Best Student Loan Refinance & Consolidation Companies of 2018


Updated: 9/12/18

Learn how you can save on your student loans through refinancing.

Today, graduates are leaving campus holding a diploma in one hand and an average of $17,000 in debt in the other. In America, student debt is the second largest form of consumer debt. Unfortunately, our nation’s education system, politicians, and students haven’t figured out a solution.

In short, when you refinance student loans, your new lender will pay off your old loans and issue you a new one. Your new loan typically has a lower interest rate, saving you money, or a lower monthly payment, making repayment more manageable.

We’ve created this guide to help borrowers better understand the emerging student loan refinancing and consolidation industry.

Best Student Loan Refinancing Lenders - Rates, Terms, & Amounts

Lender

Variable APR

Fixed APR

Terms (Years)

Minimum

Maximum

2.57% - 8.17%*

3.75% - 8.69%*

5, 10, 15, 20

$10,000

$350,000

2.55% - 6.01%

3.09% -6.69%

5, 7, 10, 15, 20

$15,000

None

Compare quotes from multiple lenders with one free application.

Note: LendEDU is owned by the same parent company as The Student Loan Report.

Splash logo

2.69% - 7.43%

3.25% - 7.03%

5, 8, 12, 15

$7,500

$150,000

purefy student loan refinance

3.48% - 7.26%

3.50% - 7.28%

5, 8, 12, 15

$7,500

$300,000

*Citizens Bank Disclosure

Eligibility Requirements for Student Loan Refinancing

This section is used to describe eligibility requirements. You can see some of the common requirements below as well as each lender's specific requirements. This will help you narrow down your search to only those who you are eligible for.

A Good Credit Score

In order to refinancing your student loans, you will usually need an excellent credit score.

History of On-Time Payments

Lenders like to see a history of on-time payments before deciding to lend to you.

Consistent Income

Borrowers with consistent income are more likely to be more successful in repayment.

Low Debt-to-Income Ratio

A low debt-to-income ratio means that you are more likely to be able to afford your payments.

Lender

Credit Score

Min. Income

Loan Types

Degrees

States Eligible

680

$24,000

Federal &  Private

Undergrad & Grad

Any

680

$35,000

Federal &  Private

Undergrad & Grad

Any

Compare quotes from multiple lenders with one free application.

Note: LendEDU is owned by the same parent company as The Student Loan Report.

Splash logo

N/A

N/A

Federal &  Private

Undergrad & Grad

Any

purefy student loan refinance

670

$25,000 (w/ cosigner), $42,000 (w/ no cosigner)

Federal &  Private

Undergrad & Grad

Any

Savings, Discounts, & Fees for Student Loan Refinancing

Each lender has different average savings amounts, discounts, and fees. Be sure to see what each lender offers before moving forward with one. Note that average savings amounts may be calculated differently by each lender.

Autopay Discount

Most lenders offer borrowers a interest rate discount for setting up automatic payments.

Soft Credit Check

In order to refinancing your student loans, you will need a credit score of at least

Common Fees

Some lenders charge origination, application, or prepayment fees to borrowers.

Unemployment Protection

Some lenders will allow borrowers to defer payments if they become unemployed.

Lender

Average Savings

Autopay Discount

Unemployment Protection

Are Fees Charged?

Soft Credit Check?

$128/month

0.25%

1 year

No

Yes

$282/month

0.25%

N/A

No

Yes

Compare quotes from multiple lenders with one free application.

Note: LendEDU is owned by the same parent company as The Student Loan Report.

Splash logo

$350/month

0.25%

Varies

No

No

purefy student loan refinance

$426/month

0.25%

N/A

Yes

Yes

How to Decide If You Should Refinance Student Loans

It Might Make Sense If...

Your student loan interest rates are 4% or higher

If your student loans currently have interest rates over 4%, you may be able to save by refinancing.

You have a great credit score and consistent income

Borrowers with great credit and consistent income are the most likely to be successful in repayment.

You want to pay off your student loans faster & can afford higher monthly payments

When you refinance, you can shorten your repayment term and pay off your student loans faster.

It Might Not Make Sense If...

You are depending on an income-driven repayment plan

When you refinance you will lose access to federal income-driven repayment plans.

You are planning on receiving student loan forgiveness

Only federal student loan borrowers may be eligible for forgiveness through the government.

Your credit score is not great or you have inconsistent income

Lenders most likely won't approve you if they believe you may have trouble with repayment.

Full Student Loan Refinancing Lender Reviews for 2018

We would like to present unbiased descriptions of the best student loan consolidation companies. Please note, from here on out, we consider "consolidation" and "refinancing" the same thing. When you refinance with any of the following lenders, you will also have the option to combine all of your student loans into one.

All of these companies have been vetted by The Student Loan Report team for product quality, security, and customer experience. For more information about any one of these student loan refinancing lenders, look for the link to our full review and analysis of the companies.

Fixed Rates

3.75% - 8.69%

Variable Rates

2.57% - 8.17%

Terms (Years)

5, 10, 15, 20


Min. Loan Balance

$10,000

Max. Loan Balance

$350,000

Fees

None

Citizens Bank Full Review

Though Citizens Bank isn't the largest bank in the nation, you may notice that it is one of the only consolidation companies with actual branches! In fact, the company has over 1,000 branches and $130 billion in assets. 

Through the company’s education finance division, Citizens Bank created the Education Refinance Loan. The Education Refinance Loan was created to help students and graduates better manage their student loan payments. In fact, Citizens Bank reports that its average customer saves $271 per month by refinancing!

Rates & Terms

Citizens Bank offers both variable and fixed interest rate products to those looking to refinance student loans. Variable rates start at 2.57% and fixed rates start at 3.75%. You can choose a new term length of 5, 10, 15, or 20 years². Both federal and private loans are eligible for refinancing and consolidation through Citizens Bank. And the company even offers an interest rate discount if you choose to make your payments via auto-pay, as reflected in the rates above.

Benefits

As you would guess, Citizens Bank charges no application origination, disbursement, or pre-payment fees. For example, you would not be charged any fees for making extra principal payments each month. 

One benefit that Citizens has that not every lender can claim is 24/7 customer service. Whether you are applying in the middle of the day or at 3 a.m., someone is there to help.

Finally, Citizens offers tons of educational resources on its website, including calculators for college savings and refinancing.

Eligibility Requirements

You must be a U.S. Citizen, or permanent resident alien, to qualify for consolidation through Citizens Bank. Furthermore, you must have at least $10,000 in debt to refinance and you must have made at least 3 on-time monthly payments post-graduation. Citizens Bank only allows refinancing of debt up to $90,000 for bachelor's degrees, $350,000 for graduate degrees (including MBAs).

Citizens Bank is one of the only companies that does not require you to have graduated in order to refinance. If you have not yet earned a bachelor’s degree, you can still qualify but you must have made at least 12 on-time monthly payments before applying. On-time payments are payments including both interest and principal. 

Application Process

In order to apply for refinancing with Citizens Bank, you will need to complete the quick application on the company's site. For the application, make sure you have proof of citizenship, proof of income, billings statements for your student loans, and proof of employment and housing payments.

This can all be done online and is a relatively straightforward and simple process, especially if you have all of the documentation nearby and ready to go. If you ever get stuck, there is even a chat box to speak with customer service right from your computer!

To read our full review of Citizens Bank click here.

Fixed Rates

3.49% - 8.72%

Variable Rates

2.51% - 8.03%

Terms (Years)

5, 7, 10, 15, 20


Min. Loan Balance

$5,000

Max. Loan Balance

$300,000

Fees

None

LendKey Full Review

LendKey is one of the best refinancing options for student loan borrowers. LendKey works to match borrowers with not-for-profit credit unions offering educational debt refinancing and consolidation.

LendKey currently works with over 300 credit unions which means the that you can be matched with at least one lender, no matter where you live. Since inception, LendKey has helped over 40,000 borrowers find lower rates through refinancing. In 2015, LendKey expanded its products offerings dramatically.

Rates & Terms

Today, LendKey offers both fixed and variable rates with term lengths ranging from 5 to 20 years. Variable rates start at 2.51% while fixed rates start at 3.49%. Additionally, borrowers approved for refinancing can choose from a repayment term of 5, 10, 15, and 20 years. These are some of the lowest student loan refinance rates of all the lenders!

Benefits

On average, borrowers save about $12,500 by consolidating with LendKey. There are zero application, origination, disbursement, or pre-payment fees. LendKey even offers borrowers cosigner release as a benefit after 24 months of on-time principal and interest payments. For more information about LendKey’s cosigner release benefit, please read our full review.

Eligibility Requirements

Eligibility requirements vary based on the credit union that you are matched with. All borrowers who are considered are U.S. citizens. Also, the minimum amount to refinance is $7,500 while the maximum is $175,000. LendKey typically looks for a minimum credit score of 660 and an annual income of $24,000. The higher your credit score and income, however, the higher your chance of approval will be.

Application Process

LendKey has really improved its technology over the last 2 years. Today, the company’s application process is very easy and the interface is friendly. From end to end, most borrowers should expect the refinancing and consolidation process to be completed in about 4 to 8 weeks. During the application process you will be required to provide evidence of a driver’s license, proof of graduation, and pay stubs that verify your income. 

To read our full review of LendKey click here.

Fixed Rates

3.25% - 7.03%

Variable Rates

2.48% - 6.25%

Terms (Years)

5, 7, 10, 15, 20


Min. Loan Balance

$5,000

Max. Loan Balance

$500,000

Fees

None

CommonBond Full Review

CommonBond has been one of the best players in the private consolidation market for a few years now. Like SoFi, CommonBond was founded by students looking to make student loans better. CommonBond was started by 3 Wharton MBA students in 2011 as project to tackle the student loan problem in the United States. Since 2011, the company has come a very long way.

Rates & Terms

CommonBond offers rates as low as 2.48% for variable interest, 3.25% for fixed interest, and 3.80% for hybrid interest. The company’s average users saves about $14,600 through refinancing. CommonBond is on the short list of lenders who allow parents to refinance PLUS loans. CommonBond does not charge any application, origination, disbursement, or pre-payment fees. In addition, the company will pause your payments if you lose your job.

Eligibility Requirements

Initially, CommonBond very particular about who was eligible. At first, CommonBond only accepted students from select top schools and degree programs. But over the last year, CommonBond has dramatically expanded its eligible school and degree list. Today, most applicants will be eligible to apply to CommonBond.

To read our full review of CommonBond click here.

Fixed Rates

3.90% - 8.18%

Variable Rates

2.80% - 7.91%

Terms (Years)

5, 7, 10, 15, 20


Min. Loan Balance

$5,000

Max. Loan Balance

None

Fees

None

SoFi Full Review

Since a group of Stanford Business students founded the company in 2011, SoFi has refinanced over $6 billion in outstanding debt, and on average its members save about $17,000, and is now one of the best companies in the industry.

Rates & Terms

As of this writing, SoFi currently offers refinancing rates as low as 2.80% for variable rates and 3.90% for fixed rates. The rates cap out at 7.91% and 8.18%, respectively. These are some of the lowest student loan refinance rates in the industry. Members can choose from variable and fixed rates with term lengths of 5, 10, 15, and 20 years. The above rates are all assuming you sign up for auto-pay. Without auto-pay, the rates would be 0.25% higher.

Benefits

By becoming a SoFi member, which is completely free, you will get access to extra benefits including unemployment protection, career support, interview coaching, and resume review. If you are interested in becoming an entrepreneur, SoFi will support you through its entrepreneurial program. Entrepreneurial program benefits include delayed payments and mentorship from successful entrepreneurs. In addition, SoFi charges no application, origination, or prepayment fees. Finally, SoFi has a great customer support team ready to help you with any problems that may arise!

Eligibility Requirements

SoFi is relatively strict in its requirements. SoFi only accepts people who have graduated, have good jobs, and have solid income. Typically, SoFi borrowers also have a great credit history and enough income to cover monthly expenses as well as student loan payments.

SoFi's minimum amount of student loan debt to refinance is $5,000.

Note: Students in Nevada are not eligible for refinancing.

Application Process

If you are planning to submit an application, block off at least 20 minutes of time to complete it. After you’ve been pre-approved online, you will be asked to select your new loan options. Then, you will be required to upload supporting documents so that SoFi can verify your income and education.

To read our full review of SoFi click here.

Fixed Rates

3.09% - 6.69%

Variable Rates

2.55% - 6.01%

Terms (Years)

5, 7, 10, 15, 20


Min. Loan Balance

$15,000

Max. Loan Balance

None

Fees

None

ELFi Full Review

ELFI was launched by SouthEast Bank in November of 2015 and provides some of the best student loan refinance options online. SouthEast Bank has a long history in the student loan industry. Throughout the company’s history, it has helped over one million families secure financing for higher education. Going back to its roots, SouthEast Bank decided that a refinancing and consolidation product that was available to a broader market could help many of its student loan borrowers payoff their debt.

Rates & Terms

ELFI’s refinancing products are very competitive. The company offers variable rates as low as 2.55% and fixed rates as low as 3.09%. At this time, ELFI offers 5, 7, 10, 15, and 20-year term length options. So, if you are looking for a 25-year term length you will need to look elsewhere. You can refinance from $15,000 and up with ELFI, assuming you meet the credit requirements.

Benefits

There are many benefits to using ELFI to refinance your student loans. The first benefit is that the company's loans are accessible to more borrowers since the minimum qualifications for applicants are quite reasonable. Your credit score must be at least 680, but you only have to be making $35,000 per year. That income requirement is lower than a lot of other student loan refinance companies who tend to focus on refinancing the loans of high income professionals.

Another way ELFI is different is that it refinances student loans that parents took out for their children. That's rare to find since most online refinance companies focus on student loans a borrower took out for their own education. Many parents take out Parent Plus federal student loans, but the interest rates can be quite high (over the past several years, they have been around 6% to 7%) and they could potentially save a significant amount of money by refinancing with a lender like ELFI that offers very low rates.

Another benefit of ELFI is that it provides loans in all 50 states. Since many online student loan refinance companies only offer refinancing in a limited number of states, this also expands the pool of potential borrowers who could benefit from ELFI loans.

ELFI’s very low interest rates also mean that you're more likely to save a significant amount of money by refinancing your student loans with the lender. ELFI even has a cap on how much its variable rates can increase – it will only raise them every three months and it promises that the rate will never exceed 9.95%. On top of all these great benefits, ELFI does not charge application, origination, or pre-payment fees.

Eligibility Requirements

To be eligible to refinance your student loans with ELFI, you have to have a credit score of 680 or above and an income of at least $35,000. You also have to have a Bachelor’s degree from an approved school. If you took out student loans but didn't graduate, then you won't be able to use ELFI as a student loan refinance provider. You can also refinance your student loans if you’re a parent who took out loans for your child's education. ELFI’s student loans refinance options start at $15,000 – so you also have to be refinancing at least that amount.

Application Process

Applying to refinance your student loan with ELFI is a relatively simple process. You start by creating a simple profile online where you tell ELFI some information about yourself. ELFI then will ask that you submit some other information about your financial situation and your student loans in order to see if it can pre-approve you.

If you’re pre-approved via a soft credit pull, ELFI will estimate the rates and terms it can offer you and you have to send some documents to finalize the loan. Once all your documents have been verified, ELFI will do a hard credit pull and send you a firm loan offer with an interest rate and term offer. You can then choose between fixed or variable interest rates, sign the loan agreement electronically, and set up auto-payments in order to begin repaying the loan. Repayments start 30 to 45 days after disbursement.

To read our full ELFI review, click here.

earnest student loan refinancing

Fixed Rates

3.89% - 6.32%

Variable Rates

2.47% - 5.87%

Terms (Years)

5 - 20


Min. Loan Balance

$5,000

Max. Loan Balance

None

Fees

None

Earnest Full Review

Earnest is one of the best student loan consolidation companies available today. Earnest has competitive product offerings, unique benefits, and a proprietary pricing model. The end result is that more people are getting approved for refinancing and creditworthy individuals are saving tons of money.

Rates & Terms

Variable rates start at 2.47% and fixed rates start at 3.89% for very qualified individuals using auto-pay! These are very competitive rates and are very close to being the lowest student loan refinance rates offered today. Customers of the company save a whopping $17,936 through refinancing! That is the highest average savings that we’ve seen across all of the lenders in the market.

Earnest has a very quick and efficient application process. In just about 2 minutes, you can get an estimated rate and a calculation of your total potential savings. Once approved, you can choose any term length from 5-20 years. Both federal and private loans are eligible for refinancing through the company. And even, parents are eligible to refinance student loans from their child’s education.

Benefits

Earnest allows you to set your exact monthly payment and even change your payment amount at anytime. Earnest is the only lender who allows customers to elect bi-weekly payments and even skip a payment! And as crazy as this sounds, Earnest gives its customers the ability to switch between fixed and variable rates at anytime for no charge. There isn’t any other student loan company on the planet that gives its customers this much flexibility. Earnest offers these benefits to promote repayment efficiency which leads to savings. It is no wonder why Earnest has gained so much traction over the last couple years.

Earnest also, like most student loan consolidation companies, charges no application, origination, or prepayment fees. On the other hand, Earnest does not ship its customers off to a new servicer like most companies. If you refinance through Earnest, you will make all payments to them, and deal with them for customer service, through the rest of your loan's life. Speaking of customer service, Earnest's Client Happiness team is working 24/7 to help you out. 

Eligibility Requirements

If you’ve tried to qualify for refinancing in the past, but you haven’t qualified, you should look to Earnest as a viable option. Earnest has a unique underwriting model that accounts for more than just credit score. Earnest uses a proprietary model based in data science. Earnest uses hundreds of different data points from your financial history to underwrite your loan. Just because you have a low credit score, you may still be able to qualify at Earnest.

To qualify for Earnest, the company suggest that you should be:

  • Employed
  • Have enough savings to cover a couple months of normal expenses
  • Carry positive bank balances
  • Have a history of making on-time payments
  • Have enough income to support comfortable monthly payments

Based off customer feedback, we believe that Earnest has one of the fastest turnaround times in the industry. You can expect the entire consolidation process to be completed in about 4 to 6 weeks.

Application Process

You can apply for refinancing with Earnest all on the company's website. To apply, you will need information about your current loans, your educational and employment history, information to access financial accounts, and some basic personal information.

Though the application process is fairly more extensive than other companies, Earnest claims that is able to better analyze their customer's chance of repayment, leading to a better situation for both the borrower and lender. 

To read our full review of Earnest click here.

laurel road refinancing

Fixed Rates

3.37% - 7.02%

Variable Rates

2.80% - 5.90%

Terms (Years)

5, 7, 10, 15, 20


Min. Loan Balance

$5,000

Max. Loan Balance

None

Fees

None

Laurel Road Full Review

Darien Rowayton Bank, or DRB, is one of the oldest and most experienced student loan refinancing companies in the industry. Recently, in 2018, the company renamed its online lending division to Laurel Road. The company as a whole has long been praised for offering the lowest rates on approved application.

Rates & Terms

Laurel Road offers refinancing rates as low as 2.80% for variable loans, and 3.37% for fixed rate loans. Laurel Road allows borrowers to refinance both federal and private debt. Laurel Road offers term lengths of 5, 7, 10, 15, and 20 years in both fixed and variable rates.

Eligibility Requirements

Getting approved at Laurel Road is difficult. To qualify, you must have excellent income and credit. We suggest only applying to Laurel Road if you are currently making over $75,000 per year and have a credit score above 750.

If you do qualify, expect the refinancing process to take a little bit longer. On average, we’ve heard that Laurel Road’s process takes about 8 weeks from end to end. 

To read our full review of Laurel Road click here.

purefy student loan refinance

Fixed Rates

3.50% - 7.28%

Variable Rates

3.48% - 7.26%

Terms (Years)

5, 8, 10, 15


Min. Loan Balance

$7,500

Max. Loan Balance

$300,000

Fees

None

Purefy Full Review

CordiaGrad is one of the newest companies to enter the student loan refinancing market. CordiaGrad was launched in 2015 by the Bank of Virginia.

Rates & Terms

Variable rates start at 3.00% and fixed rates start at 3.50%. These rates include a 0.50% discount offered for making auto-pay student loan payments from an eligible CordiaGrad Checking Account. CordiaGrad is unique by the fact that it only offers 5 year, 8 year, and 12 year term lengths. Parents are eligible for refinancing too.

Eligibility Requirements

To be eligible for CordiaGrad, you must:

  • Be a US Citizen and at least 23 years of age
  • Have a strong credit history
  • Have at least $20,000 worth of debt to consolidate
  • Have a minimum of 2 years of employment
  • Have an annual income of at least $42,000 (or $25,000 with a cosigner)

Application Process

The application is pretty easy to use. During the application process you will be asked to provide copies of your driver’s license, pay stubs, educational transcripts, and copies of your current account statements from your servicing company.


Student Loan Refinancing & Consolidation Information

Can you refinance student loans? Can you consolidate student loans? How does consolidation and refinancing work? How can you consolidate student loans? How can you refinance student loans?

Great questions! This section will be dedicated to educating you about everything you need to know about refinancing your student loans.

How Refinancing & Consolidation Works

First off, both federal and private student loans can be refinanced and consolidated together with all of the best refinancing lenders. These include Stafford, Perkins, PLUS loans, and virtually all types of student debt. When you refinance and consolidate, you are effectively paying off your old debt, and creating one new loan. When talking about refinance and consolidating with a private companies, there is no real difference between consolidating federal and/or private student loans  - they end up with the same result - a new private student loan. 

During the consolidation process, your new lender will pay off your old debt and issue you one new loan. You can choose which loans you would like to consolidate…it isn’t an all-or-none deal. For example, you may choose to consolidate only your private loans but not your federal. Alternatively, you may choose to refinance only your high-interest debt.

Steps to Refinancing & Consolidating Your Student Loans:

  1. Do your research to see if it is for you
  2. Compare options from top companies​
  3. Choose a lender to apply to
  4. Gather necessary documents & apply
  5. If approved, sign promissory note
  6. Start repayment on new loan

Cosigners

If a borrower decides to refinance in hopes of a lower rate, but has not been out of school for very long, they will may still require a cosigner for approval if they do not have a solid credit history yet. Borrowers can qualify for refinancing on their own, but may choose to have cosigners in order to get more favorable interest rates.

A cosigner can be any creditworthy adult, but usually it is a parent, other relative, or spouse who is comfortable with this obligation. A cosigner is obligated on the loan until released or until the borrower pays off the loan completely. For this reason, it’s important that any potential cosigner is aware that if the borrower stops making payments, the default will go onto the cosigner’s credit report and they can even be sued personally for the debt. Being a cosigner is a long-term commitment that should be fully understood before signing on the loan.

You should look for the following in a cosigner:

  • Someone you have a close relationship with & can contact easily (such as parent or guardian)
  • ​Must have a good credit score
  • Must have solid history of making payments on debts (student loans, credit cards, personal loans, etc.)
  • Someone who can make payments on your loan, if necessary

Downsides of Student Loan Refinancing to Consider

Unlike the typical private loan, federal loans come with guaranteed benefits such as deferment while the borrower is in school, forbearance during times of economic hardship, and in some cases a right to put the loan on an income-driven repayment plan with a capped monthly payment.

If a borrower chooses to refinance federal loans with a private lender, they will lose all federal benefits and gain only those offered by their lender on that particular loan. Refinancing these loans privately, though, can often save borrowers thousands of dollars a year, and many borrowers are willing to give up the federal benefits that they may have never utilized anyway.

After balancing the loss of federal benefits against the savings of refinancing, many borrowers still choose to refinance their federal loans. Each borrower is in a unique situation. If you don’t plan on needing any of the Department of Education’s offered benefits, then the risks of refinance are minimal.

All About Interest Rates

For those who are ready to refinance their student loans, it’s helpful to know how interest rates are determined before jumping head first into the process. This helps you find the lowest student loan refinance and consolidation interest rates, too. Rates in general will tend to rise and fall in response to financial market conditions.

Many private student loan companies have their variable interest rates tied to the prime rate of a financial index, such as the LIBOR, which is a measure of market conditions. Even their fixed rate offerings will change according to that prime rate, although then the rate is locked for the life of the loan. And of course, the rate offered to individual borrowers will depend upon additional factors specific to them and the loan products they select.

Fixed vs. Variable Interest Rates

Refinances come in two general types, fixed rate and variable rate. The borrower must decide which of the two types better fits their needs. Fixed rate loans keep their set interest rate throughout the term of the loan, while variable interest rates, as mentioned, are capable of rising and falling according to the prime rate used by the lender.

At first glance, then, a fixed rate seems like a better option – and many borrowers do decide that it is. However, the catch is that variable interest rates are generally lower when first offered to the borrower. And if the market conditions are good, then they can save the borrower money over the life of the loan. If the market conditions are not good, then it’s possible for a borrower’s monthly payment to skyrocket from one monthly payment to the next.

How Term Length Impacts Interest Rates

Lenders care a lot about the length of time they lend a borrower money, because it is safer and easier to predict short-term market and economy conditions when deciding what interest rate they must lend at to make a profit. This is why short-term loans generally have lower rates.

On the other hand, when making long-term loans the lender must attempt to set an interest rate that accounts for factors such as future inflation and unknown economic conditions. If they make an incorrect prediction and interest rates shoot up higher than the rate they have loaned money at, then they end up losing money on the loan overall.