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Can I refinance ..

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Can I refinance ..

My student auto loan which is from Fedloan servicing I owe 5,600 but the interest is 5% which is high as heck , I have good credit now I think I can get something better ?

Message 1 of 6

Re: Can I refinance ..

Oops I’m not sure why I put auto loan there .. I meant student loan

Message 2 of 6
Valued Contributor

Re: Can I refinance ..

@Jaybeltran805 wrote:
My student auto loan which is from Fedloan servicing I owe 5,600 but the interest is 5% which is high as heck , I have good credit now I think I can get something better ?

5% really isn't too bad.
Federal student loan rates are set by the legislature, and are not at all impacted by your credit rating, so the only way you could get a lower rate would be to refinance with a private party (Earnest, Sofi, those guys).

The downside is that if you will lose any protections for those loans (forebearance, deferment, income based repayment plans).  Of course, the upside is that they can't garnish your wages if you default, and all of the debt statutes and laws that people know better cover it.

You can check with banks (your own, other nationals or credit unions) or other private lenders for refinancing and see what rate you qualify for - I believe many of the ones online will let you see what you prequal for without taking a hard pull.    If your credit is good enough and you have the means to pay it off relatively quickly, you could also try to qualify for a 0% balance transfer card and pay it off before the promotional period ends.

Good luck! 

Oct 2019

Garden goal: keep on keepin' on
Usually a faithful practitioner of AZE5or6or7; working on AZE1or2 and grumbling about it.
Message 3 of 6
Established Contributor

Re: Can I refinance ..

Is the loan subsidized or unsubsidized?
Do you have a larger income and a stable job? A private loan will but be nearly as forgiving if you were to run into trouble. Also while there is a way to return the loan to a servicer if you default on a federal loan (you will owe this loan for life) a private loan will just default and be subject to the SOL. It might fade away or they might just sue you.
Have you repaid a significant portion of your loan already? If you haven't it might be a good idea to steadily chip away at the federal loan for a bit before committing to a private loan. Maybe get used to the monthly payments you'll have to make on a private loan (there will be no deferment/forbearance anymore).
Are there any fees involved to refinance it. They might offset any possible interest reduction benefits. Are there penalties for paying it off early? Will the interest rate go up if you miss a payment? Is the low interest rate locked in before you take a hard pull to apply? Can you afford a possible overlapping payment as the loan is transferred over?
These are all things to think about. I agree with Calyx. 5% is already a pretty good rate. If you're still looking credit unions such as Navy Federal are also a good place to look as they have low rates.
Hope this helps.

Message 4 of 6
Established Contributor

Re: Can I refinance ..

There are many student loan institutions where you can get an idea of your interest rate before they hard pull your credit (Earnest, SoFi, Citizen's Bank, etc). You can see what you come up with, but I doubt you'll get much better than 5%.
Message 5 of 6
Community Leader
Senior Contributor

Re: Can I refinance ..

Hi Jaybeltran805! 5% is really good, and it will be hard to get a lower rate unless you have really a really good credit profile. And I agree that you will lose all of the perks of federal student loans. Does your servicer offer an interest reduction for setting up automatic payments and, if so, have you taken advantage of that?
Current Scores: EQ 679;TU 647; EX 679 Gardening since 11/7/18
Beginning Scores-- EQ 632; TU 576; EX 619 FICO 08 (06/13/16) - BK7 discharged 11/2015
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