Should You Refinance Your Student Loans with a Credit Card?

Using a balance transfer credit card can be a great way to lower the interest rates on your debt to help you save money and pay your debt off faster. Most people only think about doing a balance transfer with high-interest credit card debt, but recently I’ve been considering a 0% interest balance transfer credit card to help me pay off my student loan.

After making my final credit card payment to be credit card debt free, I started thinking about how I could use a balance transfer offer extended by my creditor to help pay off other types of debt I still have. Since the highest interest debt I have remaining is my student loan, this is what I’m considering refinancing with a 0% interest balance transfer. My student loan only has a remaining balance of about $6,000, which means I could transfer the entire balance to the credit card and pay it off before the promotional rate expires, if I pay it off aggressively.

Of course, there are lots of reasons why you could choose to refinance or consolidate your student loans. I was curious whether or not a balance transfer could be a viable option as well.

Here are some of the pros and cons you should consider before deciding to refinance your student loans with a balance transfer credit card.

Benefits of Refinancing Student Loans with a Balance Transfer Credit Card

There are several benefits you could take advantage of by refinancing your student loans with a balance transfer credit card.

A Lower Interest Rate

One of the main reasons people choose to refinance student loans is to lock in a lower interest rate. For example, my student loans are at 6.8%. If I do a balance transfer to a 0% interest credit card, I could save hundreds of dollars on interest through the end of the 0% interest rate period on the balance transfer.

But keep in mind that not all balance transfers are created equal. You might get all kinds of different balance transfer offers from companies trying to entice you to sign up for a new credit card, or even transfer a balance to a card you already have. Some of these transfer offers will be better than others. You might encounter offers that have a 1% to 3% interest rate for a certain period of time, usually 12, 18, or 24 months. But the best balance transfer offers have a 0% interest rate, obviously saving you more on interest than the others.

Pay Off Student Loans Faster

Transferring student loan debt to a credit card can save money, but only as long as you get the balance transfer paid off before the promotional interest rate expires. This time limit is a big motivation for people to pay extra on their student loans to make sure the balance transfer is paid off before it expires. If you struggle with being motivated to make extra payments, the reality that your interest rate may spike up to 15% or more after a few months may be just the motivation you need to get serious about paying off debt. It’s worked well for me in the past when I’ve transferred high-interest credit card debt to a 0% balance transfer credit card, helping me to pay off $5,284.18 much faster than I would have otherwise.

Drawbacks of Refinancing Student Loans with a Balance Transfer Credit Card

Although using a balance transfer to help pay off your student loans sounds like a great way to save money and pay your debt off faster, there are some potential downsides you should be aware of.

Balance Transfer Fees

A lower interest rate makes balance transfer credit cards an attractive option for those looking to refinance debt, but you need to consider more than just the interest rate before deciding to refinance your student loans with a balance transfer credit card. Make sure you consider the balance transfer fee that many credit cards charge. This can eat away at the amount of money you save on interest. Luckily, some credit cards do have a cap on this fee at $50 or $75, which can be helpful if you plan to transfer a large balance that would otherwise result in a fee higher than that cap. But at that point, it could be difficult to get your student loan transfer paid off before the promotional interest rate on the balance transfer expires.

There are balance transfers without fees, but your options may be limited. If you find a no-fee, 0% interest transfer option you qualify for, it’s almost a no-brainer to use it to pay off other debt.

Potential Loss of Savings on Interest

As mentioned, it’s imperative that you pay off your entire balance transfer before the promotional interest rate expires in 12, 18, or 24 months. If you don’t, the high interest rate after the transfer expires will quickly negate any interest savings you earned by doing the transfer in the first place. In fact, you may end up paying more in interest than if you’d skipped the balance transfer in the first place.

You May Not Qualify

In order to use a balance transfer credit card to refinance your student loans, you first have to qualify for one. In order to qualify for many balance transfer credit cards you must have a credit score of at least 680.

Applying Could Ding Your Credit Score

If you don’t already have a credit card with a balance transfer offer available, you may need to apply for a new card. Anytime you apply for a new line of credit, it will ding your credit score slightly. This may or may not be an important factor depending on what your score is and if you plan to apply for any other credit cards or loans in the near future.

Loss of Federal Student Borrower Protections

A final and very important consideration to think about before you decide to refinance your student loans with a balance transfer credit card is the loss of student loan protections you may have. If you are refinancing federal student loans, you will lose the protections that are offered to you as a borrower, such as:

  • Income-driven repayment plans
  • The opportunity for student loan forgiveness
  • Deferment or forbearance
  • Discharge upon permanent disability or death

Some credit card companies may be willing to work with you in an emergency situation, but chances are high that even in those situations the flexibility offered to federal student loan borrowers is far greater. In some cases, you may be better off not refinancing your student loans in order to maintain your borrower protections.

With most low or 0% interest balance transfer credit cards, you can’t miss a payment or pay late. If you do, your promotional interest rate may be void and you will be subject to the regular interest rate, which could be 15% or more depending on the card and your credit score.

Despite these drawbacks, doing a balance transfer to help pay off your student loans can be a good idea if your goal is to get out of debt quickly while saving money on interest.

The post Should You Refinance Your Student Loans with a Credit Card? appeared first on MagnifyMoney.

Kentucky (KHESLC) Student Loan Refinance Review: Fixed APR as Low as 3.99%

Louisville, Kentucky Skyline at Night

Kentucky’s student loan refinance program is operated by the Kentucky Higher Education Student Loan Corporation (KHESLC). Although the KHESLC primarily services Kentucky residents, this student loan refinance is open to residents of some other states, as well.

At present, there are over 40 million Americans repaying student loan debt. So it’s safe to say, finding the most efficient way to tackle student loan debt is at the top of many minds. Refinancing your student loans can get you a lower, fixed interest rate and consolidate multiple student loans into one easy payment.

Lenders like LendKey and SoFi have led the pack in student loan refinance products by offering some of the lowest rates around. More state-run student loan refinance programs are popping up as well to answer the call of borrowers who want to refinance their education debt for interest savings.

In this post we’ll cover:

  • The KHESLC loan terms
  • Eligibility requirements
  • Student loans you can refinance
  • Pros and cons

KHESLC loan terms

The KHESLC refinance offers fixed interest rates starting at 3.99% APR. KHESLC also offers a rate reduction of 0.50% if you make payments through auto-pay. Factoring in this discount, the lowest rate KHESLC will offer is 3.49% APR.

The loan terms are 10, 15, 20, or 25 years. The minimum amount you can refinance is $7,500.

The KHESLC refinance has no fees, including no prepayment penalty or origination fees.

Eligibility requirements

This refinance is open to residents of Alabama, Georgia, Indiana, Kentucky, Mississippi, Missouri, Ohio, Tennessee, Virginia, and West Virginia.

To qualify, you must be employed for the past 12 consecutive months, and you need a credit score above 670.

A co-signer is not required unless you can’t meet income and credit requirements. However, applying with a co-signer even if you do qualify on your own can get you a lower interest rate.

Loans that you can refinance include private student loans, graduate or parent PLUS loans, Stafford Loans, and Perkins Loans. Students can refinance their loans together with parent PLUS loans. This means parents can add their parent PLUS loans to their children’s refinance to hand over the payment responsibility.

KHESLC borrower protections and benefits

The KHESLC is a private student loan refinance. Private student loans often come with limited benefits and protections to support borrowers in times of need. However, KHESLC is noteworthy in this area. For the interest rate, you can get a 0.50% rate reduction just for using auto-pay. That’s a nice perk.

Besides a competitive interest rate, KHESLC offers:

  • Death and disability benefits
  • Forbearance
  • Graduated payment plans
  • Co-signer release

If you pass away or become permanently disabled before your loan is paid off, you and the co-signer can be released from the debt. If you’re a parent borrower and your child who benefited from the loan passes away before it’s paid off, you can also be released from the outstanding debt.

Besides the protections in tragic situations, the KHESLC refinance has a forbearance option. If you experience a period of hardship, you can request a temporary break from payments. You can get a maximum of 36 months in forbearance throughout the life of the loan term.

There’s also a graduated repayment plan that gives you a reduced payment at first and then increases the payment by 10% every two years. Before taking advantage of this perk, understand the implications of paying less up front. Paying less can lengthen your loan term and, ultimately, increase the cost of your loan.

Lastly, KHESLC allows for co-signer release. You can apply for co-signer release after you make 36 on-time, regularly scheduled payments on the loan. However, you will have to go through a credit review at the time of the release to confirm you meet eligibility criteria.

Should you refinance federal student loans?

We usually go through the typical federal student loan disclaimer when discussing refinances because understanding what you forfeit with a refinance is important.

In this case, KHESLC offers some borrower benefits and protections that can make the decision to leave your federal student loans behind less drastic.

Some major federal loan borrower benefits include forbearance, deferment, income-based payments, and loan forgiveness. Forbearance and deferment can put a pause on your student loan payments temporarily if you’re unable to pay due to economic hardship. KHESLC also offers this option.

Income-based payment plans cap your monthly payment based on your family size and income. If you’re in an entry-level job or underemployed, an income-based program can help make your monthly payments manageable.

Keep in mind, the same downside applies here as with the KHESLC graduated payment plan. Lower initial payments can stretch out your loan term. Although, for federal loan income-based plans, after making payments for 20 to 25 years any remaining student loan balance can be forgiven.

Lastly, Public Service Loan Forgiveness is a program that will forgive your federal student loans sooner than later. To qualify, you must make 120 monthly student loan payments while working in an approved public service position. It should take you around 10 years to get forgiveness. You may want to hold off on refinancing federal student loans if you’re considering public service.

You can compare what federal student loans have to offer against private student loans here.

Pros and cons

Pro: Low and fixed interest rates. The starting interest rate offered by the Kentucky refinance is as low as the student loan refinances offered by some of the most competitive lenders. We’ll talk about a few of these lenders below.

Con: Limited eligibility. This student loan refinance is only open to residents of 10 states. If you live outside of these states, unfortunately, you’re out of luck.

Pro: The borrower benefits and protections. Altogether for protections, there’s deferment, co-signer release, graduated payment, and the death and disability benefit. If you choose to refinance your federal loans with KHESLC, you can take comfort knowing there are still some backup protections in times of trouble.

Con: Forfeiting federal student loan perks. The KHESLC benefits are nice, but there are federal loan benefits like forgiveness that you would no longer have access to if you refinance.

Pro: The parent PLUS loan refinancing opportunity. Parents with parent PLUS loans can hand over the responsibility of payment to their children. Children can refinance parent PLUS loans together with their other loans using the Kentucky refinance.

Who will benefit from the KHESLC refinance?

Ultimately, borrowers who will benefit most from this refinance will be those who live in the 10 states where the refinance is offered. That’s a given. With location restrictions aside, the borrower benefits are impressive. The starting interest rate is impressive as well.

In fact, it’s right on target with other top student loan refinances available. The top 4 student loan refinances at this point are CommonBond, Earnest, LendKey, and SoFi because they offer the lowest interest rates. Starting fixed interest rates from these lenders range from 3.25% to 3.50% APR.

Of course, the lowest rates offered by all lenders are given to those who are the most creditworthy. Applying with a co-signer will give you a better chance at qualifying for a low rate with KHESLC.

You can also take the time to strengthen your credit score before applying to obtain a competitive rate with KHESLC or any other lender. Be sure to shop around with multiple lenders when looking for a refinance to get the best deal.

The post Kentucky (KHESLC) Student Loan Refinance Review: Fixed APR as Low as 3.99% appeared first on MagnifyMoney.

Laurel Road (formerly DRB) Student Loan Refinance Review

Students throwing graduation hats

Updated August 14, 2017

[LaurelRoadSL]Laurel Road[/LaurelRoadSL] (formerly know as DRB – rebranded on June 15) is a division of Darien Rowayton Bank that offers a highly competitive student loan refinance product. In addition to a competitive interest rate, [LaurelRoadSL]Laurel Road[/LaurelRoadSL] offers some decent loan perks that sets it apart from others.

According to [LaurelRoadSL]Laurel Road[/LaurelRoadSL], someone who refinances $100,000 has the potential to save up to $15,000 over the life of a 10 year loan. And in special circumstances like disability or financial hardship, the bank might completely forgive loans or allow for partial payments. Read on for the ins and outs of a [LaurelRoadSL]Laurel Road[/LaurelRoadSL] loan to see if it’s the right refinance for you.

Loan Details

[LaurelRoadSL]Laurel Road[/LaurelRoadSL] will refinance up to 100% of Federal, private and Parent PLUS loans. The [LaurelRoadSLLoanAmt]minimum amount you can refinance is $5,000[/LaurelRoadSLLoanAmt] and [LaurelRoadSLTerm]loan terms are available for 5, 7, 10, 15 and 20 years[/LaurelRoadSLTerm].

[LaurelRoadSLAPR]Fixed interest rates are available from 3.95% to 6.99% APR. Starting variable interest rates are available from 2.99% to 6.42% APR[/LaurelRoadSLAPR]. If you choose a variable interest loan, the rate will fluctuate throughout the loan term depending on market conditions. Only consider variable interest if you can pay off your student loan refinance quickly. Otherwise, you might be taking too much interest rate risk since your interest has the potential to increase over time.

The interest rates above include a 0.25% discount for using auto-pay. You just need to set up automatic payment from any checking account in order to get the auto-pay discount.

[Look into refinance options on our table here.]

Loan Qualifications

You must be a working U.S citizen or permanent resident with a degree from an accredited U.S. school program to be eligible. In terms of creditworthiness, [LaurelRoadSL]Laurel Road[/LaurelRoadSL] does not disclose its underwriting requirements. The requirements can change over time. However, [LaurelRoadSL]Laurel Road[/LaurelRoadSL] is targeting people with good credit.

To have the best chance of approval, your existing student loans should be in good standing. You should be able to demonstrate affordability and have limited negative marks on your credit report.

A cosigner is not required to be eligible for refinancing although you’ll probably need one if you only meet the minimum credit score or income requirements above. [LaurelRoadSL]Laurel Road[/LaurelRoadSL] does not have an official co-signer release program. However, a representative of [LaurelRoadSL]Laurel Road[/LaurelRoadSL] confirmed to MagnifyMoney that [LaurelRoadSL]Laurel Road[/LaurelRoadSL] will consider a [LaurelRoadSLCoSigners]co-signer release upon request of the borrower on a case by case basis[/LaurelRoadSLCoSigners].

[LaurelRoadSL]Laurel Road[/LaurelRoadSL] will ask for documents to backup the details of your application like photo ID, pay stubs, proof of graduation and student loan pay off statements.

Fees & Gotchas

[LaurelRoadSL]Laurel Road[/LaurelRoadSL] is very transparent with fees. There are [LaurelRoadSLOrgFee]no fees for origination[/LaurelRoadSLOrgFee] or [LaurelRoadSLPrepayFee]loan prepayment[/LaurelRoadSLPrepayFee]. There’s a [LaurelRoadSLLateFee]late fee of 5% or $28 (whichever one is less) for payments that are over 15 days late[/LaurelRoadSLLateFee]. [LaurelRoadSL]Laurel Road[/LaurelRoadSL] also charges $20 for returned checks or electronic payments whether it’s due to insufficient funds or a closed account.

Pros and Cons

Low interest is the major pro of refinancing with [LaurelRoadSL]Laurel Road[/LaurelRoadSL]. Loan benefits like forbearance, deferment and loan forgiveness are other advantages. [LaurelRoadSL]Laurel Road[/LaurelRoadSL] may forgive loans if you die or if you can prove a significant reduction in income due to disability. Hopefully these situations don’t occur, but it’s good to know you and your family is covered if it does.

On a less morbid note, [LaurelRoadSL]Laurel Road[/LaurelRoadSL] offers full or partial forbearance of payments if you can prove that you’re going through financial hardship. You may also qualify to pay just $100 per month while you complete a full-time post-graduate training program like an internship, fellowship or residency. If you graduate less than 6 months before refinancing, [LaurelRoadSL]Laurel Road[/LaurelRoadSL] may allow you to defer payments for up to 6 months.

There aren’t many disadvantages of going with [LaurelRoadSL]Laurel Road[/LaurelRoadSL] other than it not having an official co-signer release program with explicit qualification terms. This may be a turnoff for cosigners since your loan will likely appear on his or her credit report until it’s repaid.

Student Loan Refinance Alternatives

How does Laurel Road stack up to other available student loan refinances?

[SoFiSL]SoFi[/SoFiSL] has a higher rate cap for fixed interest and a higher starting rate cap for variable interest than Laurel Road. [SoFiSL]SoFi[/SoFiSL] currently offers [SoFiSLAPR]variable rates from 2.815% APR and fixed rates from 3.35% APR[/SoFiSLAPR](if you sign up for autopay). However, the [SoFiSL]SoFi[/SoFiSL] refinance does come with a benefit comparable to [LaurelRoadSL]Laurel Road[/LaurelRoadSL] called unemployment insurance. If you’re laid off, [SoFiSL]SoFi[/SoFiSL] will pause your payments and help you find a new job.

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[CommonBondSL]CommonBond[/CommonBondSL] has similar rates to [LaurelRoadSL]Laurel Road[/LaurelRoadSL]. [CommonBondSLAPR]Fixed interest rates are available from 3.35% APR and variable interest rates are available starting at 2.80% APR (if you use autopay)[/CommonBondSLAPR]. Although to qualify for the [CommonBondSL]CommonBond[/CommonBondSL] refinance you must have obtained a degree from one of the graduate programs on its eligibility list. On the other hand, [LaurelRoadSL]Laurel Road[/LaurelRoadSL] will refinance any loan (graduate or undergraduate) from an accredited program in the U.S.

Who Will Benefit Most From This Refinance?

The [LaurelRoadSL]Laurel Road[/LaurelRoadSL] refinance may work out really well for people who need to complete a post-graduate training program before finding a job in their profession. Since [LaurelRoadSL]Laurel Road[/LaurelRoadSL] allows for reduced payments in this circumstance, you’re given some leeway until you can earn your full professional salary. Still, you should compare the benefits of any Federal loans you have to the benefits of a refinance before making a decision.

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The post Laurel Road (formerly DRB) Student Loan Refinance Review appeared first on MagnifyMoney.