The stress involved with repaying student loan debt is no fun. It can be a pretty overwhelming issue when you realize it’s time to refinance or figure out a better payment plan.
If you are paying off private student loans with interest rates at 6% or above listen up. I’m taking a closer look at Social Finance, or SoFi, because they have an interesting way of helping people refinance their student loans and get them paid off faster and at less of a cost.
Put your financial planning pants on and check this out.
What They Look For
SoFi is looking for only the “highly qualified” type of applicant. This means that they are looking for ways to help you pay less in interest on your student loans but they need to have a good guarantee that you can actually afford to pay it off faster. Here are some things to take into mind before applying since they will be looking at these factors to determine if you’re eligible for their refinancing or loan products.
Education source. Where you got your degree actually makes a difference to the folks at SoFi because they know this will heighten your chances of getting better jobs, higher wages, and being successful. All of these things ensure that you will be able to pay your debt off faster.
Job stability. This is where many people have issues with SoFi. Due to their strict practices that require applicants to provide lots of proof that they are employed, the application process can be slower than some may expect. Depending on your job, you will probably have to provide proof of employment, income and future employment plans in order to be considered. However, many people do not have issues with this since it is completely based on each individual situation.
Credit Score. Ahhhh yes…the good old credit score. Another good reason to keep yourself in good financial standing when it comes to payments and purchases. While they don’t consider the actual FICO score anymore when evaluating applicants, your credit history paints a vivid picture. If past behavior is a predictor of future habits, be sure to check on it and remove any mistakes where possible. They’re looking for responsible people who make payments regularly and in a timely manner.
What They Offer You
When you first sign up and log in, you will get a number of offers that show the options they suggest for paying off your student loan debt. The offers will mainly be grouped and categorized as 5, 10, 15 and 20 year plans. Depending on your preferences, financial situation and goals, you’ll most likely find an option that fits you and saves you money in the long run.
Here are some of the things you need to take into mind and choose between when considering these options:
High payments, less time, less interest. If this is your goal, great! The faster you are able to pay off your loans or debt, the lower your interest rates will be. If you are sick of making tiny payments that add up to thousands of dollars lost on interest, consider choosing an option where you pay the highest amount possible for your budget in order to snag that lower rate and get rid of your annoying debts faster.
Low payments, more time, more interest. Although this isn’t necessarily the main focus of SoFi, they do offer lower interest rates that allow for smaller payments over more time. They suggest the higher payments because they can get you better interest rates but if it’s just not feasible with your financial situation and you simply need to find lower interest rates, they’ll have some options like this for you to choose from.
Variable vs. fixed interest. To get the lowest interest rate through SoFi, you have to opt for a variable interest rate loan. Personally, I am not a fan of variable interest rates. I would rather not have my payment terms change if I can avoid it so I always opt for fixed interest rates. Budgeting for a fixed payment is a lot less stressful in my opinion. The interest rates start at 3.5% for a fixed rate loan which can be a significant savings.
See What Else is out There
Be sure to compare fees and products before making a decision. Solutions for your finances are often tricky and variable depending on a lot of factors so don’t assume that if one thing worked for someone it will work for you. That’s a good sign that something is a successful product but your specific financial situation will dictate the type of options and offers you get.
For example, there are options for student loans where you can pay them off in different amounts and get rewarded for higher payments. In other words, you can set up a plan where you decide what you pay each period and the higher your payments are, the lower interest rates you get. Run your numbers through a financial calculator.
Now THAT is good motivation to pay it off sooner but it does depend on your financial situation and how much attention you want to give to your payments.
Should You Do It
Don’t feel the need to accept an offer just because it looks better than your current situation. It’s easy to get impatient when looking at all the numbers but take your time to sit down and consult your budget and changing financial needs as you make this decision. Often it is best to pay off your loans as soon as possible but if you can get a decent interest rate for lower payments, that might work best for your current situation if you see things getting a little tight financially in the future.
Personally, I think SoFi would be the best solution for those with private student loans and limited assistance benefits. If you are making great progress with your federally subsidized loans or have an unstable employment situation, keep your loans. Sallie Mae offers a much better loan deferment/forbearance program.
However, if you’re financing a student loan through a company that does not apply extra payments to principles, will not lower your interest rate if you’re in good standing, or generally doesn’t offer decent customer service options – give SoFi a look. The application takes 5 minutes.
SoFi is an affiliate sponsor, but no worries. The Debt Free Divas will never affiliate with any organization who does not enhance, support, or encourage your debt free journey.