LendKey matches you with a local not-for-profit credit union to consolidate your student loan. The result is low interest rates, but better approval chances.
Article Updated 5/9/18 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 are able to visit a local office when they have questions or concerns.
LendKey attempts to offer the best of both worlds. Their interest rates are presently the lowest we have ever seen, but at the same time, borrowers are matched with a local community bank who actually provides the loan.
The LendKey approach to consolidation has some major advantages, but there are also a few negatives that should be cause for concern for a number of borrowers. Due to LendKey’s low interest rates and and high customer satisfaction, LendKey checks in at third place is our Student Loan Refinance Company Rankings.
How does it 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 allows 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 2.58% and the more forgiving underwriting criteria. The 2.58% is currently the lowest advertised price on the market. Additionally, the fixed-rate loans with LendKey start at 3.15%, which is the second best on the market. With fixed-rate loans so close to the variable-rate loans, many borrowers would be wise to lock in a low fixed-rate loan for the length of their repayment.
LendKey offers 5, 7, 10, 15 and 20 year loans, and each repayment length comes in either the fixed-rate or variable-rate variety. LendKey seems to excel in the 5, 7 and 10 year lengths, and while their longer duration loans are still competitive, several lenders offer better rates in these categories. LendKey will refinance student debt as small as $5,000 while the maximum amount that can be refinanced is $300,000.
As with any reputable lender, LendKey offers no origination fess 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.
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.
The Bottom Line
If you are shopping for student loans, LendKey is a company that deserves some serious consideration. With interest rates supposedly on their way up, now might be the best time to consolidate your loans. Ultimately, whether or not LendKey is a good option will depend almost entirely upon the interest rate you are to qualify for.