These Companies Offer an Interest Rate Discount when Refinancing? How Much Does It Actually Save?

By | March 30, 2017
These Comapnies Offer an Interest Rate Discount When Refinancing

One of the reasons you refinance student loans is to save money by negotiating a lower interest rate. When you refinance your student loans, your new lender often provides the opportunity to save some additional money by offering an interest rate discount by simply signing up for automated payments. Are you interested? See how much additional money you can save by refinancing.

How to Get an Interest Rate Discount when Refinancing

Many of the leading refinancing lenders will offer an interest rate discount of 0.25%-0.50% when you automate your payments and authorize the lender to monthly payment from your savings or checking account on the same date each month.

If you have a banking relationship with a lender, they might also offer an additional 0.25% discount as a loyalty bonus as well.

The interest rate discounts not only save you money, but, also increase the likelihood that the lender will get the payment on-time each month because the payment is automated & computers are far less likely to forget to make a payment like a human is.

Sofi

Discount: 0.25%
Current Variable Interest Rates: 2.365% to 6.290%
Current Fixed Interest Rates: 3.375% to 6.740%

Sofi arguably has the largest name recognition in the student loan refinancing arena due to their advertising campaigns during major sporting events and the fact that so many borrowers have saved thousands of dollars by refinancing with them.

Signing up for AutoPay with Sofi will allow you to reduce your interest rate by 0.25%. Essentially, instead of having an interest rate 4.00%, it would be 3.75% instead. You can receive the discount on a fixed or variable interest rate with repayment terms ranging from 5 years to 20 years.

College Ave. Student Loans

Discount: 0.25%
Current Variable Interest Rates: 2.88% to 6.13%
Current Fixed Interest Rates: 4.75% to 7.35%

With College Ave., you can receive a 0.25% discount and you also have two different repayment options. You can make interest-only payments for the first two years of refinancing or begin making full principal and interest payments immediately on your refinanced student loans.

Citizens Bank

Discount: 0.25% Autopay & 0.25% loyalty discount
Current Variable Interest Rates: 2.39% to 8.18%
Current Fixed Interest Rates: 4.74% to 8.24%

If you or your co-signer currently bank with Citizens Bank, you have the ability to save 0.50% instead of 0.25%! They also offer repayment terms ranging from 5 years to 20 years.

CommonBond

Discount: 0.25% Autopay
Current Variable Interest Rates: 2.35% to 6.27%
Current Fixed Interest Rates: 3.37% to 6.74%
Current Hybrid Interest Rates (10-year loan): 3.94% Fixed & 3.15% Variable to 6.50% Fixed & 5.65% Variable

CommonBond offers the traditional fixed and variable interest rate loans and they also offer a unique product called a hybrid loan with a 10-year repayment term. When you refinancing with a hybrid interest rate, you pay a fixed interest rate the first 5 years of the loan (when a greater portion of your monthly payment is applied to accrued interest instead of the principal) and the final 5 years are a variable rate when the principal is much lower.

CommonBond offers a 0.25% autopay discount for all three interest rate types.

How Much Money Can Be Saved Through Autopay?

Let’s see how much you can save by enrolling in autopay when refinancing your student loans.

Example 1

Loan Balance: $10,000
Repayment Term: 10 years (120 months)
Interest Rate without AutoPay: 2.6%
Interest Rate after AutoPay Discount: 2.35%
Savings Per Month: $1
Overall Savings: $136

If you refinance for the lowest current variable interest rates you would save approximately $1 per month & $136 total if it took 10 years to repay the balance. As your normal monthly payment is approximately $94, the savings would essentially cancel out one monthly payment.

$136 might not seem a lot in savings, but, if you have $30,000 in student loans, you would save $409 over the course of 10 years.

Example 2

Loan Balance: $10,000
Repayment Term: 10 years (120 months)
Interest Rate without AutoPay: 3.625%
Interest Rate after AutoPay Discount: 3.375%
Savings Per Month: $1
Overall Savings: $141

If you qualify for the lowest fixed interest rates, you would save $141 on a 10-year loan just by signing up for auto-payments. On a $30,000 loan balance, you would have a total savings of $422.

Example 3

Loan Balance: $50,000
Repayment Term: 10 years (120 months)
Interest Rate without AutoPay: 6.99%
Interest Rate after AutoPay Discount: 6.74%
Savings Per Month: $6
Overall Savings: $770

If you have a high student loan balance of $50,000 and also have the highest fixed interest rates with a 10-year repayment term, you would save $6 each month & $770 total by having the 0.25% interest rate deduction.

What if I Can’t Refinance?

If you cannot refinance, it’s also possible that your existing student loans offer a similar autopay discount. This is for the same reason that refinanced student loans offer a rate deduction, autopay is a win-win for you and the lender. They are more likely to receive an on-time payment on the same day from the same bank account each month and you are rewarded with some additional savings in the process.

Summary

Signing up for automatic payments for your student loans has two primary benefits. First, you get a small interest rate reduction that will save you some money each month. Secondly, you don’t have to remember to schedule a payment each month and be charged a late fee if the lender doesn’t receive the money in time. All you need to need is make sure there is enough money in your designated bank account on the due date & they will do the rest of the work for you.

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