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Do you have student loan debt? What is the interest rate? Chances are it could be lower if you refinance. We’ll review LendKey and see if they can save you money.
It can feel like you’ll never pay off your student loans but one way to really tackle it is to lower your interest rate by refinancing. A lower interest rate can speed up the process of paying off your student loans and save you money, win-win!
What is LendKey?
LendKey is not a traditional student loan refinancing company. LendKey does not make the loans directly. Instead, they bring together small community banks, credit unions, and borrowers. LendKey users can see the loan and refinancing terms for more than 300 lenders.
It’s All About The Interest
Interest is something to be avoided or at least minimized whenever possible. If you’ve ever struggled with credit card debt, you know why. Interest is the cost to borrow money.
The higher your rate of interest, the more expensive your loan. That’s why it can be hard to pay off your credit card debt because if you carry a balance, the interest just keeps accumulating.
We have interest on our student loans too. It’s not as high as the interest on a credit card, but odds are, you could be paying less then you are. The way to lower the interest rate on your student loan is to refinance. And that’s where LendKey and their partners come in.
You Better Shop Around
If you had to spend several thousand dollars on a purchase, a new car, or furniture for your home, would you just choose the first thing you saw? Of course not. You would shop around, compare prices, look for the best deal. When you are looking to refinance your student loans, it shouldn’t be any different.
Many of us took out our first student loans when we were still teenagers. We didn’t know what we were doing, and if our parents didn’t either, we just accepted the first loan we found. We’re a little (maybe a lot) older now and a little savvier when it comes to spending our money.
We want choices and LendKey gives us plenty of them. LendKey works with so many community banks and credit unions; it’s almost like Amazon for student loan refinancing. You can browse dozens of different student loan refinancing offers and choose the one that works best for you.
How Refinancing Works
When you refinance you take out a new loan in order to pay back the old one. The benefit is not only that you can get a new, lower interest rates but you also may be able to lower your monthly payments, shorten the length of the loan, change the terms of the loan, and simplify the payments.
The new lender will pay the previous one, and you start paying your monthly payments to the new lender.
What LendKey Does
LendKey doesn’t loan you the money, but they handle most of the moving parts that borrowers see. You can refinance both types of student loans through LendKey, federal and private. Some of the partners who work with LendKey allow both types of loans to be combined into one monthly payment.
There are a few requirements to refinance through LendKey and one of their partners. You can refinance between $5,000-$250,000 of student loan debt, you need a credit score of 660 (Fair) or higher, and have an income of $24,000 or more. You must have graduated with an undergraduate or graduate degree.
Their lending partners offer 5, 7, 10, 15, and 20-year terms at both variable and fixed APR’s. Variable rates start as low as just 2.67% and fixed at just 3.25%. There is no application fee or loan origination fee, and you won’t be penalized for making early payments.
Even though LendKey is not the lender, they do service the loans. You will make all transactions through their site, and their customer service team will handle any questions you may have.
Not Just a Number
Why does LendKey partner with community banks and credit unions rather than traditional banks? Because they’re better than traditional banks. Working with these small lenders is a very different experience to working with a big bank.
A community bank is owned and operated locally. There isn’t some bank president sitting in New York City making decisions for all of the branches.
Community banks are invested in their towns and in the people who live in them. Those people are their customers, and if their customers are doing well, the bank is doing well too.
A credit union is run as a not for profit business; the owners are the members of the bank, the customers, and not stockholders.
Because both these types of entities have a vested interest in the people who borrow money from them doing well, they work closely with their customers. If your credit union helps you refinance your student loan and pay it off early, you might take those monthly payments and decide to put them toward a house. When you need a mortgage, you go to your credit union. It’s beneficial for you and for them.
While community banks and credit unions offer the same things typical banks do like checking and savings accounts, debit and credit cards, bill paying, and loans, they offer better, more personal customer service and often have better interest rates on checking and savings accounts and on loans.
Even though you will deal with LendKey as the servicer for your loan, you are still a customer of the community bank or credit union who holds the loan and are therefore able to use any of the other services offered.
LendKey’s partners do have some restrictions on whom they can work with. In the case of a community bank, you have to live, well, in the community. Credit unions are open to particular “fields of membership.” You can join certain credit unions based on things like your field of work, geographical area or membership in something like a union or alumni association.
Choose Your Terms
When you see all of the refinancing options you are offered, you will see a variety of not only interest rates but repayment terms as well. If all you remember about taking out your initial student loans was signing the forms, this can all seem a little confusing.
LendKey partners offer both fixed and variable rate loans.
A variable rate loan has an interest rate that can fluctuate based on current interest rates. Because rates have been low, a variable rate loan can look very attractive. It is a risk though; interest rates could go up and bring your monthly payment up with them.
If you are in a position to pay your entire loan off quickly, a variable rate loan may be worth the gamble.
If you are not a gambler or even with a reduction in interest you know you would not be able to pay your loan off in full quickly; then a fixed rate loan is the answer.
The shorter the loan term you decide on, the less you will pay in interest over time because you pay off the loan more quickly than someone who stretches the loan out for more years. A shorter term though means that the monthly payments will be higher.
Because LendKey doesn’t penalize borrowers for paying off their loans early, if you aren’t making a lot of money now but are on a career track to make more in the near future, you could have the best of both worlds. Choose a longer-term loan now, so you’re monthly payments are low. When you start earning more, pay more than your minimum monthly payment and pay the loan off before the term ends and you’ll save money on the interest as well.
Let’s Get Started
Ready to save some money? Great, LendKey makes it easy to get started and only takes about fifteen minutes. Remember, you’ll do everything through the LendKey site.
You’ll provide some information about your income and the loans you currently have including the total remaining balances and what type of loan it is, federal or private.
LendKey will use that information to compile some preliminary offers. If you continue on, the process will require a soft credit check which does not impact your credit score. Based on the credit check, you will see the refinancing offers you are eligible for.
Next, you will select an offer. At this point, you will create an account with LendKey, and they will require the information needed and your permission to run a hard credit check, like your Social Security number and date of birth.
A hard credit check does impact your credit score but not significantly.
You will submit the documentation the lender requires through LendKey, things like pay stubs and bank statements and information from your current student loan lender verifying how much of the loan is still outstanding and how good or bad your on-time payments have been.
You may also need to provide proof of address if the lender has residency requirements. LendKey takes care of sending all of this to the lender and will let you know if anything more is required.
But Wait, There’s More!
LendKey is not just a place to go to find a better rate on your current student loan. They also match borrowers with community banks and credit unions for new student loans. You can use LendKey to check your eligibility and view your offers from their partners.
Choose an option and upload your verifying documents through the portal. Everything will be reviewed, and LendKey will notify you when your loan has been approved. Rates start at 4.21% for variable rate loans and 5.36% for fixed-rate loans.
Do you have some home renovations you want to do? LendKey can help you there too. They offer home improvement loans through their community bank and credit union partners as well.
A great way to save money, especially over the long run is to increase the energy efficiency of your home. LendKey and their partners have you covered.
They have two programs, one offering 0% loans for up to $10,000 with a seven-year maximum term for those eligible and another offering loans at 4.99% interest up to $15,000 for a ten-year maximum term.
LendKey can save you money on interest and that is a big pro. If you think you currently have a pretty good interest rate, even a small change can save you a lot of money.
If you have $20,000 in student loans at an interest rate of 6% and a term of 15 years and were able to drop that rate down just two points, to 4%, you would save $3,750 over the life of your loan.
It doesn’t cost anything to shop around on LendKey and see if you can get better terms. You can use their calculator here to see how much you will be able to save when you refinance. If you’re still reluctant to refinance, this might push you over the hump. LendKey comes with a 30-day money back guarantee!
If for any reason you are unhappy with your new refinanced loan, you can cancel it within 30 days of disbursement without paying any penalty or interest. You can see refinancing with LendKey really is a no-risk proposition!
When you refinance through LendKey, you become eligible for some pretty great perks too. Once you have paid off 10% of your new loan, your interest rate will be lowered another 1%!
If you required a co-signor to refinance and they were reluctant, LendKey has some good news for them. Once the borrower has made 12 payments on time and in full consecutively, the cosigner is released from responsibility. The borrower though is required to submit updated financial documents and allow a hard credit check before this step is approved.
Even though your loan through LendKey is considered a new loan, they don’t charge an origination fee. That fee is typically between 1-6% of the amount you are borrowing so it could be many hundreds or even a few thousand dollars so this is a big savings.
When you refinance federal student loans, you lose certain protections like pay as you earn and loan forgiveness programs. That said, LendKey does offer some protections of its own.
In the event of a job loss, you can pause your loans for as long as six months, and you can do that three times, for a total of 18 months which is the longest loan deferment currently in the student loan refinancing industry.
If you are struggling with your monthly payments, you can just pay the interest and not the principle for up to four years though this option is only open to those who have 15-year term loans.
Refinancing your student loans is a great way to save money, always our goal here at Frugal For Less and there are a lot of companies and banks you could use to do that.
But LendKey stands apart. They have been widely lauded for their customer service, they offer some great perks like the 1% reduction in your interest rate after paying off 10% of your loan, and they offer some similar protections to the ones you forfeit when you refinance federal loans.
We also like the fact that LendKey is bringing borrowers to community banks and credit unions. Many people are unaware that they have any alternatives to the big banks where everyone is just a number that either meets the bank’s criteria or does not.
These smaller institutions are more personal and do take into account more than just the numbers on your paycheck and credit score. You can build a relationship with these lenders and count on them to help you with things like buying your first home or starting our own business.
Shop around on LendKey and see how much you can save. Remember, they have a 30-day guarantee, so you have nothing to lose but your high-interest rate!