Article Updated 5/24/20 to include $150 signup bonus information and the latest interest rate information.
LendKey is a bit of an oddity in the student loan consolidation and refinancing marketplace. Most lenders fall into one of two groups. Group one would be the startups like SoFi and CommonBond that are newer companies with low interest rates, but they lack a local presence or longstanding reputation. Group two would be established banks and lenders like Wells Fargo or Citizens Bank. These companies have higher interest rates, but borrowers can visit a local office when they have questions or concerns.
LendKey attempts to offer the best of both worlds. Their interest rates are presently among the lowest we have ever seen. However, the low rates don’t come at the expense of customer service and a local branch. Using LendKey, borrowers are matched with a local community bank that provides the loan.
The LendKey approach to refinancing has some major advantages, but there are also a few negatives that should be cause for concern for some borrowers. Due to LendKey’s low interest rates and high customer satisfaction, LendKey checks in at first place is our Student Loan Refinance Company Rankings.
How does LendKey Refinancing work?
The application process is identical to any other lender. Borrowers fill out basic loan information and authorize a credit check. At the end of the process, the borrowers are matched with a local credit union that will ultimately be providing the funds for the loan.
The goal behind this approach is to allow smaller credit unions and local banks to compete on a national scene. By working together, they can reduce advertising costs, which enables them to offer the lowest interest rates on the market. However, because they are local credit unions, acceptance rates tend to be slightly higher than many of the national lenders.
The LendKey Pros
Without question, the big advantage to LendKey is the interest rates that start at 2.70% and the more forgiving underwriting criteria. The 2.70% is among the lowest but not quite the best advertised price on the market. The fixed-rate loans with LendKey start at a similarly impressive 3.39%.
As with any reputable lender, LendKey offers no origination fees with their loans, nor is there any prepayment penalty.
LendKey also advertises an interest-only repayment option for the first four years of the loan. While it sounds nice, it is something we likely wouldn’t recommend for most circumstances. That being said, if you are a resident physician or someone who will have a relatively low salary before an expected major hike, it could be a nice route.
Finally, LendKey is currently offering a $150 bonus to new customers. We don’t think $150 is really enough to tip the scales one way or another when it comes to finding the best lenders, but it is definitely a nice perk.
A Warning About LendKey and Others…
LendKey consolidates private loans with federal government loans. Going this route makes sense in some circumstances, but in others, it could be a huge mistake. Because there is no way to “undo” a student loan consolidation, it is essential the borrowers know whether or not combining their federal and private loans is a good idea.
Borrowers who are worried about a possible job loss or income reduction in the future would be wise not to refinance their federal loans. Federal loans come with borrower protections that no private lender can match.
Switching from one private lender to another does not carry the same risk. In fact, borrowers with private loans can utilize a refinance to lock in lower interest rates and lower monthly payments. For this reason, it is often advisable to just refinance private loans.
Should I Refinance with LendKey?
If you are shopping for student loans, LendKey is a company that deserves some serious consideration. With the economy in chaos, now might be the best time to consolidate your loans. Ultimately, whether or not LendKey is a good option will depend almost entirely upon interest rates. Click here to check rates directly with LendKey.