College is an expensive prospect for most students, who often spend years paying off their education. Traditional finance options, including federal loans, private loans, scholarships and grants, can bridge the gap between available funds and the hefty tuition, book and cost-of-living fees, but they usually come at a high price. Long-term interest rates and unfavorable borrowing conditions can cripple sincere efforts to get out of debt once school is over and done with.
Old-school lending agencies fail to accommodate student borrowers, who often represent a greater risk than banks are willing to tolerate. However, there is a group of lending agencies whose mission is to meet the needs of diverse borrowers. Credit unions and community banks can offer attractive lending terms to people looking to refinance student loans or finance a new educational venture. LendKey is a cloud-based platform that connects borrowers with lending institutions that meet their financial needs.
LendKey reviews are published on its website. For the most part, they are positive, with users praising the platform’s ease of use and the quality of customer service. Some customers report that the length of time for a LendKey loan approval was longer than anticipated. However, others say they ultimately received a better lending rate than that of their existing loan and were pleased with the service overall.
However, confusion about the process and the identity of LendKey partners did lead to some negative reviews. People pointed to the site’s lack of detailed information about requirements to fill out a loan application. One user was confused about the respective roles of LendKey, Dwolla and Veridian but was required to open an account with each entity. As is explained elsewhere on the LendKey site, in order to get a discount on the interest rate, borrowers may have to open an account with the lending institution and have payments directly withdrawn from that account.
LendKey is a Lending-as-a-Service, cloud-based platform, according to a write-up in Bloomberg. It may be misleading to think of LendKey as a lending agency, though, as its primary focus is to connect borrowers with lenders through its platform.
LendKey services include private student loans that fund graduate and undergraduate education and refinancing of existing student loans. Although LendKey may not be a direct-lending agency, a 2017 article in Diginomica claims the platform may have a 10-percent stake in some loans, giving it a direct role in the process.
In a 2015 press release, LendKey noted that it provides a means for financial institutions to promote their products without creating an in-house online lending platform. From LendKey’s perspective, keeping lending agencies happy may be as important as serving borrowers. For example, in 2014, LendKey announced a partnership with Western Independent Bankers (WIB), a trade association of 150 community banks. WIB was to offer the LendKey platform to its entire network of banks.
In addition to student loan financing, LendKey furnishes home improvement loans and green loans to New Jersey residents who want to make their homes more energy-efficient.
LendKey has two primary services for student borrowers: student loan refinancing and private loans. Through the online platform, users can search different options for term, monthly payment amount and interest rate. Customers can use the LendKey phone number to contact an agent to assist with the process, or they can use email to chat with a representative.
LendKey connects borrowers with lenders for new student loans. Using the platform offers many potential benefits, including cosigner release to borrowers who meet several conditions during the repayment period of the loan. There is usually no origination fee for loans negotiated through a LendKey student loan.
Although LendKey is not a student loan refund program, refinancing can add up to substantial savings. The site promotes savings as high as $10,000, which, to some, can feel like receiving a refund check for college education.
According to its website, LendKey refinance rates can be as low as 2.22 percent (variable) or 3.25 percent (fixed). For new loans, the rate is as low as 3.28 percent. The low rate includes a discount for agreeing to the AutoPay option. This option mandates that loan payments be drawn from an account held at the lending institution. Because of that requirement, LendKey borrowers may have to apply for a loan as well as open an account at the credit union or community bank that is lending the money. Interest rates on new loans can drop by one percent under certain conditions – like when 10 percent of the principal is paid and borrowers are in the full repayment period.
LendKey describes its refinancing options as the opportunity to combine several student loans into one. The new loan will have new terms, possibly with a lower monthly payment and interest rate. Student loan refinancing offers the chance to take advantage of an improved credit rating from years of being in the workforce after school. For borrowers, it tends to be cheaper and easier in the long run than sticking with original federal and private loans.
Some financial commentators caution against refinancing federal loans without understanding the full consequences of that choice. Federal student loans have built-in protections, such as income-based repayment plans and forbearance, that no longer apply once a loan is refinanced. Refinancing may also result in a lower monthly rate but longer repayment term, which may cost more over time.
A consolidation loan, unlike refinancing, does not offer a drop in interest rate, balance or monthly payments. It just combines multiple loans into one loan. After consolidation, it may be possible to refinance the loan, but that is a separate process. According to the LendKey blog, the purpose of consolidating on its own is largely to reduce the hassle of dealing with separate loans, perhaps taken out for each year of school. It is possible to consolidate federal student loans and retain the benefits that come with federal programs like loan forgiveness and income-based repayment. These are options that are not possible with refinancing.
LendKey could be a great platform for student borrowers who want to explore their financing options for old debt or a new educational endeavor. Before agreeing to LendKey loans or any new financing arrangement, it’s important to understand the benefits and drawbacks of sticking with your existing lenders and to know your aggregate loan limits. Using LendKey’s online tools, such as the refinancing calculator, can help you decide whether this new service is right for you.
If you don’t think LendKey is right for you, there are alternative online loan options that can help, including student loan expert SoFi and Upstart, which uses additional factors beyond your credit score to approve you. You can check out our Upstart review to learn more.
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