Written By: Louis DeNicola
Many private lenders, including large traditional and small community banks, credit unions and alternative online lenders, offer student loan refinancing. When you refinance your loans, the lender pays off your current balances and issues you a new loan — ideally, you wind up with a lower rate or better terms than you had.
Refinancing can be a helpful, money-saving choice. In addition, if you’re consolidating multiple student loans into one, that strategy can make managing monthly payments easier.
However, if you refinance federal student loans with a private lender, you may lose out on certain federal benefits, so consider the pros and cons carefully. You’ll also want to shop for lenders, as your new loan’s terms, interest rate and other features will vary based on your creditworthiness and your choice of lender.
Gearing up to offer student loan refinancing can be difficult for small community banks and credit unions, while, from your perspective, finding and comparing offerings from regional financial institutions can take a lot of time. LendKey, founded in 2009 after the arrival of the Great Recession, aims to solve both of these problems.
LendKey isn’t a lender. Rather, it’s a cloud-based platform that community banks and credit unions can use to quickly and easily offer student loans and student loan refinancing. You can apply for student loan refinancing through LendKey and compare offers from community banks and credit unions.
The money you borrow comes from the bank or credit union, and each lender may have its own criteria for applicants. However, LendKey services the loans and manages much of the loan application process, ensuring that you only see offers from lenders that operate in your area.
As of Sept. 7 of this year, LendKey had more than 275 financial institution clients. Although they may not all offer student loan refinancing or be available in your area, being able to quickly find and compare offers from a variety of small lenders can be advantageous to borrowers.
|Fixed APR range*||Starting at 3.15% with autopay.|
|Variable APR range*||Starting at 2.90% with autopay. The variable-rate cap depends on the lender and will be listed in the loan disclosure form.|
|Loan terms offered||Five, seven, 10, 15 or 20 years|
|Fees||No origination fees, but you may need to pay a small fee to become a member of a credit union before refinancing your loans with it.
There may be late-payment fees, such as 5% percent of the unpaid amount, and returned check charges, such as $10-$25 per returned check.
|Loan amount||The limits vary depending on the lender.|
|Repayment plans||Interest-only for the first 48 months if you choose a 15- or 20-year repayment term. Or, you can start full interest and principal payments at the outset with any of the repayment terms.|
|Co-signer release||Most lenders let you release a co-signer after making a series, such as 12, 24 or 60, of on-time full principal and interest payments. You also must pass a credit check and meet the lender’s income requirements.|
|Savings opportunities||You can get a 0.25% interest rate discount if you set up automatic debit payments.|
|Additional features||Most of the lenders let you put your loans into forbearance for up to six months at a time, for a total of 18 months over the loan’s lifetime, if you lose your job.|
*As of January 8, 2018
What it takes to qualify:
|Credit score and income||The minimum credit score varies by lender, but is often in the mid-600s, according to a LendKey representative. You must also make at least $24,000 per year.|
|Loan types||Private and federal student loans for associates, undergraduate and graduate degrees.
Parent loans, LSAT, MCAT, GRE and other exam-preparation loans are not eligible.
|School and state eligibility||You must graduate with an associates, undergraduate, graduate or doctorate degree. The eligible-schools list varies by lender.
Refinancing is not available to residents of Maine, Nevada, North Dakota, Rhode Island or West Virginia.
The lenders in LendKey’s network may offer lower interest rates than other student loan refinancing companies. But even though there are many lenders in its network, it’s still important to compare offers from multiple places. Generally, as with so many types of loans, you’ll need higher credit scores to get the premium rates with any student refi lender.
A LendKey representative told us that borrowers with credit scores in the mid-600s should be able to qualify for most refi offers from its network of lenders. You’ll also need a minimum annual income of $24,000, which is in line with other lenders, including Citizens Bank, iHelp Student Loans and EdvestinU.
There are a few features that every LendKey lender offers, such as a 0.25 percent interest rate discount when you use autopay, and no origination fees. Both of these are fairly standard with student loan refinancing, but are still worth noting, especially if you’re comparing offers from other lenders that may not offer a discount or charge an origination fee.
With LendKey, you can also choose from five different loan terms: five, seven, 10, 15 or 20 years, and between a fixed- or variable-rate loan. That’s not an unusual range, but some other lenders may offer fewer loan term options, such as only 10, 15 or 20 years. Some lenders also only offer one interest rate type, although many offer both fixed- and variable-rate loans.
You can’t refinance your student loans through LendKey if you didn’t earn a degree, a requirement that some lenders don’t impose. For example, you can refinance at Citizens Bank without a degree if you make 12 full on-time payments on the loans you wish to refinance and meet its other eligibility criteria, including no longer being enrolled in school.
A few of the features that really stand out are available from most, but not all, lenders in the LendKey network. These include a graduated repayment option, which lets you make interest-only payments for the first four years if you choose a 15- or 20-year repayment term.
While making interest-only payments can lead to higher monthly payments later, it may be a good option if you want to lock-in a low interest rate now (because you think interest rates may rise) but can’t afford a high monthly payment at the moment. You can still make larger payments and pay down the principal during these four years if you want. Student loans don’t have prepayment penalties.
Lengthy loan forbearance. You may be able to delay payments for up to 18 months, in six-month increments, if you lose your job. Other lenders offer similar forbearance options, but generally not for as long. Since your loan will still accrue interest when it’s in forbearance, this could increase your overall cost of borrowing. But it’s still a better option than missing payments, which could hurt your credit and result in you defaulting on the loan.
Advantages of refinancing with LendKey
Easily compare prescreened offers. LendKey lets you check and compare loan offers with a soft credit inquiry, which doesn’t hurt your credit score. You’ll only see offers from eligible lenders based on your address, degree type, loan amount and loan types. The offers may depend on these factors, as well as your income and credit, and they’re contingent on a hard-inquiry credit check and verification of your information.
You can easily sort your loan offers by annual percentage rate (APR), monthly payment or number of payments (the term), and filter the offers by APR, monthly payment, terms and interest rate type.
Most LendKey lenders offer a co-signer release option. If you’re applying for refinancing with a co-signer, you may be able to release the co-signer and take complete responsibility for the debt after as few as 12 consecutive full payments.
Repayment plan options. Some lenders let you choose a four-year interest-only repayment plan if you take out a 15- or 20-year loan.
Lengthy loan forbearance. You may be able to delay payments for up to 18 months, in six-month increments, if you lose your job.
No origination or application fees. It doesn’t cost anything to refinance your loans through LendKey. However, you may need to pay a small fee to become a member of a credit union before refinancing your loans with it. There also may be late-payment fees, such as 5% percent of the unpaid amount, and returned check charges, such as $10-$25 per returned check.
Combined federal and private loans. Some of LendKey’s lenders let you refinance federal and private students loan into a single new loan. While you’ll lose some federal benefits when you do, if you’ve decided the refinancing is right for you, then such consolidation can be helpful.
Disadvantages of refinancing with LendKey
Rates may vary depending on where you live. While LendKey has some of the lowest advertised interest rates, even if you have excellent credit and little debt you might not be able to get the low rate. The advertised rate on LendKey is the lowest possible rate among all of its lenders, and some lenders are only available to residents of specific areas.
Lack of filters when comparing offers. While it’s easy to compare offers during the prescreening, you can only filter the loans based on annual percentage rate, monthly payment, term and type of rate.
Other features may be important to you, such as a graduated repayment plan, 12-month co-signer release, forbearance options or a high loan limit. To compare these, you’ll need to select a loan offer to view the lender and either contact the lender directly or review the loan disclosure form (available on the following “submit your application” page).
Only available in select states. You won’t be eligible for refinancing through LendKey if you’re a resident of Maine, Nevada, North Dakota, Rhode Island or West Virginia.
You can’t refinance parent loans or test-prep loans. Some lenders, such as SoFi, let you combine loans that your parents took out to pay for your education with your student loans. LendKey’s lenders may let you combine your federal and private student loans, but you can’t include parent loans. You also can’t include loans you took out to prepare for a test, such as the LSAT or MCAT.
You must earn your degree to qualify. If you took out a student loan and attended school, but left before earning a degree, you won’t be able to refinance through LendKey.
What customers is LendKey best for?
Comparing offers from a variety of lenders is a good way to ensure that you get the best rate and terms possible. LendKey lets you quickly see offers from community banks and credit unions that you might not otherwise know about or think to check.
Since LendKey’s prescreening process is quick and easy and doesn’t hurt your credit, anyone who’s meets the minimum credit, loan type, degree and residency requirements should at least take it for a spin.
Taking a closer look at the online platform
It’s easy to find and apply for refinancing on the LendKey website. The student loan refinancing home page lists interest rate ranges, has a video and snippets explaining the potential benefits of refinancing with LendKey, and offers informational articles about refinancing student loans.
However, it can be difficult to find specific information about LendKey’s loan terms and eligibility requirements. SimpleTuition had to reach out to a press representative to clarify potentially important information, including where LendKey offers student loan refinancing and whether benefits like a co-signer release are available from all lenders.
Some of these points may not be important to you. LendKey screens out ineligible lenders and if your loan amount is too low or high, or you don’t meet other loan requirements for lenders in your area, you’ll get a screen that says no offers are available.
Still, it would be helpful to have a page that clearly lists general qualification requirements, benefits and other terms.
Those quibbles aside, the online platform is easy to navigate and very responsive. After filling out a simple questionnaire, you typically be able to compare and filter loan offers based on several criteria, including the loan terms and APR. You could apply for refinancing in a few minutes, although it’s best to take your time, compare lenders and read the fine print first.
Reviewing fine print before signing a contract is always important, but it may be especially important when you’re refinancing a student loan with LendKey. While the basic features, such as the interest-rate type, APR and term are easy to see, other features and benefits depend on the lender.
You have to start the lending process through the prescreen, but that doesn’t commit you to refinancing with LendKey. You may want to submit the application information, narrow down your options to the few loan offers that have the lowest APRs (and fit your term and interest rate type preferences) and then review the fine print for those lenders.
An option to filter loan offers based on features, such as the number of consecutive payments you need to make to release a co-signer, would be helpful. Instead, you need to choose a loan offer before you can see which lenders offer these terms, then research the fine print for that lender on your own.
You can find some information, such as the loan’s fees, interest rate cap for variable-rate loans and interest rate reduction terms, near the top of the loan disclosure form, which is available near the bottom of the application submission page.
However, the loan disclosure may not show when and how you can release a co-signer or if a particular lender offers interest-only repayments. You could call the lender or LendKey to find out the specifics.
Alternatively, if you search the lender’s name, “refinancing” and “partner.lendkey.com,” you should find the website for refinancing student loans through the bank or credit union. The page will have the lender’s interest rate ranges, loan features and eligibility requirements.
The loan application process begins when you click the “check your rate” button, which prompts you to choose whether you’re applying for a new loan or want to refinance. (If you’re on the student loan refinancing page, you might not see this popup.)
Fill out the application
To proceed with the application, you’ll have to share:
- Your name, address, email address and phone number
- Your citizenship status
- Your total annual income
- The school you graduated from and the type of degree you earned.
- The estimated total loan amount you want to refinance and the loan type or types
If you don’t think you’ll qualify for refinancing due to your credit, or you want to add a co-signer to see if you’ll get better terms, you’ll also need to include a co-signer’s information.
You don’t need to put in your Social Security number, although you do need to be a U.S. citizen or permanent resident. At this point, your credit will only be checked with a soft credit pull, which doesn’t hurt your score.
Compare loan offers
After submitting your application, you’ll generally see the results within 30 seconds. The number of results you’ll get depends on the information in your application, including where you live and what types of loans you have.
You can narrow down the results by filtering for an APR range, monthly payment range, loan terms or interest rate type, and sort the results by APR, monthly payment or number of payments.
Choose a lender
Once you’ve determined which loan offer is best for you, clicking on “select and continue” will show you which banks or credit unions could refinance your loans with these terms. You can switch between lenders that offer the same loan terms. Or, you can go back to the list of all the offers by clicking “reselect offer.”
Click “confirm” once you’ve decided on the terms and chosen your preferred lender.
Submit an application
The next step is to submit your application and authorize the lender to do a hard credit inquiry, which could ding your credit. You’ll need to enter your Social Security number and date of birth. You’ll also have to create an account, which allows you to log in and submit required documents or check your loan status later.
Review the loan disclosure form before submitting your application. If you might want to release a co-signer, use a graduated repayment plan or put your loans on hold after losing a job, you may want to contact the specific lender to check if it offers these benefits.
Review the conditional loan offer
Once you submit your application, LendKey will review your credit and conditionally approve you for a loan. The terms may be different than the original offer you saw, so be sure to review them before proceeding.
Verify your information
If you want to move forward with the loan offer, you’ll need to verify your information. For example, you could upload copies or pictures of pay stubs to verify your income, a picture of your diploma to show you earned a degree and a picture of a government-issued ID to prove your citizenship status.
Final approval and loan disbursement
LendKey will forward your information to the lender, who will then send back the official loan document for you to sign. Once you do, the lender will pay off the student loans that you’re refinancing and you’ll begin making payments toward the new loan.
These finals steps may take a few weeks. Make sure you continue paying your student loans until the process is complete.
While LendKey makes it easy to compare loan offers from community banks and credit unions, you may also want to consider refinancing with a traditional bank, alternative lender or a community bank or credit union that’s in your area but isn’t part of the LendKey network.
Other lenders may offer you a lower interest rate, more-fitting terms or additional features that you think will be beneficial. For example, SoFi lets you refinance your student loans with a parent’s educational loans. Also, while SoFi has shorter three-month (12-month maximum) unemployment forbearance options than some LendKey lenders, if you lose your job, you’ll get free access to a career counselor who can help you find work.
You may also need to use a different lender to refinance your loans if you don’t qualify because you didn’t earn a degree or don’t live in an eligible state. You could use SimpleTuition to compare student loan refinancing lenders and terms. As with LendKey, some of these lenders will show you refinancing offers based on a soft credit check.