LendKey Review: What You Need to Know Before Refinancing Student Loans

LendKey, a relative newcomer to the field of student loan refinancing lenders, is a third-party online lending platform that connects clients to banks and credit unions offering loans.

It promises to lower your payments.

It promises to simplify your finances.

Does that grab your attention?

LendKey, founded in 2007 and rebranded in 2013, fancies itself as a matchmaker between clients and small banks or credit unions that normally don’t extend their reach beyond a small community. It wouldn’t make sense for small businesses to increase advertising or offer online applications, but LendKey takes care of that process, seemingly opening a new world of lending products to clients seeking competitive rates.

It’s an entree for consumer to work with smaller lending institutions (more than 13,000 are under LendKey’s umbrella) instead of big banks, which could be an advantage in some cases.

How does LendKey work?

Think of LendKey as a one-stop shopping experience in the confusing swirl of potential lenders. You apply for the loans through LendKey, which will match you with the appropriate banks or credit unions to get you a loan.

LendKey is NOT a lender. That is important to understand. After choosing your loan, you move forward with the bank or credit union you chose. LendKey doesn’t underwrite or fund the loan.

Borrowers will undergo a hard credit inquiry as part of the application process, but that’s typical. LendKey, which offers its service free, builds its appeal around presenting multiple offers with different options for you to compare.

Loan approvals are based on your location, degree, type of loan, loan amounts, proof of your income and credit score.

The application process is standard for the online lending businesses. In order to check available rates in your area, you must provide your name, address, annual income, school and degree type and loan amount. After submitting your application, it should only take a few minutes to begin receiving offers.

From that point, you review the offers, do some comparison shopping and look for a loan that fits your needs.

When you determine a good lender, more information can be provided through the LendKey interface. Generally, the lender will respond with a conditional offer. That lets you know what’s needed to approve the loan.

The consolidation of multiple student loans into one loan should eliminate confusion (and maybe late payments) by making your finances easier to monitor. As always, it pays to consider all of your options, but LendKey provides ample opportunity to do so.

When is refinancing with a company like LendKey a bad idea?

If you have federal student debt, LendKey might not be your best option. The government provides options, such as a variety of repayment and forgiveness plans, longer repayment periods, income-based repayment plans and some plans that forgive your balance after you meet certain criteria. By refinancing with LendKey, all of those options would be eliminated.

Depending on your need for detail, LendKey’s streamlined service might not be your best bet, either. While providing a quick variety of options, LendKey doesn’t offer information on the banks and credit unions, such as their reputation or any fine print that is part of the loan. That could mean more legwork — again, depending on your need for detail.

It’s always a good idea to weigh benefits over the short term and long term. In other words, don’t just focus on monthly savings. How much is being paid out over the life of the loan?

LendKey’s network of 13,000-plus institutions is considerable, but many of them aren’t eligible because you are often required to live in a certain area. It’s also possible that there are better offers available from larger banks, so it’s wise to shop around with a variety of national institutions and online lenders.

How does Lendkey compare to other programs?

SoFi

It offers loan programs similar to those from LendKey and could have slightly lower interest rates. Borrowers are provided the funds from alumni and individual investors.

Earnest

It focuses on your savings pattern, number of investments and job history (instead of the typical credit score and income) to determine your ability to consolidate student loans. It offers loans as low as $5,000.

CommonBond

It offers programs for borrowers who experience hardship after taking a loan and prides itself on its financial education programs.

What are the requirements to qualify? Credit score? Minimum debt?

LendKey requires a minimum credit score of 660 (although the typical credit score of approved borrowers or co-signers is 757). You must have an income of at least $24,000 ($12,000 with a co-signer), but approved borrowers average $63,000 per year. LendKey’s maximum debt-to-income ratio is 43%.

What do repayment terms look like? Interest rates?

LendKey offers loan terms of five, seven, 10, 15 and 20 years. Interest rates range from 5.13% to 8.97% fixed and 2.57% to 8.44% variable (with an autopay discount of 0.25%). For undergraduate degrees, loans are available from $7,500 to $125,000 and up to $250,000 for graduate degrees (slightly boosting to $300,000 for medical, dental or veterinary degrees).

Who is a good candidate for a LendKey refinance?

Student-loan refinancing is always a good possibility if your income or credit situation has improved. Wading into the refinancing world can be confusing, but LendKey stands as an excellent option for busy professionals who don’t have the time to do exhaustive research. In short order, LendKey can present a laundry list of potential loans. When the typical soft credit inquiry is launched — which doesn’t affect your credit score — you can run the numbers and see if a refinance will be beneficial.

Instead of applying with lenders one at a time, you’ll be matched with several lenders in the LendKey network. Another plus: There’s no origination fee with lenders in the LendKey network. That alone could save you thousands of dollars.

When is refinancing with a company like LendKey a bad idea?

If you have federal student debt, LendKey might not be your best option. The government provides options, such as a variety of repayment and forgiveness plans, longer repayment periods, income-based repayment plans and some plans that forgive your balance after you meet certain criteria. By refinancing with LendKey, all of those options would be eliminated.

Depending on your need for detail, LendKey’s streamlined service might not be your best bet, either. While providing a quick variety of options, LendKey doesn’t offer information on the banks and credit unions, such as their reputation or any fine print that is part of the loan. That could mean more legwork — again, depending on your need for detail.

It’s always a good idea to weigh benefits over the short term and long term. In other words, don’t just focus on monthly savings. How much is being paid out over the life of the loan?

LendKey’s network of 13,000-plus institutions is considerable, but many of them aren’t eligible because you are often required to live in a certain area. It’s also possible that there are better offers available from larger banks, so it’s wise to shop around with a variety of national institutions and online lenders.