Student Loan Refinance companies love to advertise the ease of their application process. They ask for a few minutes of a borrower’s time with the promise of excellent rates and low payments.
Unfortunately, the “fast” and “simple” process often ends with a rejection for borrowers.
Rather than focusing on the easiest application, today we will focus on hunting down the easiest approval.
Borrower Circumstances Improve Odds of Approval with Certain Refinance Lenders
Each refinance lender has its own unique formula for determining who gets approved, what interest rate is offered.
Some lenders have a reputation for catering to specific groups of borrowers. If you fall into a targeted demographic, your odds of getting approved increase dramatically.
- If you have medical school debt – The residency salary is often dwarfed by medical school debt. Large debt and a smaller income can be devastating for refinancing approval odds. However, Laurel Road has a clear focus on young physicians. Their formulas account for the low starting salary but high earning potential. As a result, Laural Road may be the easiest place for a young doctor to get approval.
- If you have money in a retirement or savings account – At most lenders, credit score and debt-to-income ratios are the primary concerns. This is unfortunate for savers who have demonstrated financial responsibility. A notable exception to this rule is Earnest. Applicants to Earnest can document their savings to get lower interest rates and increased odds of approval.
Sadly, the list of lenders targeting specific groups is short. In most cases, shopping around is the best way to get a loan.
Borrowers short on time can cast a wide net by targeting lenders that work with many different companies.
- LendKey – LendKey works with a long list of local, not-for-profit credit unions to create a national student loan lender. Borrowers that apply are paired with a local credit union. By applying, borrowers are essentially checking rates with many smaller credit unions that don’t advertise their loans.
- Credible – Credible has a continually evolving roster of national lenders on its platform. Credible doesn’t directly offer student loans. Instead, they allow borrowers to check rates with about a dozen lenders with one application.
- Splash Financial – Splash started out as a smaller lender but has grown quickly by offering a mix of in-house loans and loans offered by other lenders. Over the last year, Splash has gone from being a more selective lender to one of the easiest approvals in the business.
Surprisingly, the overlap between the lenders on LendKey, Credible, and Splash lenders is minimal. By spending approximately 30 minutes, borrowers can cast a very wide net. Not only does this approach increase the odds of approval, but it also helps borrowers ensure they have found the lowest interest rate available.
Refinance Company Health and Available Funding Influences the Chances of Getting a Loan
Lenders short on cash will be far more strict with loan approvals. Limited finances mean the lender may be more selective, and that interest rates might be a bit higher. Their goal is to maximize profits from a smaller pool of money.
The flipside of this equation is the lenders who are well funded. Finding customers is the biggest obstacle for these lenders. Thus, they will offer better interest rates to a wider group of borrowers.
However, lenders don’t advertise how well funded they are or how desperate they are for new borrowers. The best I can do is infer who is most likely to approve borrowers based upon trends and feedback received from readers to this site. I try to incorporate this information in the refinance lender rankings. If a company has tightened up its approval requirements, it will fall in the rankings.
Presently, lenders ELFI and CommonBond are approving borrowers at a higher than expected rate. Meanwhile, SoFi approval rates seem to be dropping. Individual experiences may be different, but that is the trend I am seeing based upon reader feedback.
The Lesson for Borrowers
Predicting which lender is most likely to approve any individual borrower is an inexact science. We can make predictions based upon the previously discussed borrower and lender health, but it is hard to say anything for certain.
However, the one thing that can be said for certain is that the more applications you submit, the better your chances are for approval. Some borrowers may strike out completely, but it isn’t unusual to see a borrower get rejected at two lenders and then approved with a third.
Generally speaking, borrowers have two main objections to checking rates with many different lenders:
- It takes too much time. The time commitment is a fair concern, but for most people, it is time well spent. Each application normally takes 10 to 15 minutes. A reduced interest rate can save hundreds or even thousands of dollars per year. As far as time commitments are concerned, spending some time shopping around is time well spent.
- I Don’t Want Multiple Credit Inquiries – Protecting your credit score is always a good idea. Fortunately, consumers are not penalized for rate shopping with multiple lenders. While there may be a slight drop in credit score for checking with one lender, each subsequent lender is treated as shopping around and does not impact the credit score. The window for shopping around is 14 to 45 days depending upon the credit model in use.
In short, if you are looking for an approval or low interest rates, your best bet is to visit at least 3-5 lenders.
Turning a Student Loan Refinance Rejection Into an Approval
If you shop around and receive only rejections, hope is not lost.
The two crucial numbers to try to improve are your credit score and debt-to-income (DTI) ratio. One of the quickest ways to improve things is to pay down credit card balances. A reduction in credit card debt can help both your credit score and DTI.