Student loan refinancing has become a popular option for borrowers looking to reduce their interest rates and save money. Unlike loan consolidation, which simply rolls all of your federal student loans into one repayment plan, student loan refinancing repays your existing loans by issuing a new loan with a lower interest rate and different repayment terms. There are a number of lenders and programs available for borrowers to consider, so you should carefully consider which lender best suits your needs.
What Makes Earnest Better?
Earnest Student Loans offers refinancing packages that may be particularly attractive to borrowers who have a steady income and solid repayment record but a limited credit history. Unlike many other lenders, Earnest uses a unique underwriting method that considers information on your credit report without looking at your actual score. There is also no minimum income requirement in order to qualify to refinance your student loans with Earnest.
Flexible repayment plans tailored to your unique needs are Earnest Student Loans’ specialty. The company’s offerings include:
Fixed or variable interest rate plans
Fixed rates currently between 3.37% and 6.49% APR
Variable rates currently between 2.8% and 6.38% APR
Terms between five and 20 years tailored to your specific needs
Flexible repayment plans
Interest rate reduction for automated payment
Unlike many other lenders, Earnest will allow you to determine your exact repayment term based upon the payment you wish to make each month. Your interest rate will be determined by that repayment term.
Who is the Typical Earnest Borrower?
The person who is most likely to benefit from Earnest’s unique approach to refinancing is a borrower who can demonstrate a solid financial record of paying bills on time, saving and investing for the future and increasing earnings but may not have built a lengthy credit history. Earnest employs a “big picture” approach to determining eligibility for it’s refinancing programs. This means they consider your credit activity, but they also review your earnings history, banking and investment accounts and student loan repayment records during the approval process. Borrowers who might be rejected by other lenders simply because they do not have a high credit score could qualify to refinance with Earnest Student Loans if they have a solid record of financial performance.
Benefits of Refinancing with Earnest
In addition to the unique underwriting process employed by Earnest, borrowers who refinance with the company enjoy other benefits, including a repayment plan tailored to your specific budget and financial goals. Many lenders offer only fixed repayment terms in five-year increments, with interest rates tied to the chosen term length. Earnest allows borrowers to determine their repayment term based upon the payment amount they wish to make each month. With that, Earnest will let you know what your exact repayment term and interest rate will be. You can make adjustments until you are comfortable with the repayment plan and then lock in your loan.
Borrowers who refinance with Earnest are free to switch between variable and fixed rate with no penalty. There is also no pre-payment penalty with Earnest, and you can increase the amount of your monthly payment at any time. Should you find yourself unemployed for any period of time, you can temporarily place your loan on a forbearance status for three-month periods, up to a total of 12 months over the life of the loan.
Unlike many other lenders, Earnest services and manages all the loans it underwrites, so if you refinance your student loans with Earnest, you will always deal with them. You won’t have to worry about your loan being sold or trying to find the right person to talk to if you have questions or concerns.
Drawbacks of Refinancing with Earnest
As is always the case, borrowers should carefully consider all of a lenders’ requirements before choosing to proceed with a loan application. One of the potential drawbacks to refinancing with Earnest is that the company requires online access to all financial records, including banking and investment accounts, current student loan accounts and tax records. This is in order to gain a full understanding of how you manage your finances and your overall approach to handling your money. However, it means having to share passwords and personal information through an online network with little more than a promise that the information will not shared or used other than to underwrite your loan request. If you are uncomfortable with sharing that much information, Earnest may not be the best lender for you.
This approach can also take longer than the standard loan application process, particularly if they have any difficulties accessing any of your financial records. If you are on a tight time deadline to obtain your refinancing, you may want to consider another lender. Also, Earnest is currently unable to service borrowers residing in Alabama, Delaware, Mississippi, Nevada or Rhode Island. Finally, Earnest will not be able to refinance your loans if you did not complete your degree program and graduate.
It is best to compare lenders before choosing the student loan refinancing option that best suits your needs. For borrowers with a strong financial performance record but limited credit history, Earnest Student Loans could be the best option for lowering your interest rate and creating a repayment plan that fits with your long term financial goals. You can visit their website to learn more about their refinancing options or to apply for a loan.