Article Updated 11/6/17 to include the latest available interest rate information.
SoFi and LendKey are both premium student loan refinancing and consolidation companies. At present they are ranked first and second out of 18 lenders in our student loan refinance rankings. How is a borrower to pick the best lender?
The LendKey Edge
LendKey’s edge comes from the fact that they work directly with local banks and credit unions. These smaller local institutions have a desire to create lasting financial relationships with local college graduates. Because many of the credit unions are not-for-profit, they are able to offer lower interest rates than most national lenders.
By working with local lenders, LendKey is also better positioned to evaluate the true value of an income based upon location. $50,000 per year goes much further in Indiana than it does in New York City. These neighborhood banks and credit unions have the best understanding of the local cost of living.
SoFi originally started out as the “premium” student loan refinance company. They had the best rates, but these rates were reserved for people with excellent credit scores and debt-to-income ratios. This left many borrowers with less than perfect credit upset over being rejected. However, for SoFi to grow as a lender, they had to be willing to accept more than just high earners with perfect credit. SoFi has largely accomplished this goal. As a result of the growth of SoFi, borrowers are now much more likely to be approved, and more likely to get a preferable interest.
SoFi has also expanded far beyond student loans. They now offer personal loans, mortgages, and wealth management services. These other financial services can be far more profitable than student loan refinancing. This creates a huge incentive for SoFi to offer low interest rates to establish a relationship with as many borrowers as possible. Even if a borrower has no interest in any of these services, the fact that SoFi offers them gives SoFi a reason to provide quality service in hopes of getting a borrower to sign up for more SoFi financial products.
In our In-Depth Review of SoFi, we also noted that SoFi offered a job placement program for borrowers. The bet that SoFi is making is that they will make more money by investing in their borrowers and helping them find jobs than they would if customers were left to struggle on their own.
SoFi vs LendKey: Loan Terms
Both lenders offer 5, 7, 10, 15, and 20 year loans. Both lenders also offer fixed-rate and variable-rate loans for each length.
SoFi and LendKey get high marks for they fact that they do not charge loan origination fees or access any form of prepayment penalty.
The one term that all borrowers should understand is that both lenders are willing to refinance or consolidate federal government student loans. The advantage to borrowers is that it allows them to lock in lower interest rates. The danger is that federal perks like income driven repayment plans and student loan forgiveness programs are gone forever if they refinance.
Ultimately, from a loan term standpoint, there is very little that separates these two lenders.
SoFi vs. LendKey: Interest Rates
The one term that matters to all borrowers is interest rates.
Both lenders offer rock bottom interest rates, currently starting at 2.47% with LendKey and 2.27% with SoFi for five-year variable-rate loans. The rates are also very close with the two lenders across a number of different loan categories. For borrowers that are interested in fixed-rate loans, SoFi offers better starting rates in the 15 and 20-year categories while LendKey has better rates for shorter duration loans.
The advertised interest rates in all categories are very close with these two lenders. Borrowers looking to find the best deal would be wise to apply with both to find the company that actually offers the lowest interest rate.