Updated August 8, 2017
Most private student loans can’t compete with Federal loans when it comes to interest rates. Private loans are typically more expensive, especially if longer repayment periods are offered. (You’ll pay more in interest over the life of your loan.)
However, LendKey provides a different solution. It’s a marketplace that offers you a chance to browse private student loans offered by credit unions and community banks. These institutions usually have better interest rates than big banks. As another bonus, credit unions offer a more personalized banking experience, and tend to be more lenient when it comes to credit history.
If you’ve had a rough time finding a private student loan lender who will work with you, then you should give LendKey a shot.
How Does LendKey Work?
It’s important to understand that LendKey itself is not a lender. It’s a portal you can use to find a lender. Filling out one application (on LendKey’s website) enables you to view all the private loans you’re eligible for from community banks and credit unions that have partnered with LendKey.
Unfortunately, because there are hundreds of banks listed with LendKey, it’s impossible to say what the specifics of each loan are. On its website, LendKey says variable interest rates start as low as 4.19% APR (with autopay).
You must be a U.S. citizen or permanent resident to apply for a private student loan through LendKey. You must also be pursuing an undergraduate or graduate degree at an eligible school. You can check to see if your school is eligible in the first section of the application.
Be prepared to join a credit union or community bank if you choose to move forward with a loan offered. Most institutions require that you become a member during the application process. This is standard for credit unions and community banks that have specific membership requirements.
The LendKey application process has three steps:
- Check your eligibility: You can fill in preliminary information to see if you’re eligible to apply for a loan.
- Apply for a loan: If you want to move forward with any loan option presented, you can do so in this step. This requires you to fill out personal information such as your Social Security number and identification information.
- Submit documents: LendKey requires you to submit proof of identity (photo ID, such as a Driver’s License), your school transcript, and other documents as needed.
Overall, the application process should take around 15 minutes or less to complete. LendKey will then review the information you’ve provided and give you a decision.
If your credit history isn’t the best (or isn’t very lengthy), you can apply with a cosigner. This gives you a better chance of getting the best interest rates possible on your private student loan. Some lenders affiliated with LendKey may actually require you to apply with a cosigner. Be aware that a hard credit inquiry will be used when you apply.
The Fine Print
LendKey claims that there are no origination fees associated with any of the private loans offered by the credit unions or community banks it has partnered with. That doesn’t mean there aren’t any fees; late fees may still apply.
Additionally, a search for credit unions that use the LendKey application revealed one that does charge an origination fee. On The Great Lakes Credit Union page, a 2.5% fee is listed. It states there is an “upfront fee” which “is charged one time at loan disbursement.” As you can see on the page, “Powered by LendKey” is at the bottom.
We strongly recommend reading through the fine print of the organization you choose should you find a loan through LendKey. Don’t be afraid to ask about fees before signing anything.
The disclaimers are also nearly hidden at the bottom of LendKey's site as you need to click on “Some Disclaimers” to review them.
Pros and Cons of LendKey
There are many advantages to applying for a loan through LendKey:
Pro: After paying back 10% of your loan principal, you’ll be eligible for a 1% interest rate reduction. This is only applicable to those who have entered full repayment status (after your grace period has ended).
Pro: You’re also eligible for a 0.25% interest rate deduction if you enroll in automatic payments. Most lenders offer this.
Pro: Most of the lenders that partner with LendKey don’t charge origination fees for private loans.
Pro: If you apply with a cosigner, a release is available after a certain amount of consecutive payments have been made. For most lenders, this period is between 24 to 48 months.
Pro: Most loans offered through LendKey seem to come with a 30-day return if you decide you don’t want to take the money. No fees or interest will be charged.
Pro: The application process is simple. Instead of having to shop around for loans individually, you have one company that will do it for you. This is much more convenient for you and takes less time.
Pro: LendKey has extensive customer service hours. You can call 888-549-9050 Monday through Friday from 9AM – 8PM ET.
There are several disadvantages to LendKey as well:
Con: You’re dealing with a number of different lenders, and it may be difficult to choose the best from a large list. You should do your own research on the banks LendKey matches you with.
Con: There are possible origination fees even though LendKey claims its lenders don’t charge upfront fees. You should call and confirm if you go with a loan that says its origination fee is 0%.
Con: Many of the individual lenders have loan pages that state the only options for repayment are interest-only or a minimum of $25 per month while in school. This means your loans are never in deferment, unlike Federal student loans.
Con: One large negative to consider with any private student loan is the lack of inherent benefits that come with them. Federal student loans give you more options when it comes to repayment plans and flexibility during tough financial times. It’s worth calling and asking if repayment assistance is offered before you go through with any of these loans.
Con: Some institutions may not offer fixed rates. Variable rates may be lower, but they’re subject to change, which can make it difficult to budget for your student loan payment in the future. Fixed rates offer stability as they’re locked in for the life of your loan.
Other Private Student Loan Alternatives
Some states may not have as many private student loan choices as others. If you can’t find a loan that fits your needs, you may have to look elsewhere.
Citizen’s Bank: Variable APRs range from 3.99% to 10.59% for a 10-year term and 4.19% to 10.79% for a 15-year term. Fixed APRs range from 5.99% to 11.24% for a 10-year term and 6.19% to 11.45% for a 15-year term. You can choose to repay your loans on terms of 5, 10, or 15 years, and the maximum amount you can borrow is $90,000.
SunTrust Custom Choice Loan: Fixed APRs range from 4.751% to 11.500% and variable APRs range from 3.12% to 10.18%. A 7 and 10 year repayment term is available, and if you borrow over $5,000, you can choose a 15-year term. The minimum amount required to borrow is $1,001 and the maximum amount is $65,000. SunTrust also offers a 1% reduction on your principal loan balance if you graduate with (at minimum) a Bachelor’s degree.
It’s worth mentioning that you should exhaust your federal loan options before considering private student loans. Fill out the FAFSA and see how much you’re eligible for. Private student loans should only be used to bridge the gap if federal loans aren’t enough to cover your tuition.
LendKey is a great tool to use if you want to see what your local credit unions and community banks can offer you in terms of private student loans. There’s no application fee, but you should double check origination fees on any loan recommended to ensure you’re not left paying extra for a loan.
It’s also a good idea to shop around for private student loans as you want to get the best rates available. As long as you apply to multiple lenders within a 30-day period, the credit bureaus will count those inquiries as one inquiry. There’s no reason not to apply with more than one lender as one could offer you better rates, saving you thousands of dollars over the life of your loan.