Financial technology startup CommonBond aims to do more than just lend: It wants to create community. The private lender hosts networking events, helps borrowers find jobs, and partners with a nonprofit to fund disadvantaged students’ educations.
More importantly for its customers, CommonBond offers refinance loans with competitive interest rates to undergraduate and graduate students. Borrowers can refinance up to $500,000 in student loans, which is more than many other lenders allow.
AT A GLANCE
- Interest rates: 2.14% to 5.69% APR (variable) and 3.5% to 7.49% APR (fixed)
- Loan forbearance for up to 24 months.
- 10-year hybrid loan has a fixed rate for the first five years and a variable rate for the subsequent five years.
Although its roots are in refinancing for graduate students, CommonBond has expanded its reach: About 20% of the company’s refinance customers have undergraduate debt. Borrowers with Parent PLUS loans can also refinance through CommonBond.
Like many private refinancers, CommonBond offers five-, 10-, 15- and 20-year loan terms. Borrowers get a 0.25% interest rate deduction for setting up automatic debit payments, and there’s no penalty for making early payments.
CommonBond also has a forbearance policy that lets borrowers facing an economic challenge, such as job loss, temporarily postpone payments in three-month increments for up to 12 months consecutively and 24 months total. However, interest still accrues while loans are in forbearance.
Do you qualify?
| Minimum qualifications |
The typical borrower | |
|---|---|---|
| Credit score | High 600s | 750+ |
| Income | No specific income requirement | $100,000+ |
Reasons to use CommonBond
Low interest rates: CommonBond’s interest rates are among the lowest of its competitors, with fixed rates ranging from 3.5% to 7.49% APR and variable rates currently ranging from 2.14% to 5.69% APR. Variable rates change as the markets fluctuate, but CommonBond caps the amount you could pay at 9.99% APR.
For context, other lenders offering similar products have fixed rates as high as 9.5% APR and variable rates currently as high as 7.9% APR.
The rate you’ll be offered depends on your credit profile, your cash flow (how much money you have available to repay your student loans given your other financial obligations, such as housing payments or credit card payments), and the term length you choose (shorter terms have lower interest rates, longer terms have higher rates).
Save on interest with a hybrid loan: CommonBond’s uniquely defining feature is its hybrid loan, a 10-year loan with fixed interest for the first five years and a variable rate for the second five years. It’s one of the company’s more popular products, says CommonBond Chief Marketing Officer Phil DeGisi.
The hybrid loan is a good option for people who want to repay their student debt quickly, without committing to a five-year term. Hybrid loan rates are not as low as those that come with five-year fixed-rate loans, but they’re lower than those for 10-year fixed-rate loans.
COMMONBOND LOAN INTEREST RATES
| Loan type | Fixed APR | Variable APR | Hybrid APR |
|---|---|---|---|
| 5-year | 3.50% to 5.74% | 2.14% to 4.69% | N/A |
| 10-year | 4.61% to 6.75% | 2.94% to 5.06% | 3.78% to 5.96% |
| 15-year | 5.12% to 6.99% | 3.31% to 5.44% | N/A |
| 20-year | 5.37% to 7.49% | 3.56% to 5.69% | N/A |
Where CommonBond falls short
The hybrid loan is risky: Although some borrowers can save with hybrid loans, there’s risk involved with variable interest. You’ll have the same rate for the first five years, but there’s no way to tell what the variable rate will be once it kicks in — it could be higher or lower than the fixed rate, depending on market conditions at that time.
You can minimize your risk of rising variable interest rates by paying off the hybrid loan as soon as possible. There’s no prepayment penalty, and many customers pay off their hybrid loan in fewer than 10 years, DeGisi says.
More limitations: CommonBond has some eligibility criteria that some similar lenders don’t. For example, borrowers need to have graduated from college to qualify for a CommonBond student loan. Borrowers refinancing undergraduate loans need to have graduated more than two years prior to qualify. Citizens Bank, on the other hand, will consider lending to borrowers who haven’t received a diploma. Additionally, borrowers in Delaware, Idaho, Louisiana, Mississippi, Nevada, Rhode Island, South Dakota, Tennessee and Vermont are not eligible for a loan through CommonBond.
Next steps
If you’re ready to refinance your student loans through CommonBond, you can apply on the company’s website. However, it’s smart to compare interest rates from multiple lenders before you make a decision.
You can compare rates from up to seven lenders by filling out one application through Credible, a student loan refinancing marketplace and NerdWallet partner. If interested, fill out the form below to see how much you could save by refinancing through Credible. Here’s how the student loan refinancing calculator works.
» MORE: Choosing the best student loan refinancing offer
Remember: When you refinance federal student loans, they become private loans. Private student loans don’t offer as many borrower protections as federal loans do, such as the ability to enroll in income-driven repayment plans and forgiveness programs. If you’re unsure whether refinancing is the right option for you, these articles can help you make a smart 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.
This post was updated. It was originally published Aug. 4, 2015.
Image via iStock.
from NerdWallet
https://www.nerdwallet.com/blog/loans/student-loans/commonbond-student-loan-refinancing-graduate-degree-debt/
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