Generally, there are no fees associated with student loan refinance. There are no prequalifying fees, nor are there any application or origination fees. Most lenders will go out of their way to give you the best deal without charging you any extra costs. Many even offer additional perks and benefits. The reason for this is simple.
There’s high competition in the loan refinancing space. Lenders compete with each other to lend money to creditworthy borrowers who are more likely to repay the money on time. The lower the interest rate they quote, the higher their chances of attracting such borrowers. They know they will make money off your loan no matter how low an interest rate they quote.
However, this is not something you should take for granted when applying for refinancing. There may be a few instances of unexpected charges in the refinancing process. Here are a few of them.
Fees vary significantly from one lender to another. However, lenders must mention any fees upfront. Some lenders bury this information deep in the fine print of their marketing material or in the terms and conditions.
These are some hidden fees to watch for with student loan refinance:
Application fee – Processing loan applications involves assessing credit reports and other financial credentials to determine eligibility and set a customized interest rate. This can take up many man-hours, which the lender has to pay for. Some lenders absorb these charges. Others charge an application fee to cover the cost of processing the application. This fee is usually due at the time of submitting the application.
Origination fee – Some lenders charge an origination fee instead of an application fee. The origination fee covers the combined costs of processing, disbursing, and administrating the loan.
Late fee – Most lenders charge a late fee if you miss a payment deadline. With some lenders, the late fee is calculated started from the day after the due date. Others may give you a grace period before the late fee kicks in.
Returned payment fee – If you attempt to make a payment but your checking account doesn’t have the funds to cover the payment, the transaction won’t go through. Some lenders charge a fee for the failed transaction.
Hidden fees can add to the overall cost of borrowing. The best way to avoid getting hit with hidden fees is to take your time when looking for a lender. Make sure to read the fine print and follow this up by asking the lender directly about the fees they charge.
We hoped you enjoyed this article! Remember, you canand potentially lower your monthly student loan payments and save money.