One of the student loan questions I see the most is, “which private student loan company is the best?”
I don’t like this question.
I understand why people ask the question, but it is the wrong question to ask. That said, if I have to answer, my choice for the best private student loan company is Credible.
There Isn’t One Best Private Student Loan Company
Asking about the best lender is a reasonable inquiry. As a college student looking for a private loan, you presumably want to find a company that offers low interest rates, fair terms, and quality service.
The problem is that the best company depends upon who you are, where you live, and when you apply.
Each lender has an algorithm or formula for determining who gets approved and what rates they receive. These algorithms are closely guarded secrets.
As consumers, it puts us in a difficult position. How do we know who will offer the best interest rate?
Some lenders may offer lower rates if you have a cosigner. Other lenders might emphasize your debt-to-income ratio. Some companies may offer the best rates to the students at the best schools. There is a long list of potential factors for lenders to consider, and there is no way of knowing how this equation will shake out.
Thus, if you only send in one application for a private loan, you have no idea if you are getting the best rate possible.
Picking Credible as the Best Private Student Loan Company
If I have to pick the best private loan company, I will cheat. I’m going to choose Credible.
Credible isn’t actually a student loan lender. Instead, Credible has a marketplace of lenders.
Borrowers complete one application, but they get a list of potential lenders and interest rate offerings. If you are going to go to one place, Credible is the best bet to find the lowest interest rate available.
Sherpa Thought: If you are reading this article, you might be looking for the best lender, making my choice of Credible a bit of a bait-and-switch.
In my defense, the title clearly says best student loan company. It’s a slight distinction and arguably a dirty lawyer trick, but I stand behind it. Welcome to the world of student loans and fine print. Hopefully, my little deception to trick people into learning about how student loan interest rates work helps more borrowers than it irritates.
Shopping Around is Still the Preferred Route
If I needed a private student loan, I’d shop around and check rates with 6-10 companies. If I needed a particularly large loan, I’d probably check rates with every lender I could find.
This brute force method is the only way to ensure you get the lowest interest rate possible.
Additionally, interacting with each individual lender can provide valuable information. If you have a question and place a call for help, you get firsthand exposure to the lender’s customer service. If the hold times are long and the service is terrible, this might be a lender to avoid.
I’d probably choose to put up with a headache or two for lower interest rates, but checking out each lender — even if it is just visiting their website — can be a helpful tiebreaker.
The Problem with Shopping Around
Many people fear that multiple credit inquiries can negatively impact their credit score.
This fear is justified as a hard inquiry stays on your credit report for two years and usually slightly lowers your credit score for a few months. Checking rates with a dozen different lenders might seem especially dangerous for your credit score.
Fortunately, there is a special expectation in credit score formulas for shopping around. If you do your rate checking within a 30-day window, it doesn’t impact your credit score.
In other words, the biggest cost of shopping around is the time spent investigating lenders.
Credible Strengths and Limitations
Credible works as a nice shortcut to shopping around.
If you complete a Credible application, Credible will do a soft pull of your credit and provide a list of private lender offers. At that point, you can select a lender and move forward with the lender offering the best terms.
Credible helps the lazy consumer shop around and find low rates.
However, Credible isn’t superior to shopping around. Credible doesn’t have a complete list of private lenders. The companies on Credible are the ones that Credible has partnered with. The borrowers who search beyond Credible may find even better rates.
Thus, I’d say Credible is the best private student loan company. Still, if you want to find the best private student loan for you, I’d suggest starting with Credible and then investigating as many lenders as possible.