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Buying a house can be a fraught process, and when the market is hot, the days between offer and closing can feel endless, especially if the mortgage underwriter asks you to write a letter of explanation.

But there’s no need to panic or assume that your mortgage application will fail. The lender is simply seeking clarification about any potential red flags in your financial documents or credit history.

What’s a Letter of Explanation?

A letter of explanation for a mortgage explains details of your financial situation that may need further clarification. Because a mortgage is a large loan, lenders need to know that the borrower is capable of shouldering the mortgage.

Lenders also know that life can’t be boiled down to a spreadsheet, and that it’s not unusual for a mortgage application to include things like a late credit payment or a period of job loss.

To do due diligence, the mortgage underwriter will ask you to explain the situation in a brief letter, which will be added to your mortgage application. Additional documentation and paperwork may be required.


💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.

Why Do I Need to Provide a Letter of Explanation?

Common issues that could trigger a request for a letter of explanation include:

• Questions about your income if you don’t have W-2s or are self-employed

• Negative items on your credit report

• Employment gaps

• Your living situation if you don’t pay any rent or mortgage

• A property income or loss you claim

• Credit lines opened after you’ve put in your mortgage application

• Large deposits to, and sometimes withdrawals from, your bank account

Must I Explain a Large Deposit?

If there’s a big or unexplained deposit to your bank account, your lender may want to know where the money came from — and whether that money needs to be paid back.

A lender may also question any uneven income streams, or ask about any deposits that don’t line up with your W-2s or your tax returns.

If you received cash from, say, a parent to help with a down payment or closing costs, you may also need a gift letter signed by the giver and recipient stating that the money was a gift, not a loan. Your lender may have a template for a gift letter.

Keep in mind that your lender may be more likely to scrutinize any large deposits or withdrawals that were made within the last 60 days.

Letter of Explanation Template

A letter of explanation is not an autobiography or an admission that you did anything wrong. It’s simply a statement of the reason for any discrepancy or issue, along with any documentation, to back up your current financial picture.

You can keep a letter of explanation brief. It should include:

• Your name and address

• Your lender’s name and address

• A subject line that includes your application number and name

• A brief paragraph explaining the situation

• A polite closing

• Your signed full name

It might look like this:

Date

Lender
Lender’s Address
Lender’s Phone Number

Subject Line (RE: John Doe’s Mortgage Application #1234)

Letter of explanation, naming the specific item being asked about and explaining it to the best of your abilities.

Sincerely,

Applicant’s Name
Applicant’s Address
Applicant’s Phone Number

Enc.: (Relevant documentation).

The tone of the letter should be polite and factual. Remember: Your goal is not to pull on the lender’s heartstrings; it’s to reassure them that your application is solid and you would responsibly pay back your mortgage on time.


💡 Quick Tip: Jumbo mortgage loans are the answer for borrowers who need to borrow more than the conforming loan limit values set by the Federal Housing Finance Agency ($832,750 in most places, and up to $1,249,125 in high-cost areas). If you have your eye on a pricier property, a jumbo loan could be a good solution.

4 Tips for an Effective Letter of Explanation

Although being asked to write a letter of explanation may sound like being assigned homework, it’s actually a great opportunity: It means you might be able to qualify for the mortgage you want, even with an imperfect application. Here are some tips to help ensure you get an A+ on this particularly important homework assignment.

1. Keep It Simple

When you’re asked to explain yourself, it can be easy to jump into a broad-reaching narrative starting from childhood, but the best letters of explanation tend to be short and simple: They clarify the situation being asked about and reassure the lender that the “red flag” situation won’t affect the borrower’s ability to repay the loan.

2. Provide Clear Details

Generally speaking, you’ll want to specifically name whatever item you’re being asked about (late payments on a credit card account ending in 0101; an employment gap between 2/20/2020 and 9/07/2020; etc.).

Then explain. For instance, if you’re being asked about an employment gap, you might let the lender know that you were let go as a result of corporate downsizing and that you freelanced while searching for a new job.

If you’re being asked about late credit card payments, you might let the lender know that you were in the hospital at that time and thus unable to make your credit card payments, or whatever the case may be.

The key is to take responsibility for the issue and provide clear, pertinent details without being too wordy.

3. Be Honest

This may go without saying, but you definitely don’t want to lie in your letter of explanation. For one thing, doing so is likely to keep you from being approved for the mortgage — and for another, it can be considered mortgage fraud, a serious crime that can come with prison time and fines.

4. Acknowledge Responsibility, but Don’t Get Emotional

When writing a letter of explanation, you may be justifying negative items in your credit history that resulted from poor decisions — or just poor circumstances. Nobody’s perfect, and a lender simply wants to make sure you won’t default on your loan.

It can be helpful to acknowledge the ways you’ve adjusted your financial habits in response to a negative item. This helps to reassure the lender that the issue won’t have an impact on your ability to pay your mortgage.

For example, if you’re writing a letter of explanation to address late rent payments after a layoff, you might add that you’ve since saved up an emergency fund of three months of living expenses in order to avoid being financially blindsided in the future.

However, writing an emotional sob story won’t help. Remember: It’s a good idea to keep it simple, clear, honest, and as short as possible while still covering all those bases.

Getting Your Mortgage Application in Shape

Knowing what documents you need and what a mortgage lender will look at can help get your application in good shape before you file it. Your lender will scrutinize your credit history and any late payments, especially ones within the last 12 months. But there are ways to proactively tackle any issues on your credit reports.

• Check your credit reports. Knowing what your mortgage lender may see can help you assess where any weak points may be, and what information they may ask for.

• Call the creditor if you have a recent late payment. Creditors know that accidents happen and bills may be misplaced. If your account is otherwise in good standing, it’s possible that a creditor may erase the late payment.

• Focus on additional aspects of your credit. Making sure to pay bills on time and keeping your credit utilization below 30% can help build credit.

• Think twice about opening accounts. Before and after applying for a mortgage, it can be a good idea to be mindful about opening new lines of credit or charging an extensive amount on current cards. Suddenly taking on more debt on credit cards can raise a red flag to lenders, which may result in being asked to write a letter of explanation.

Understanding how a lender will see your mortgage application can give you confidence and may help you head off any potential problems.

Recommended: Preapproved vs. Prequalified: What’s the Difference?

The Takeaway

A letter of explanation may be needed when a mortgage lender needs clarity about a red flag or discrepancy that arises on your application. Knowing what to expect, having documentation ready, and answering any questions the lender may have can all be helpful in getting your home loan approved.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What is a letter of explanation?

When you’re applying for a mortgage, if your lender has questions about something on your financial record – like a series of late payments or a period of unemployment – they may ask for more information. The letter of explanation is meant to clarify your situation and will become part of your mortgage file.

What should I write in a letter of explanation?

A letter of explanation clarifies an item in your financial history for a mortgage lender. Include a brief, factual explanation of how and why the issue occurred and any extenuating circumstances. For instance, you might explain an employment gap by explaining that you lost your job in a corporate reorganization and freelanced for several months while you looked for a new job. Briefly mention any steps you’ve taken in response to this issue. For instance, you might say you’ve built up a three-month emergency fund to draw on if you become unemployed again. Be clear, concise, and polite, and include your name and application number.

How long should a letter of explanation be?

There’s no set length for a letter of explanation. In general, it’s best to address the lender’s question thoroughly, but as clearly and briefly as you can. This may take only a few sentences.

Photo credit: iStock/scyther5

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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The high seas, sun, 24/7 dining, and stops at exotic ports of call: What’s not to love about a cruise? Sometimes, the answer is the price. A cruise can be a big-ticket vacation item that’s a challenge to afford.

But for the people who crave an all-inclusive travel experience, there are smart ways to snag a deal. Whether your fantasy is navigating the dramatic Alaskan coastline or floating through the Caribbean’s crystal waters, there are hacks that can help make it a reality.

Read on to learn insider strategies for finding the cheapest ways to cruise.

Buyer Beware

First, a word to the wise: As just about every frugal traveler knows, sometimes deals really are too good to be true…or at least not all they’re cracked up to be. It’s important to read the fine print and be sure of what’s included and not included in cruise deals you may find.

When considering the cheapest way to cruise, you’ll want to think about airfare, meals, excursions, room type and location, and other amenities that can lead to upcharges. That way, you can budget appropriately and make sure you have enough money in your travel fund to ensure you can afford your trip.

You’ll also want to pay close attention to cancellation policies. Many people plan trips far in advance, and situations can change between the time you book and the time you are supposed to board the ship. It can be wise to consider the costs and benefits of trip insurance. Note: Some credit card travel insurance may have you covered; check with your card issuer for details.

Next, the money-saving tips.

1. Read Cruise News

There are countless sites and blogs devoted to the cruise industry, staffed by both insiders and frequent cruise passengers. These sites cover both industry trends as well as specific deals and offers from particular cruise lines. In addition to finding cruise deals, they are great for learning about unique cruise offerings and locales. Some noteworthy sites include CruiseFever, CruiseHive, and CruiseCritic.

2. Search the Travel Sites

CruiseDirect.com, CruisesOnly.com, Cruise.com, and others are searchable databases of cruise offers. They are similar to Expedia, Travelocity, and other general interest travel websites, except they are devoted to cruises. These sites typically have sections focused on cruise deals and may at times have exclusive offers that aren’t available elsewhere.

Cruise lines, like Carnival, Princess, and Royal Caribbean, also typically have their own deals section, which can be worth checking out.

3. Scan Social Media

To find cruise deals on social media, it’s a good idea to follow your favorite cruise lines’ official accounts on platforms like Facebook, X (formerly Twitter), and TikTok. You might also search for the hashtag #cruisedeals and related terms to discover promotions, giveaways, and last-minute sales.

4. Look for Bundles

Both travel websites and cruise lines themselves often encourage passengers to bundle a variety of services and amenities when booking. These cruise bundles can offer real savings. Some of the options that are typically bundled include airfare, meal and drink packages, transport to and from the ship, free WiFi, and more. (About that WiFi: While some cruise lines have free WiFi, others can charge around $20 or more per person per day for this.)

When evaluating these packages, it’s worth taking the time to review each item, what it includes (there are various levels of perks available on ships, after all), whether you really want everything in the bundle, and what it would cost if you were to purchase the items separately.

5. Travel With Friends

If you have a big family and/or lots of friends, or if the idea of going on a cruise with your coworkers isn’t terribly off-putting, you might be able to score a group rate on a cruise. For example, Norwegian Cruise Lines features a group deal that offers bonuses for every five cabins booked. People traveling on group deals may qualify for bonus packages that include food and drinks, excursions, free WiFi, and more.

Recommended: Creating a Travel Fund

6. Book Well in Advance…Or Last Minute

Popular cruises, particularly the more luxurious ones, tend to fill up quickly. And the best rates are usually available when tickets first go on sale, which can be as much as a year or more advance. After tickets begin to sell (often between November and March, when promotions kick in) and the sail date nears, prices typically start to rise. The other benefit of booking early is that you’re more likely to get your choice of cabin and dining options. Early bookers may also get access to other special perks, like free airfare, upgrades, and free drinks.

That said, there are also plenty of stories of people scoring incredible last-minute deals on cruises. As the departure date grows closer, if a ship hasn’t sold out, the cruise line may offer serious incentives in order to fill up those empty rooms.

💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.

7. Sail During Shoulder Season

Determining peak cruising season, when demand is the highest, can be tricky because of all the variables involved. First and foremost (and perhaps most obviously), different parts of the world experience the seasons and corresponding vacations at different times. So peak season in one part of the world may be very different from peak season in another.

Many think that off-peak season, when demand is the lowest, is the best time to find a cruise deal, though that may not always be the case. If a cruise line cuts back on the supply of cruises too much because of seasonal drops in demand, there may not be many deals or even much availability to be found.

That’s why many point to “shoulder season,” the period between the peak and off-peak seasons, as the best time to find deals on cruises. Keep in mind that the weather might not be as great as it is during peak season, but you’re also more likely to avoid crowds both on the boat and on shore excursions. You’ll also want to consider seasonality when looking for the cheapest days to fly to and from your cruise’s point of departure and return.

8. Check for Special Discounts

Factors such as what organizations you’re a member of and where you live can help you save money on your dream cruise, whether that means exploring the Mediterranean or waters around Mexico.

You may find that belonging to a group like AARP can score you a cruise discount. In addition, some credit card issuers offer cruise benefits. There may also be general discounts for seniors, military families, teachers, and even frequent cruisers.

You might also be able to take advantage of resident cruise deals if you live in a particular area. Celebrity Cruises, for example, offers exclusive deals to residents of certain states, while Disney offers Florida residents up to 25% on select Caribbean cruises.

9. Pay in Full

Even if you’ve found a fantastic deal on a cruise, vacations are expensive, so it’s important to consider your financial options. If you don’t have the funds to cover the entire cost of the trip, then you may want to consider waiting until you’ve saved up enough cash to pay in full up front.

Keep in mind that if you put the trip on a credit card and carry that balance over from month to month, you’ll be paying relatively high interest rates, perhaps 20% or higher. That adds to the cost of the trip significantly, even if you’re using a cash back rewards credit card.

Some people opt to use personal loans for vacations, which typically come with lower interest rates than credit cards. But personal loans, though often more affordable than credit cards, aren’t free, and they’ll add to your vacation budget as well.

10. Maintain a Budget

When planning your cruise, it’s important to drill down and really think through the budget. If you don’t have a truly all-inclusive deal, you’ll want to to itemize everything, such as:

•   Cruise tickets

•   Flights

•   Ground transportation

•   Food and drinks

•   Excursions

•   Souvenirs

•   On-ship entertainment

•   Gambling

•   Pictures

•   Travel insurance

•   Gratuities

•   WiFi

•   International calls

•   Fees for any travel visas

•   Currency exchange

There are plenty of great budgeting trackers that can help you monitor spending on vacation and more. But when it comes to vacation planning, it’s best to earmark the money before you’ve spent it, add a cushion of 10% or 20% to cover the unexpected, and then stick to it. You’ll enjoy the vacation more knowing that you’ve got it covered and won’t stress out when it’s over because you’ve spent more than you can afford.

Also don’t forget to see how you might apply your credit card rewards for travel; you might be able to apply cash back or otherwise lower costs this way.

The Takeaway

Taking a cruise doesn’t have to be expensive. If you’re wondering how to get cheap cruise tickets, there are luckily myriad ways you can get cruise discounts, ranging from going during the off or shoulder seasons to bundling your vacation expenses.

The cheapest way to cruise may be to avoid paying with credit cards, personal loans, or other methods that will end up costing you in interest. Instead, consider setting a savings goal based on the expected cost of the cruise then opening a savings account earmarked for the trip. Choosing a bank that pays a competitive rate, and setting up a monthly automated transfer into the account, can help you reach your goal sooner.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

How do you get the cheapest prices on cruises?

To get the cheapest prices on cruises, book during the off-season or “shoulder” season (the period between the peak and off-peak seasons). Look for last-minute deals, but also consider booking well in advance to lock in lower rates. Other tips for finding cheap cruises include: using cruise comparison websites, following your favorite cruise lines on social media, being flexible with your travel dates, and considering less popular destinations.

Do cruises go cheaper closer to departure?

Cruises can go cheaper closer to departure, especially if the ship isn’t fully booked, since many cruise lines will offer last-minute deals to fill remaining cabins. However, prices can also rise if the ship is nearly full. It’s a good idea to monitor prices and be ready to book quickly if you find a good deal. Always check for any restrictions or blackout dates.

How can I pay less for a cruise?

To pay less for a cruise, book early — cruise lines often offer big discounts when you book a year or more in advance. If you are flexible on dates, on the other hand, you may be able to get deals within 30 days of your departure. Cruise lines will often offer deep discounts if a ship hasn’t sold out. Also consider using credit card points or rewards to cover some of the cost, and booking through a travel agent that specializes in cruises (they often have access to lower bulk fares not available to the general public).

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Photo credit: iStock/nantonov

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If you have student loan debt, chances are you’re looking for ways to save money on your payments. You may be wondering how to pay off student loans faster, for instance. Or you might be thinking about student loan refinancing as a possible option for making loan payments more manageable.

Which method can help you save more? The best strategy for paying off student loans comes down to how much you owe and the specifics of your financial situation. Read on to learn how the different student loan repayment strategies work to help determine which may be the right option for you.

Understanding Your Student Loan Repayment Options

Student loan repayment options differ by the type of loan you have. Federal student loan borrowers can choose from the following repayment plans:

•   Standard Repayment Plan. On the standard plan, you pay off your loans in fixed monthly payments within 10 years

•   Graduated Repayment Plan. With this option, your payments start lower and increase every two years. The payments are designed so that your loans are paid off within 10 years.

•   Extended Repayment Plan. On this plan, your payments may be fixed or graduated, and your loan term is up to 25 years.

•   Income-Driven Repayment Plans. These plans base your monthly payments on your discretionary income and family size. There are currently three income-driven repayment plans you can choose from: Pay As You Earn (PAYE), Income Contingent Repayment (ICR), and Income-Based Repayment (IBR). If you’re planning to seek student loan forgiveness, the IBR is the only plan currently offering that option.

For borrowers with private student loans, the repayment terms are set by the lender. You may have anywhere from 5 to 20 years to repay your loans, depending on your loan agreement.

How Refinancing Student Loans Works

When you refinance student loans, you replace your existing loans with a new loan from a private lender. Ideally, you may qualify for a loan with a lower interest rate or more favorable loan terms.

Borrowers typically start the refinancing process by shopping around to compare lenders and choose one that offers the best loan terms for their situation. Next, you apply for refinancing and tell the lender which loans you’d like to refinance. Once you’re approved, the lender pays off the old loans, and you make payments on the new loan going forward.

You can refinance private and federal student loans. However, refinancing federal loans makes them ineligible for federal benefits, including income-driven repayment, federal deferment and forbearance periods, and federal student loan forgiveness such as Public Service Loan Forgiveness.

How Paying Off Student Loans Early Works

Paying off student loans early means repaying the full balance you owe before the final repayment date set by the lender.

For example, say you have $20,000 in federal student loans and you’re paying them off on the standard 10-year repayment plan. You can pay your loans off early by using one of these strategies:

•   Put extra funds toward the loan. By paying extra on your student loans each month, you can help shrink your debt and reduce the total amount of interest you’ll pay over the life of the loan. Just be sure to specify to your lender or loan servicer that the extra money you’re paying should be applied to the principal.

•   Put “found money” toward your loan. Apply your tax refund or a bonus you receive at work to your loan principal to help reduce your balance.

•   Round up your monthly payments. If you don’t have a lot of extra funds to put toward your loan payments, start on the smaller side. Instead of paying $346 per month, round up your payment to $350. It might not seem like much, but it adds up over time.

If you have several federal loans and they feel like a lot to keep track of, you could consider consolidating them into one Direct Consolidation Loan to streamline your monthly payments. While consolidation generally won’t save you money, it can make your payments easier to manage.

That’s one difference between student loan consolidation vs. refinancing. The interest rate of a consolidation loan is a weighted average of your previous loan rates, rounded up to the nearest ⅛ of a percent, so the rate is not necessarily lower. With refinancing, you may be able to get a lower interest rate if you qualify, which could help you save money.

Comparing the Costs: Refinance vs. Early Payoff

If you’re considering refinance and early loan payoff, you’re probably asking yourself, does refinancing student loans save money? The answer depends on your new loan terms.

Refinancing student loans could save you money if you get a lower student loan refinancing rate rate and/or choose a shorter repayment term. Paying off your loans early will save you money by reducing the amount of interest you pay over time. To get a sense of which method might help you save more, here’s an example that shows how the two options compare.

Say you owe $30,000 in federal student loans with a rate of 6.53%. You’re enrolled in the Standard 10-year Repayment Plan, with a monthly payment of $341, and you’re debating between two options:6 refinancing to a new private loan with a 10-year term at 5.50%, or keeping the loan you have but increasing your payments to $500 per month. This is how the math works out for each option.

	Refinancing	Early Payoff
New Monthly Payment	$326	$500
Payment Savings or Increase	~$15 per month	+$159 per month
Repayment Term	10 years	6 years and 1 month
Interest Savings	$1,863	$4,520

If you want to be even more aggressive and pay off your loans faster through refinancing by choosing a 5-year term instead, your monthly payments would increase to $573, but you’d save $6,550 in interest, and you’d pay off your loans half the time.

A student loan refinancing calculator can help you estimate your total savings based on different repayment terms, interest rates, and monthly payment amounts.

Factors to Consider Before Choosing Between Refinancing and Paying Off Early

Refinancing student loans vs. paying them off early are two very different strategies, and one may suit your situation better than the other. There are several important factors to weigh before making a decision.

Interest Rates and Loan Terms

If you’re exploring student loan refinance, compare loan rates and terms from different lenders to estimate your potential savings. Many private student lenders allow you to check your rates online without any impact on your credit score.

Here are some general rules to remember:

•   A shorter loan term usually means a higher monthly payment, but a faster payoff overall.

•   A longer loan term reduces monthly payments but increases the total interest paid over time.

An ideal combination to maximize savings is a refinance loan with a low rate and a shorter term, if you can qualify. Your monthly payments will be bigger, but you’ll pay less interest in total.

Recommended: A Guide to Refinancing Student Loans

Monthly Budget and Cash Flow Considerations

Paying off student loans early and refinancing can both affect your budget if your new payments are higher than they were previously. A review of your budget can give you an idea of how much of an increase you might be able to afford with either strategy.

Don’t forget to factor in the unexpected. For example, would you be able to keep up with the new loan payments if you lose your job or your roof starts leaking and needs immediate repairs?

A healthy emergency fund can act as a buffer against those types of situations, but even then your savings may eventually run out. While you can choose to stop putting extra cash toward paying off your loans early at any point, with a refinanced student loan, you have payment due dates to meet. Refinancing makes sense if your payments are affordable not just right now, but for the entirety of the loan term.

Credit Score Impact

Applying for student loan refinancing can affect your credit, since lenders will generally do a hard pull of your credit reports and score. Hard inquiries factor into your credit score calculations.

Your score will usually drop a few points temporarily, though you can typically strengthen it again by making on-time loan and other bill payments. Still, you may want to consider the potential credit score impact if you’re planning to apply for a mortgage or another type of credit in the near future.

Pros and Cons of Refinancing vs. Paying Off Early

Student loan refinancing and paying off your loans early each have their advantages and disadvantages. Here’s a breakdown of the pros and cons of both methods to help you weigh the options.

Pros and Cons of Refinancing Student Loans

Student loan refinancing may be appropriate for individuals who have good credit (or a loan cosigner with strong credit) and want to change their loan terms.

Pros and Cons of Paying Off Student Loans Early

You might opt to pay off your loans early if you’re trying to put money toward other goals, such as a down payment on a house or saving for retirement.

The Takeaway

Student loan refinancing could give you the chance to get more favorable loan terms, including a lower interest rate, if you qualify, which could save you money. An early student loan payoff plan could potentially yield serious savings on interest if you’re dedicated to following through.

While both options have their merits, the best strategy for paying off student loans is the one that fits your financial situation and goals.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Should I refinance or pay off student loans if I have extra cash?

Which method is a better choice depends on your specific situation. A few things to think about: If you have enough cash to pay off student loans early, that could result in substantial savings on interest. However, if an emergency happens and you’ve used your savings, you could end up in a tough spot unless you have an emergency fund. Refinancing may save you money over time if you’re able to get a lower interest rate, and you likely won’t have to deplete your savings.

Does refinancing student loans save more money than early payoff?

Whether refinancing student loans saves more than an early payoff depends on the loan’s refinance terms. You may save more with refinancing if you get a lower interest rate and a shorter loan term. However, your monthly payments will be higher. Do the math to compare what you could save with each option to help decide which is right for you.

How does refinancing affect my credit score?

Applying for a refinance loan typically triggers a hard credit pull, which can show up on your credit reports. Hard inquiries can temporarily drop your score a few points, but you can usually rebuild your credit over time as you pay down your new loan and make all your other payments on time.

Is it better to pay off student loans early if I plan to buy a home?

Paying off student loans early means you’ll have one less debt payment to make, which is a plus if you’re preparing to take on a mortgage. Just be sure to consider how paying loans off fits with saving money for a down payment to help decide if you can afford to do both.

Can I refinance my student loans multiple times to maximize savings?

You can generally refinance student loans as many times as you want. Whether that strategy saves you money depends on the terms you get each time you refinance. If your financial situation improves — say you build your credit and think you can get a lower interest rate — it may make sense to consider refinancing then, for example.

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SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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