Refinancing student loans with a current bank: pros and cons

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Refinancing a student loan is a good option for borrowers looking to get a lower interest rate on their monthly payments.

The big question is, who do you turn to when you decide refinancing is the next best step for your finances?

For many borrowers, using a local bank on the street that you have had a relationship with for many years may seem like the most convenient option, especially when dealing with a heavy debt load.

However, before making this choice, there are several pros and cons that borrowers of student loans should be aware of when they want to refinance them at their current, local or large bank.

To choose I spoke with Dan Rooker, CFP Senior Consultant and Certified Student Loan Specialist at Student Loan Plannerwhat you should think about.

Pros of Refinancing Student Loans at Your Current Bank

Your current bank is probably where you opened your first bank account. This can be a traditional, well-known large bank (eg Chase, Wells Fargo, Bank of America) that offers all kinds of financial products, from checking and savings accounts to credit cards and mortgages. Or it could be a small local bank or credit union serving only one community.

But besides several banks, for example PNC Bank as well as Citizens Bankmost brick jars do not offer student loan refinancing.

If so, Rooker says you can bet on some of the benefits, such as more personalized customer service, lower late fees, and the ability to get flexible underwriting terms tailored to your relationship. For example, you can get a better loan term by meeting face to face and discussing your goals.

Cons of Refinancing Student Loans at Your Current Bank

The biggest disadvantage of refinancing student loans through your current bank is the interest rate they can offer you.

You may have a higher interest rate than an online lender because your local bank has physical branches. These places involve overhead costs that large banks often pass on to customers in the form of higher interest rates.

“However, if your current bank is an online lender, it can be competitive with the online refinancing market when it comes to interest rates and loan terms,” adds Rooker.

Refinancing Student Loans in Online Banking

Federal Student Loan Borrowers: Wait For Refinancing Now

With federal student loan payments and interest on hold until at least September 2021, federal borrowers must wait until the freeze ends before considering refinancing. If you ever refinance with a private lender, you will lose all of the built-in protections you had with your federal loans, such as income-based repayment plans, loan forgiveness, and deferral / abstinence options.

On the other hand, those with private student loans may want to consider refinancing today before interest rates rise again.

Our methodology

To determine which student loan refinancing companies are the best for borrowers, To choose analyzed and compared financing of private student loans from national banks, credit unions and online lenders. We’ve narrowed our ranking to only those that offer low student loan refinancing rates and pre-qualification tools that won’t hurt your credit history.

While the companies we have selected in this article consistently rank among the most competitive in terms of refinancing rates, we also compared each company for the following characteristics:

  • Wide availability: All of the companies on our list refinance both federal and private student loans, and each offers a variable and fixed interest rate to choose from.
  • Flexible loan conditions: Each company provides a variety of funding options that you can customize based on your monthly budget and student loan repayment duration.
  • No commission for creation or registration: None of the companies on our list charge borrowers an upfront “fee” to refinance your loan.
  • No penalties for early payment: Companies from our list do not charge borrowers for early repayment of the loan.
  • Streamlined application process: We made sure that companies offer a fast online application process.
  • Joint signature options: Every company on our list allows co-signing unless the direct borrower is eligible for refinancing on its own.
  • Auto payment discounts: All listed companies already include auto payment discounts in their advertised rates.
  • Private student loan protection: Although you lose your federal student loan benefits when you refinance, each company on our list offers borrowers some type of protection against financial hardship.
  • Loan size: The aforementioned companies refinance loans of various sizes – from $ 5,000 to $ 500,000. Each company advertises appropriate loan sizes, and completing the pre-approval process can give you an idea of ​​your interest rate and monthly payment.
  • Credit Requirements / Eligibility: We took into account the minimum credit rating and the required income level, if this information were available.
  • Support: Each company on our list provides customer service by phone, email, or secure online messaging. We have also selected lenders with an online resource center or advisory center to help you learn more about the student loan refinancing process.

After reviewing the aforementioned features, we have sorted our recommendations for the most appropriate for general refinancing needs, having a co-signer, applying with a fair credit score, refinancing parent loans and medical school loans.

Please note that the rates and commission structure for refinancing private student loans are not guaranteed forever; they are subject to change without notice and often fluctuate in line with the Fed’s rate. Choosing an annual interest rate with a fixed rate when refinancing will ensure that your interest rate and monthly payment remain the same throughout the life of the loan.

Your refinancing rate depends on your credit rating, income, debt-to-income ratio (DTI), savings, payment history, and overall financial condition. To refinance your student loan (s), lenders will do a rigorous credit investigation and ask for a full application, which may require proof of income, proof of identity, proof of address, and more.

Editorial note: The opinions, analyzes, reviews or recommendations expressed in this article are solely owned by the Select editors and have not been reviewed, endorsed or otherwise endorsed by any third party.

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