If you’re like most young professionals, debt is probably something you deal with. Most of this probably is student loans, which isn’t necessarily a bad thing. I like to think of debt as good or bad, good debt being things like buying a house or attending college, both good things that can enrich our lives. Bad debt is things like credit card debt or payday loans, and I classify car debt as “gray debt”, as I used to think it should be avoided and you should just pay cash, but interest rates have been so low that it’s not the worst thing. Back to student debt though! 70% of all new college grads graduate with a ‘significant’ amount of loans, and 1 in 4 of all Americans are paying off a total of $1.5 trillion in return for getting an education.

It can be overwhelming graduating with so much debt, or really any debt in general. One thing that you may want to consider is refinancing your debt, with the goal of either getting a lower interest rate (pay less over time) or extending your term, which will lower your payment. There are a few modern options out there for young professionals that I wanted to call out and review with you today. If you’ve got debt that you’d like to refinance, keep reading to learn why, how, and where you should do it!

What refinancing is

Refinancing involves applying for and getting a new loan to cover the cost of another loan. You’re essentially restarting the whole process, but this time the loan amount will likely be lower than what it was when you started, as you’ve likely been making payments on the loan. Your new lender will then send the old lender the balance of the loan, that one will be closed out and you’ll start making payments to the new lender. Getting a new loan can allow you to:

• Get a lower interest rateand pay less in interest fees over the course of the loan. Of course this is contingent upon interest rates having gone down since you got the original loan.
• Lower your monthly paymentby taking the balance of the loan and re-stretching it out over a longer period of time. For example, let’s say your loan was a 10-year loan and 2 years into it, you decide to refinance. Your now 8-year-old loan gets refinanced at another 10-year loan. That means you’ll now have 10 years to pay off an 8-year-term loan, meaning your payment would go down.
• Get better terms with a new loan.Perhaps your new lender offers better service or better flexibility.

Refinancing can save you money and make it easier to pay off the loan. Sound good right? However, refinancing may or may not make sense for everyone, so let’s explore the pros/cons.

Why you should considering refinancing (or why not)

• Make sure you’re getting a lower interest rate. If interest rates have gone up or if you only qualify for a higher rate, it probably won’t make sense, as you don’t want to pay morein interest!
• Make sure you’re getting the right terms for your goals. If you’re looking for lower payments, getting a loan with a shorter term wouldn’t help.
• Make sure the fees make sense and it’s worth the costs. Refinancing will often come with costs, and if you don’t have to pay it up front, those costs will be wrapped into your loan. Most of the time it’s worth any fees charged, but it’s good to be aware of them.  
• Make sure you’re not losing special protections. Particularly with some government sponsored student loans, there are additional loan protections like: income based repayment so you’re paying a percentage of your income instead of a fixed amount, or the ability to have it forgiven after a number of years in ‘public service’ like working for the government, being a teacher, or in public health. Refinancing your student loans that have those perks with a private lender would lose you those protections. So think carefully and make sure it’s worth it before refinancing those types of loans.

How you should refinance

There are a lot of options when it comes to refinancing your debt, including your local bank. However, in this article, I’d like to explore 3 online options that cater to young professionals like us: Earnest, SoFi, Lending Club.

All 3 are all online based, meaning everything you do will be filled out online, no having to go into a branch or mail stuff in. They all offer relatively quick applications, with a relatively quick approval/denial process. I’ve looked at all 3 and would personally recommend them. In fact, I’ve done articles on Lending Club and SoFi in the past. Earnest is also a great option too, with the same great service and refinancing terms.

If you’re looking to refinance student loans, I’d recommend first applying to both Earnest and SoFi to compare the interest rate and terms. They offer student loan specific refinancing and have much, much lower interest rates (like 2-3%) than I’ve seen elsewhere. SoFi tries to build in a community aspect of their loans, like setting up hang-outs in various cities for networking opportunities. I like Earnest for their quick approval process (2 mins it says on their website), their flexible terms (more than just 5, 10, 15, 20 year terms) and their hardship assistance (deferment in a personal loss situation). Lending Club is great for more personal loans, which have a higher interest rate but they’re still lower than traditional banks.

Refinancing can make a lot of sense, especially with interest rates being so low! I’d encourage you to check Earnest and SoFi to compare rates and terms. Note that applying may affect your credit score slightly as an ‘inquiry’. Best of luck managing your debt!

Disclosure: Some links are affiliate links that may earn me a commission. I am recommending these companies based on my research and/or experience and truly think you would benefit from them, regardless of any commission I may earn.