Marc Serafino
Refinancing is one of key strategies for many folks looking to save money on student loans. And today, you can choose from quite a few companies which will offer to refinance your student loan, from traditional brick-and-mortar banks to novel, web-based companies which make the process that much easier.
Yes, we tend to favor the latter group. But even with them we are extra careful, and we advise you to be the same. You need to look at all the details, not just one number (rate). In fact, here are…
7 Questions to Ask a Lender About Refinancing Your Student Loans
1. What’s the rate?
This is seemingly obvious question but you need an answer before the lender does a hard credit pull, which could affect your credit rating. You want to shop around so if they can’t tell you the number — look elsewhere for the deal. (Also read: How to Get the Lowest Rate When Refinancing Student Loans)
2. Can you refinance federal loans?
Many lenders won’t refinance federal student loans and will rather only deal with those issued by private companies. If you have a federal loan, you’ll want to “talk” to the company that can refinance your “type” of loan — it’s not really a “type” but you know what I’m talking about.
3. Can you choose between fixed and variable rate loans?
Fixed rate loans work for the majority of people as they can take advantage of today’s low interest rates. However, if you think you will have more money in the years ahead, you may want to opt for the variable rate to be able to pay off your loan more aggressively. In either way, you want a lender that supports both options so you could eventually switch from one rate to the other. Or not — but it’s good to have the option available to you at all times.
4. Can you choose the loan term?
Similar to the previous question, with a 10-year loan you’ll get lower monthly payments and higher total interest. On the other hand, a shorter term loan comes with higher monthly payments and lower total interest. You want the option to choose between the two.
5. Is there some unemployment protection included?
A good lender will have it prepared, allowing eligible users to temporarily put loans on hold if they lose their job. Also, some companies will take a few extra steps to help the loan user find a new job.
7. Are there other perks included?
You want a loan and other perks? Why not? Some of the newer companies on the market — rather than traditional banks — will also organize networking events for their clients. These modern lenders understand that if their clients are prospering, they will be able to repay their debts. And that’s a win-win for both parties.
Also read: 5 Myths of Student Loan Refinancing
So where to go?
We went through a dozen of lenders and we side with SoFi. They tick all the boxes above, and will let you complete the entire process online. In fact, they have helped us come up with these questions, and we tend to trust them. Shop around if you need to, but chances are you will get back to SoFi. Naturally, you are free to disagree with us using the comments form below…
