With its broad qualification criteria and customizable repayment options, Earnest’s student loan refinancing is particularly appealing for people with short credit histories and entry-level incomes. The company’s competitive interest rates and flexible monthly payments make it a solid option for many borrowers.
AT A GLANCE
- Interest rates 2.13% to 5.41% (variable), 3.50% to 7.05% (fixed)
- Personalized terms from five to 20 years
- Flexible repayment offerings
Earnest collects and manages payments, whereas some lenders hire third-party servicers to do this work. So if you have any questions about your loan, you can contact the company directly, instead of tracking down an outside loan servicing company.
Like most student loan refinancing lenders, Earnest offers a 0.25% interest discount to borrowers who sign up for automatic debit payments. The company doesn’t charge a fee for making extra payments or switching from variable to fixed interest rates.
Additionally, borrowers who lose their jobs can temporarily postpone payments for three months at a time, for a total of 12 months, a process called forbearance.
Do you qualify?
| Minimum qualifications |
The typical borrower | |
|---|---|---|
| Credit score | None; Earnest analyzes information in borrowers’ credit reports, but doesn’t evaluate their actual credit scores. | 700+ |
| Income | No minimum | Can comfortably afford expenses, saves money regularly, and has a retirement savings account. |
Reasons to use Earnest
Customized repayment terms: Most lenders only offer loans with five-, 10-, 15- and 20-year terms — nothing in between. Interest rates increase as the term length increases, and even if you pay off the loan early, you still pay the interest rate that corresponds to the term you originally chose. So if you have a 10-year term, you’ll pay the 10-year interest rate, even if you pay it off in six years.
But Earnest lets borrowers chose a precise term length — say, six years, two months and one day — based on how much they want to pay each month. For example, if you decide you can budget $400 a month toward your student loans, you can opt to pay that exact amount, and Earnest will give you whatever term and interest rate correspond to that amount.
Flexible monthly payments: With Earnest, you can increase your monthly payment at any time, and the company will show you exactly how much the increase will save you in interest. Earnest borrowers can also skip one payment a year after they’ve made on-time payments for six consecutive months.
Nontraditional underwriting: Unlike many student loan refinancing lenders, Earnest determines whether you qualify by looking at more than just your credit score, income level and existing debt.
The company’s underwriting algorithm also takes into account borrowers’ education and employment histories, as well as data from credit reports and checking, savings, investing and retirement accounts. This approach is especially beneficial for borrowers who are financially responsible, but may not have a long credit history.
Where Earnest falls short
Syncs online financial accounts: As part of its application process, Earnest requires potential borrowers to connect their online banking, investment and retirement accounts with Earnest’s data-driven underwriting system.
The company promises rigorous security and privacy, but Earnest may not be the best option if you’re uncomfortable with this level of data-sharing.
Not available nationwide: Earnest isn’t available to borrowers in 13 states: Alabama, Delaware, Idaho, Iowa, Kentucky, Louisiana, Mississippi, Montana, Nevada, North Dakota, Rhode Island, South Dakota and Vermont. Residents should consider one of the many other student loan refinancing lenders that serve borrowers in those states.
Next steps
If you’re sold on Earnest, you can apply directly on the lender’s site. However, it’s smart to compare offers from multiple lenders before you choose one. You can fill out one application and compare offers from up to six other lenders through Credible, a student loan refinancing marketplace and NerdWallet partner.
To get started, fill out the form below and see how much you could save by refinancing through a lender on Credible’s platform. (Note that the calculator assumes a 15-year loan term and the lowest currently available interest rate, which could be variable). Then, continue to Credible’s website to complete a full application, which will trigger a hard pull on your credit report.
If you’re still unclear if refinancing is the right choice for you, reading the articles below can help you make the best decision.
- 4 signs you’re ready to refinance federal student loans
- Student loan consolidation vs. refinancing
- 10 questions you should ask before refinancing your student loans
Teddy Nykiel is a staff writer at NerdWallet, a personal finance website.
Email: teddy@nerdwallet.com. Twitter: @teddynykiel. Arielle O’Shea, a staff writer at NerdWallet, contributed.
This post was updated. It was originally published on Aug. 12, 2015.
Image via iStock.
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