As the outstanding student loan debt in the United States now easily surpasses $1 trillion, students across the country are exploring ways to be smarter with their money. A key solution to save money is to explore student loan refinancing options, which even though still an emerging market, has enabled many graduates to save thousands on their student loans.
There are over a dozen lenders in the student loan lending market willing to refinance your debt compared to just two lenders just three years ago. If you are considering refinancing your student loans and have done some preliminary research, you may be wondering what type of lender would be best to take out a new loan from.
Should I get a loan from a banking institution?
Banks have commonly gone with the term private consolidation over refinance, but they are one and the same. Several banks offer refinancing as a way to take advantage of your improved financial history and current market rates to help lower your total student loan repayment. Banks have been the traditional method to most financial decisions because of their convenience and market dominance, but generally had higher interest rates compared to federal loan offerings. With the emergence of more nontraditional lenders, though, banks have had to compete in the market and offer more competitive rates, which has been good for the consumer. Many choose to refinance with a bank because of their long-term credibility and competitive products.
What about a Credit Union Student Loan?
Credit Unions have been increasingly popular since the 2008 financial crisis. Many Americans would prefer to invest in a local Credit Union to give back to the community rather than dealing with a large corporation. Like banks, a student loan through a Credit Union is considered a private loan and is similar to a bank loan. But, unlike banks, Credit Unions are generally not-for-profit, meaning they are focused on providing a service to their customers rather than focusing on maximizing profits. This can lead to lower interest rates on student loans compared to banks, potentially saving you thousands in the long run. Credit Unions usually have a smaller limit on how much you can borrow compared to banks and other lending institutions.
Are New Lending Options a Viable Choice?
There are many new financial startups offering student loans. These generally come in the form of P2P lending institutions or balance sheet lenders. P2P loans are seen as a positive thing because they increase both options and competition in the student loan market. Many of these lenders are capitalizing on niche borrowers and offer tailored products with strong interest rates, for various segments of the market. They have also in certain cases streamlined the application and disbursement process making refinancing an easier process. In order to compete with federal options, many of these new lenders are offering similar benefits to federal loans to stay competitive. Some of these options, which are not normally found on private loans include, deferment and forbearance, career services, and entrepreneurial programs.
Choosing the right lender for you is a matter of personal preference. Lenders also have unique underwriting models to assess your risk as a candidate – this means that you may qualify for a loan from one lending institution but not from the next.
To compare personalized refinancing offers side by side and to see what you may qualify for, visit Credible and see what institution may be best for you.