Have student loans? Have you realized it may be time to refinance? You know you’re grown up when you are not only willing to undergo this process but also feel a need to do the proper amount of research beforehand.
It’s rather commendable, as anything that revolves around percentages, APRs, and rates is often enough to make most people zone out and drop the ball completely.
But believe it or not, making an informed decision doesn’t have to require you to read through hundreds of hours of lending wikis. Any job worth doing requires a tool, regardless of your experience level. For student loan refinancing, the tool even experts use is LendKey.
Never heard of it? It’s time you did.
What kind of company is LendKey?
First off, let’s talk about what LendKey is not. LendKey is not a lender. Instead, LendKey connects people with a multitude of lending institutions. In a sense, it’s the Travelocity of student loans.
However, LendKey does not connect borrowers with huge chains such as Wells Fargo, Bank of America, or Chase.
Instead, it connects borrowers with smaller chains because it believes that they offer better services overall. These lenders are community-oriented and often not-for-profit credit unions.
What does LendKey do?
LendKey can pull data from over 275 community-based financial institutions with some pretty powerful data analytics engines. It then compares and contrasts them and presents its findings from best to worst to consumers.
This means the average person can look at their options and come to the same conclusion as a professional loan consultant would. The average borrower also saves $191 on their monthly payments with LendKey.
In the company’s own words, they state that they aim to “[match] consumers with community banks and credit unions to create the most transparent, accessible and low-cost borrowing options in online lending.” Online customer satisfaction surveys place them around 4 ½ out of 5 stars, so they are doing a pretty good job of it.
Who is LendKey best for?
LendKey is not just a student loan refinancing company. They can help you find the best private student loan to go to school and even offer home improvement loans.
How do I qualify to use LendKey?
Applicants should aim to have a credit score of at least 660 and have an annual income of at least $24,000. Although none of these things are stated on their website, these standards have been inferred by customers.
Typically, however, borrowers who work with LendKey have a 728 credit score and make around $70,000 a year. But again, this doesn’t mean you’ll be turned down if you don’t have these things.
What are some of LendKey’s specifics?
LendKey offers student loan refinancing for debts ranging from $5,000 to $250,000. The loan terms can vary from five, ten, fifteen, or twenty years. Generally speaking, the shorter the loan term, the higher your monthly payments will be. However, you will benefit from a lower APR, so more of your monthly payment goes towards the actual balance.
With longer loan terms, the reverse is generally true. You’ll have a higher APR, but less of your monthly payment will go towards the principal. On the bright side, your monthly payments will be lower.
Fixed APR rates are usually slightly higher than variable rates. Visit LendKey for the latest rates and terms, as they change quite often. Take a quick look at the pros and cons of each.
What is the difference between a fixed interest rate and a variable interest rate?
As you might expect, having a student loan with a fixed rate means that the rate never changes throughout the life of the loan. A variable-rate may change month to month depending on what the lender is able to offer. Variable interest rate loans are a risk for borrowers because they don’t know what their payments will look like ahead of time.
Interest rates may be high, or they may be low, so there is a certain degree of risk involved. If you can accept that, however, there is the possibility you may save money in the long run, even though some months will be high.
Are all LendKey lenders available to all borrowers?
Some borrowers will have access to certain lenders that other borrowers won’t in certain geographical areas (remember, they connect borrowers with lenders near them).
Why the disparity?
Lots of reasons. Limitations or qualifications can range from anything such as the type of work you do to where you live. They also consider your student loan amount, whether you have served in the military, and of course, your credit history and income level.
However, no matter where you live or work, if you qualified on minimum income and credit score criteria, you will likely see at least 2 to 3 lenders – that’s a minimum no matter where you are. Regardless of what sort of profile you fit in, LendKey will find you the best lenders that want to work with you.
What is the LendKey process?
Once you complete a profile, lenders compete for your business. If and when you choose a student loan, the new loan goes through the bank, NOT LendKey. However, LendKey will handle origination and servicing.
LendKey does not share your information with lenders until you’ve selected the student loan you want. You will never be treated like a “lead,” and your information will not be sent to multiple lenders as other loan comparison sites do.
For most private student loans, borrowers become a customer of the bank but will still manage their loan through LendKey. Moreover, LendKey also handles any questions regarding the new loan — but the bank will, too, if you prefer to go through them.
Why would you want to work with a community bank or credit union?
Though national lending institutions can offer things smaller lenders can not, they fail borrowers on various fronts. For one, local banks and credit unions are, as a whole, much more service-oriented than national chains. Hate calling an 800 number and speaking to a robot for five minutes? Smaller lenders know this and get you in contact with a person as fast as possible.
Don’t think that the interest you would get with a smaller company would be higher than what you would get with a larger one. The numbers simply don’t support this. Smaller lending institutions are often able to offer better rates with lower monthly payments.
Plus, many of them offer borrowers the option to only pay interest for four years if they can’t afford to make payments on both interest and principal. Think of it as an option that allows you time to get back on your feet.
Is it possible to refinance federal and private student loans together through LendKey?
Yes, LendKey connects borrowers with smaller lenders and credit unions, so you will do so through a private lender if you want to refinance both federal and private loans. As with any student loan refinancing option, you’ll lose any loan forgiveness or income-based repayment plans with your federal loan if you choose to refinance.
Is there a difference between consolidating and refinancing?
There is a difference! And it’s actually quite a big one.
When you consolidate your student loans, the only real thing you’re doing is combining all of your student loans into one payment. The total amount owed and the interest will be the same. The only real benefit is that you don’t have to remember to make multiple payments each month. Make one payment and you are done.
Student loan refinancing is a different story. When you refinance, you are consolidating your student loans, but you are getting a new interest rate and a new loan term. On top of all that, you are also apt to get a new monthly payment amount (which is usually lower than what you were paying before, but it is not 100% guaranteed).
Are there penalties for paying off a loan early?
Whereas larger banks often penalize borrowers for paying off a private student loan too early, a community bank or credit union won’t do this through LendKey. If you want to pay off your loan early and move on with your life, you’re free to do so.
Can you cosign a student loan through LendKey?
If your credit and income level are a tad low to meet lender requirements, it is possible to cosign on a student loan. Obviously, you want someone with strong credit, and the co-signer must be willing to have a hard credit check on his or her account.
This isn’t the biggest deal, but if an account has multiple hard credit checks on it, that person’s credit score will lower slightly as a result. Another thing to consider is if you stop making payments for whatever reason on the student loan, your co-signer will become liable for the loan. However, if you make 12 months of successful payments on time, then your co-signer can then be released from the contract.
Obviously, if you’re going to co-sign a student loan with someone, you both need to talk about ‘what-if’ scenarios and know what the plan is should you not be able to make payments. Don’t ruin a lifelong friendship over money.
How do you apply for LendKey student loan refinancing?
Luckily, it doesn’t take long to set up an initial account with LendKey and start looking at quotes from community-based lenders. You may be asked to provide proof of certain statements, such as a pay-stub or scan of your driver’s license. However, that comes later once you have decided to go with a certain lender.
To start off, you’ll need to provide the following information:
- Full name
- Physical address
- Email address
- Phone number (landline or cell)
- Your total yearly income
- Loan amount you are pursuing
- Loan Type
- School Information
Once you submit your information, LendKey begins a soft credit inquiry, which won’t affect your credit. After this, you’ll get lender options in your area and, if you choose, you can filter out results depending on the interest rate and loan term.
If you like a lending option and want to proceed, you can elect to move forward. At this point, a hard inquiry will be conducted. Just remember that too many of these in a short amount of time will affect your credit.
To lower your interest rate even more, you can sign up for automatic payments and lower your rate by 0.25%. If your financial situation is stable and reliable, definitely do this! It will save you money in the long run — which is the reason you’re doing this in the first place, right?
Why is LendKey a smart choice?
- You are supporting a local business. Whenever you support a local business, your community gets stronger as a result.
- The interest rates are often better than large-scale financial lending institutions.
- You’ll get better customer service via LendKey and whatever lender you choose to go with.
- If you co-sign with someone, that person is released from the contract after only one year of on-time payments (sign up for those automatic payments if you can!).
- You are not penalized for paying back the student loan early.
- There are no origination fees to refinance your student loan.
- If you become unemployed and your chosen lender agrees, it’s possible to stop payments for as long as 18 months — this is unusual in the private sector. If you do have to do this, make sure you know what the deal is on interest. Will it continue accruing? If so, when you start making payments again, your payments may be larger than they were before you stopped.