. On average, couples spent $4,000 on engagement rings in 2012, according to a 2013 report from Jewelers of America.

However, a little forethought and some creativity can lead to significant savings and even a debt-free engagement ring. Think of it this way: It can be far more romantic to propose with a paid-for ring than to drag the equivalent of a car payment into your marriage. Here’s how you can purchase that ring without breaking your bank.

Set a budget

1. The first step you should take in the ring-buying process is setting a realistic budget for yourself. Don’t just go shopping with no maximum price in mind, as that may lead to you making a purchase you can’t really afford. If you know what you want to spend beforehand, and make sure you stick to that, you are already showing the kind of discipline that can help you avoid serious debt.

Heirlooms are a wallet’s best friend

Jewelry passed from generation to generation denotes sentimentality and fiscal prudence. Ask your family, or your future spouse’s family, if they have any heirlooms they would like to pass on. Keep in mind: Heirloom jewelry will be free, but the service and upgrades can run from a few hundred to several thousand dollars. If you do obtain an heirloom ring, consider these three options.

2. Leave the ring intact (except for resizing and repair).

3. Create a new setting for an heirloom diamond.

4. Incorporate a new band into the old ring design.

Buy your diamond on the cheap-ish

Real diamonds are never truly inexpensive, but knowing what and when to buy can save you a bundle.

5. Shop in the summertime. Because winter proposals are very popular (think Valentine’s Day), it can make a lot more financial sense to buy your diamond in the off-season. The summer months can offer stable pricing at a discount.

6. Buy diamonds shy of critical weights. If you want a full-carat diamond, look for something around .9 carats instead. You’ll get close to the same look at a nice discount.

7. Look before you buy. Compare diamonds at various areas of the color and clarity spectrum. If you can’t tell the difference in the diamond’s appearance, choose the less-expensive option. Also, be sure to comparison shop at different retailers; don’t just go with the first ring you love, as you may find something very similar, for less, at another shop.

Replace the diamond, save the difference

Thanks to the diamond industry’s multi-decade, multi-billion dollar advertising campaign, diamonds remain the most popular stone in engagement rings, but forgoing the traditional gem can save you thousands. Consider these emerging trends.

8. Choose synthetic diamonds. Diamonds created in labs share the same properties as mined diamonds, but they cost up to 75% less than traditional diamonds, and they are a great choice for those seeking to avoid conflict diamonds.

9. Replace a diamond with moissanite. A gemologist will never tell you this, but moissanite (a synthetic material) is the hardest gemstone used in jewelry next to diamonds, and it ranks high on clarity and color scales, too. It’s not a valuable gem, but it is beautiful. (Pro tip: Ask your future spouse before you go this route. Many people do prefer authenticity.)

10. Pick an alternative gemstone. Pearls or jade are popular choices outside of the United States, and garnet and topaz are gaining popularity stateside. If you want something out of the ordinary, consider alternative gemstones, but be aware that some gemstones are actually even more expensive than diamonds.

11. Skip gemstones altogether. Ornamental rings (especially knots) are popular choices for those who want to skip traditional gemstones. Handcrafted gold rings can be purchased for as little as $200 on Etsy.

Forgo tradition

Some of the best ways to save money on engagement rings involve breaking tradition, and some couples are more open to an alternative ring style than others. These are a few ring choices that definitely buck tradition.

12. Wooden rings: Wooden engagement rings occupy a large niche in the market, and can be a cost-effective alternative to precious metals. Wooden rings run anywhere from $50 for simple bands to several thousand dollars for rings that include ornate details and gemstones.

13. Tattooed rings: Some couples chose to get tattoos instead of rings, citing that nothing says forever quite like a tattoo. Keep in mind that this may be a dangerous option, as you will have a much harder time removing a tattoo than a ring if your relationship ends (either before or after the marriage).

14. Leather rings: Leather rings can include braiding, engraving and colored beads, among other stylings, and will certainly save you a bundle compared to a diamond. If you don’t want to go with real leather, faux leather can work as well.

15. Go dutch. If the ring in question is outside of your price range, consider asking your sweetheart to split the cost with you. As you’ll be combining finances after you’re married, this may actually lead to some great money-focused conversations.

Save money now, upgrade later

If your partner has a big diamond taste, but you’ve got a small budget, then consider upgrading later on. Here’s how.

16. Propose with costume jewelry. If you think you can save up for the real ring by the time of your wedding, an inexpensive piece of costume jewelry may be just right for the proposal.

17. Build as you go. Start with a simple band and stone, and add more or bigger gems for anniversary milestones, or upgrade when you can afford it.

Buy used

Consider buying a ring that already has a history. You can have the ring professionally cleaned to give it new beauty and make it “yours.”

18. Visit pawn shops. You may be buying the ring of a recent divorcee, but the savings can be irresistible.

19. Search estate sales. If you regularly shop estate sales, you might uncover a vintage ring at a spectacular price. Rings that aren’t presented with a certificate of authenticity will give you room to negotiate on price, but you may accidentally buy overpriced junk. This technique is best for people with an eye for authenticity.

20. Shop on eBay. Pre-owned rings from eBay can represent about a 30% discount over identical new rings, and many owners provide certificates of authenticity.

Creative ways to get cash

Whether you’ll spend a few hundred dollars or thousands, an engagement ring doesn’t have to mean big debt. Consider a few creative ways to save the cash you need to pay for a ring in full.

21. Sell your memorabilia. Your partner may not be too enthusiastic about your KISS memorabilia, or your 27 signed hockey jerseys. Selling these to help pay for an engagement ring will be a double sign of your love.

22. Save up, way in advance. If you’re not currently in a serious relationship, but you think you’re the marrying kind, consider setting aside some cash for a future ring purchase. While some people may find this a strange thing to do, there is no harm in being over-prepared. If you don’t end up using the money to buy a ring, it will be on-hand for other potential purchases (think a wonderful vacation, or a luxury item you really want).

23. Get a side hustle. People are increasingly taking on side hustles to earn extra cash, even if they have full-time jobs. This can include selling your artistic creations on Etsy, becoming an Uber or Lyft driver or writing freelance articles. Then you can put all the extra money you earn into an account for a ring.

Consider a personal loan

It is definitely ideal to be able to purchase an engagement ring without going into debt at all. However, if you simply have to finance at least part of the ring’s purchase, you might consider a personal loan, as you may be able to get a better interest rate than with a credit card, depending on your own credit and where you are able to obtain your loan.

Bottom line

Getting married can be an expensive undertaking, and you don’t want to put yourself in a difficult financial place just by purchasing the engagement ring. Keep in mind the alternatives to the traditional pricey diamond, and also remember that the love you share with your partner should be far more important than buying a ring with a sky-high price tag. Avoiding debt as much as you can also means you’ll be starting off your new marriage on a financially healthy note.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah here