Complete Guide: How Purefy’s Student Loan Refinance Process Works

Sara Cantu

Student loan refinancing is a common tool that student loan borrowers use to pay off student debt more quickly and save money on interest.

In fact, refinancing is one of the most popular methods borrowers implement to regain control of their student debt and begin a new path toward a debt-free lifestyle.

But just because student loan refinancing is a smart move doesn’t mean it’s right for everyone. It’s important to pursue refinancing with a sense of what to expect and a game plan for your financial goals.

The best way to succeed on your refinancing journey is to think clearly about your own finances, thoroughly research your lender options, and make decisions with the future in mind, as well as the present.

What is student loan refinancing?

Student loan refinancing is the process of borrowing money from a new student loan lender in order to pay off high-interest debts from your current lenders. There are many different instances in which a financial move like this makes a lot of sense.

Every borrower’s refinancing journey is different. What works for one borrower may not work for another due to different financial situations. Some may require small loans of $5,000-$10,000 while others require loans of upwards of $250,000 to pay off their current lenders. How much money you borrow from your new lender will depend on what you’ve borrowed in the past.

And there are a number of key reasons with financial benefits to refinance student loans, too.

One borrower may be eager to lower their interest rate for big savings, while another may be seeking to shorten or extend their repayment term in order to pay off debt more quickly or decrease their monthly payment, respectively.

These are all great reasons to refinance, but there are still more.

Before you begin the process of student loan refinancing, it’s time to get clear about your goals. What are your main reasons for refinancing? What type of interest rate should you secure in order to save money on your student loans?

Committing to these goals can help you approach refinancing with a greater sense of purpose, allowing you to narrow down your non-negotiables and make calculated choices toward your best refinance option. It may help to explore the various ways refinancing can change your student loan repayment for the better.

Some of the most common reasons borrowers refinance their student loans include:

Lower interest rate

This is one of the most common reasons borrowers choose to begin the student loan refinance process. Many students, while in a rush to pay tuition, may have gotten stuck with student loan offers carrying high interest rates. Unfortunately, this is far too common in the student loan world and can become a major source of financial stress upon graduation and entry into the work force.

High interest can make repaying your student loans a huge burden on your monthly finances. If you are currently stuck with high interest rates, refinancing your student loans may be one of the best options to save significant money and take charge of your debt.

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Lower monthly payment

These are tough financial times we are living in. For many families, every cent of savings counts. That’s why high monthly student loan payments can have such a negative effect in today’s economy and why borrowers are exploring various methods to secure better terms for their financial future.

There are many reasons why one might seek to lower their monthly payments. While your student loans may have fit snugly into your budget last year, changing financial conditions may mean that you just can’t afford to keep up with payments now. Whether due to a job loss, illness, or other life circumstances, you may be searching for ways to cut back on any expenses you can.

If you find yourself in this situation, student loan refinancing may be the easiest way to lower your monthly payment. Doing this can help you balance your budget more efficiently or allow you to set aside money for an emergency or savings account.

Longer repayment term

Student loan refinancing is a powerful financial tool for several reasons. This opportunity to “start fresh” allows borrowers to take stock of their budget and spending, and evaluate how their repayment terms affect their financial future.

When it comes to student loans, a longer repayment term may serve you well if you are seeking to meet certain financial goals. Instead of continuing with your 10-year repayment plan, perhaps extending your terms by 5 years can help your finances significantly. For example, saving for a house or car may become easier if you are able to extend your repayment term and lower your monthly payment. With this, you can begin allocating more of your income toward future purchases while still paying off your student loans in a timely manner.

Shorter repayment term

Many borrowers mistakenly assume that a shorter repayment term leads to more financial pressure. While this may be the case in some situations, a shorter repayment term can also be a big benefit for some borrowers.

This is because financial situations often change with time, and you may be earning more than you expected. This means you are capable of paying more money toward your student loans each month, getting you one step closer to full repayment and a student debt-free lifestyle. This is a big financial goal for many student loan borrowers, and one you can certainly reach if you’ve got a game plan. Ultimately, paying off your student loans faster can help you save or begin investing, paving the way for you to begin living with more financial freedom.

Consolidate debt

Paying off debt can be a juggling act. You may be near the finish line when it comes to paying off one student loan only to still owe monthly payments to yet another student loan lender. This amount of financial clutter can be exhausting. Luckily, there’s a better way with student loan refinancing.

Consolidating your debt can be a wise move if you are hoping to simplify your finances and minimize the clutter. Juggling multiple monthly student loan payments, credit card payments, and living expenses like rent and utilities can become a major source of mental stress, especially when combined with an already hectic work and life schedule. For this reason, simplifying your finances where possible is a good idea. Student loan refinancing can do this for you. With refinancing, you’ll consolidate your debt under one new lender, allowing you to pay off your debt to your other lenders and begin a more streamlined repayment routine. You may be surprised to find how this one thing can help alleviate some of the stress associated with your finances.

Drop a cosigner

There are many scenarios in which the help of a cosigner for your student loans was a necessity. This is often the case for young students whose parents cosign for their student loans. But just because you once used a cosigner doesn’t mean you will always need one. Refinancing your student loans allows you to drop a cosigner and take on the full responsibility of your loans.

Work with a better lender

You might be dissatisfied with your current student loan lenders for any number of reasons. Whether due to bad customer service or policies that simply don’t jive with your financial goals, there is nothing wrong with changing your mind and seeking out a different qualified lender. You can do this with refinancing. Refinancing gives you the opportunity to more closely evaluate which lenders you want to work with, getting you that much closer to finding loan terms that really work for you.

Did you know? Comparing your prequalified refinance rate options only takes 2 minutes.

If you’re interested in saving money, use our rate comparison engine to quickly see real-time rate offers from industry-leading lenders.

Takes 2 minutes • No impact on credit

How to refinance student loans

Once you’ve made the choice to begin the student loan refinance process you may be wondering: how do I refinance student loans? Where does a hopeful borrower begin on the path to refinancing? For starters, you can research which lenders you may be working with. Each lender is different in what they have to offer, and things like customer service can go a long way when it comes to your refinancing experience. Taking the time to research your options ahead of time with a student loan refinance rate comparison can give you a leg up when it comes to choosing the right lender, and it can also mean the difference between a headache and a hopeful new beginning.

Student loan refinancing is something all kinds of borrowers can take advantage of. Whether you are a graduate who has already joined the work force or a recent graduate hoping to save money on student loans before you even begin repayment, a wide variety of borrowers can benefit from refinancing.

How to compare student loan refinance rates

Researching lenders’ reputations online is one thing, but comparing rates and finding the best deals is quite another. For that, an award-winning website like Purefy has much to offer.

Purefy gives you access to a student loan refinance comparison of reputable lenders through one platform, giving you a bird’s eye view of what they have to offer in terms of refinancing. Once you compare student loan refinance rates and make a decision, you can apply with your chosen lender and quickly begin the process of refinancing with your new lender.

While student loan refinancing can be a powerful financial tool on your quest for a debt-free lifestyle, there are some caveats. For example, not everyone may qualify. There are certain criteria lenders look for when evaluating whether a candidate is a good fit for refinancing, and there are several reasons why a borrower may not fit the bill.

The top lenders are careful about who they allow to borrow money. Keep in mind that simply qualifying isn’t enough to get you the best rates available on financing. While each lender has different requirements for qualification, here are some common factors they’ll use to determine what finance rates you are eligible for:

Income: Lenders need to be sure that you have the means to keep up with payments on your loan. This is why you will likely need to have secure employment before qualifying for refinancing. Whether you have recently seen a reduction of hours or are going through a period of unemployment entirely, be aware that lenders may find you ineligible for refinancing. However, you can always reapply once you get back on your feet.

Credit score: You know your credit score is important for many reasons. It’s especially important when you are trying to take out a loan. If your credit score is in the red zone, you may not be seen as a favorable loan candidate for some lenders. Or if you do qualify for refinancing, you may be far from securing the best rates available to others. This is why maintaining a good credit score is always important, regardless of whether you plan to refinance or not. Doing things like making timely payments, keeping your spending under control, and paying attention to interest rates can all go a long way in keeping a good, steady credit score.

Debt-to-income ratio: Many borrowers run into trouble when they start spending beyond their means. It’s a common trap made worse by multiple credit cards and high interest rates. Spending beyond your means that you can’t afford to pay off the debt you are accumulating, whether because you are buying too many things or simply aren’t earning enough money. If your debt-to-income ratio is high, it’s a signal to borrowers that you don’t have your spending under control. This spells danger when it comes to loans and credit, meaning you should be careful about your spending and keep track of your purchases. Failing to do this on a regular basis can lead to a downward spiral that sees you take on a high amount of debt with no real plan for how to pay it back.

School and degree: In addition to your employment history, it’s possible that lenders may also consider things like the university attended and the type of degree you earned. This can sometimes help gauge how much you will be earning and whether or not you will be able to repay your loans in a timely manner. 

Repayment history: Do you make your payments on time each month? If so, you likely have a strong repayment history, which is a large factor when determining your credit score. Lenders, before accepting a loan application, need to make sure your repayment history doesn’t include a pattern of missed or late payments. If you don’t always make payments on time or pay close attention to due dates, there is no better time to start than now.

For example, if you have a poor repayment history, an overall low credit score, or are undergoing a period of unemployment, you may not quality for refinancing right off the bat. But that’s OK. Just because you don’t quality for refinancing now doesn’t mean you won’t in the future. Often, it may take several months or perhaps a couple of years for you to improve your financial situation and quality. Or you may even need to enlist the help of a trusted co-signer to secure the rates you need to save money on your student loans.

How a cosigner can help you save

There are several reasons why enlisting the help of a cosigner may be right for you. For instance, one of the biggest hurdles potential borrowers must overcome when refinancing is a lack of lengthy credit history. If you do not have much credit history to demonstrate your credit worthiness, a cosigner may be just the solution.

However, keep in mind that not everyone wants or requires a cosigner. This may because you don’t know anyone that would make a good cosigner or you just want to avoid someone else sharing the responsibility of your student loans.

In this case, there are some things you can do to improve your credit score if you are hoping to qualify for the best refinancing rates without a co-signer. For many borrowers, improving their credit score is a matter of using credit. If you don’t have any type of credit, consider signing up for a low-interest credit card. You could even ask a family member or trusted friend if you can become an authorized user of one of their credit cards. You can still reap the benefits without even using the card. And if you already have a credit card or loans of your own, you can improve your score over time by continuing to make on-time payments. If your debt-to-income ratio is too high, you may consider lowering your credit card usage to bring that score up and achieve your financial goals independently. 

Also remember that employment carries a lot of weight in terms of credit worthiness and acceptance. If you don’t currently have steady employment, it may be difficult to secure a good refinancing rate. Consider getting a new job or increasing your income through a part-time job to help improve your credit score and financial standing.

Although the process of refinancing isn’t always easy, it can definitely be worth it for those hoping for a new beginning when it comes to their student loans.

Can I refinance all types of student loans?

Student loan refinancing is a straight-forward process, but can quickly become more complicated when factoring in what type of loans you are dealing with. For example, many borrowers wonder whether federal student loans can be financed at all.

When applying for refinancing, you have the opportunity to choose which of your loans can be refinanced. Chances are that your federal student loans are already secured under a great interest rate, so refinancing these may not be necessary. You can also choose to only refinance loans with the highest interest. This in itself is a great benefit that borrowers can take advantage of.

There are some drawbacks to refinancing federal student loans, if you aren’t careful. You might forfeit certain federal benefits if you refinance haphazardly. For example, your access to income-driven repayment plans, loan forgiveness programs, and the chance for forbearance or deferment may all be null and void upon refinancing. It’s important to think about whether refinancing this type of loan is worth it for your own financial needs.

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Why now is the best time to refinance student loans

Many borrowers agree to subpar loan terms with the notion that they can easily refinance later on down the line. However, deciding when to refinance student loans isn’t always easy, and the “right time” may be different for everyone. Despite that, there is no disputing that now is a great time to take out loans through refinancing. Interest rates are currently trending at historic lows, meaning now may be the best time to refinance student loans. By securing a low rate now, you can remain confident that you are making a move that will ultimately lead to better financial opportunities in the future.  

How to refinance with Purefy

There are plenty of benefits to refinancing your student loans with Purefy’s platform. A one-stop-shop for student loan refinancing, Purefy’s unique platform allows borrowers to compare real prequalified rates from the best lenders in the industry – all at once with no impact on your credit.

This eliminates the need for hours upon hours of research into what lenders have to offer and whether you even qualify. With Purefy, you’ll simply compare rates from the lenders for which you’ve been pre-approved. Once you determine which lender and interest rate works best for you, you’ll apply with that lender through Purefy’s platform. Once your application is accepted, you are ready to begin refinancing and enjoying your savings.

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ELFI Rate Disclosure

4 ELFI Rate Disclosure:

Education Loan Finance is a nationwide student loan debt consolidation and refinance program offered by Tennessee based SouthEast Bank. ELFI is designed to assist borrowers through consolidating and refinancing loans into one single loan that effectively lowers your cost of education debt and/or makes repayment very simple. Subject to credit approval. See Terms & Conditions. Interest rates current as of 01/01/2023. The interest rate and monthly payment for a variable rate loan may increase after closing, but will never exceed 9.95% APR. Interest rates may be different from the rates shown above and will be based on the term of your loan, your financial history, and other factors, including your cosigner’s (if any) financial history. For example, a 10-year loan with a fixed rate of 6% would have 120 payments of $11.00 per $1,000 borrowed. Rates are subject to change.

SoFi Rate Disclosure

3 SoFi Rate Disclosure:

Fixed rates range from 4.49% APR to 8.99% APR with a 0.25% autopay discount. Variable rates from 5.09% APR to 8.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

Earnest Rate Disclosure

2 Earnest Rate Disclosure:

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.72% APR to 9.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 4.39% APR to 9.19% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.

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ISL Rate Disclosure

5 Iowa Student Loan Rate Disclosure:

Fixed Rate Loan Terms: 5 years/60 monthly payments, 7 years/84 monthly payments, 10 years/120 monthly payments, 15 years/180 monthly payments, or 20 years/240 monthly payments. Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. This rate is expressed as an APR. Fixed APRs range from 6.94% to 11.58% APR [low to high range with 0.25% auto-debit rate reduction]. Rates are subject to change without notice. Fixed rates will not change during the term. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan including a 0.25% auto-debit rate reduction. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. All estimates are based on information provided by you and are for informational purposes only, accuracy is not guaranteed and may not reflect actual rates or savings and do not constitute an offer of credit. Your actual rate, payment and savings may be different based on credit history, actual interest rate, loan amount, and term, including your cosigner [if applicable]. If applying with a cosigner, we use the higher credit score between the borrower and the cosigner for approval purposes. All loans are subject to credit approval.

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