Student loan refinancing can be a great way to reduce your interest rate on private and federal student loans. When you take out a refinance loan, you can consolidate some or all of your existing debt by using the new loan to pay back what you’ve borrowed. Your new loan should ideally have a lower interest rate than your current loan(s) so you can save money.
Note that, if you refinance federal student loans, you’ll no longer be eligible for federal benefits such as access to income-driven repayment plans, deferment and forbearance protections, and student loan forgiveness.
SoFi and LendKey are two lenders you could use to refinance student loans.
SoFi is a big player in the student loan refinance marketplace and offers the opportunity to get a new loan at a competitive rate.
LendKey is also a popular option, but it works differently because it doesn’t refinance your loans itself. LendKey connects you to its network of community banks and credit unions to help you find the best deal from among multiple financial institutions.
There are pros and cons to both SoFi and LendKey, and this guide will help you decide which of the two loan refinancing services is right for you.
In this comparison:
SoFi vs. LendKey Comparison
|Fixed APR||3.89% – 8.07%||5.10% – 8.93%|
|Variable APR||2.49% – 7.11%||2.68% – 8.96%|
|Loan Terms||5, 7, 10, 15, 20 years||5, 7, 10, 15, 20 years|
|Loan Amounts||$5,000 up to your total outstanding loan balance||$5,000 – $300,000|
SoFi is an online-only financial institution. It has lower operating costs thanks to its digital-only status, which means it can pass savings on to customers.
It’s also focused on meeting the needs of members by looking beyond traditional metrics lenders consider when deciding whether to approve a loan. SoFi considers not just income and credit scores, but also other factors including education, career, and estimated cash flow. Its unique underwriting process makes loan approval easier so you can get your student debt under control using a refinance loan with favorable terms.
SoFi has more than half a million members and offers not only student loan refinancing but also mortgages, personal loans, banking, investing, and term life insurance.
Terms, Rates, Fees, and Other Important Details
SoFi offers student refinance loans with repayment periods ranging from 5 to 20 years.
Interest rates vary based on your loan term, whether you opt for a fixed or variable rate loan, and whether you’re seen as a risky or safe borrower.
The APR for a fixed rate refinance loan with a 0.25% autopay discount ranges from 3.899% to 6.583%.
If you opt for a variable rate loan instead, the repayment APR can vary between 2.470% to 6.333%.
SoFi does not charge any application fees, origination fees, or prepayment penalties.
Refinancing Student Loans with SoFi
When you refinance with SoFi, you can complete a quick online pre-qualification questionnaire and find out within two minutes if you’re qualified to obtain a loan. Private refinance lenders like SoFi don’t have to approve you for a loan and will consider many factors to determine if you’re eligible to refinance. The good news is, this pre-approval process will not affect your credit score.
If you move forward in the application process, you’ll have to select your rate and term. A longer-term loan will have a higher rate — and you’ll pay more in interest over time — but monthly payments will be lower. Alternatively, you could select a lower rate loan with a shorter repayment term to pay more each month but less in total.
You’ll also need to choose between a fixed rate loan or a variable rate loan. With fixed rate loans, your interest rate and monthly payment stay the same until the loan is paid off. With a variable rate loan, your rate is tied to a financial index. It could go up or down, and your payment will change as your rate does.
Once you’ve completed the application process, SoFi pays off your existing loan servicers and you have one new student loan you pay back to SoFi in accordance with the terms you agreed upon when you took out the loan.
The SoFi application process is all completed online, and it’s a quick and simple process. You only have to provide basic information, including:
- Your name and address
- Your birth date
- Your citizenship status
- Where you went to undergrad or grad school and when you graduated or stopped attending
- Your employment status
- Your individual annual income
- Your total years of professional experience
- The loan amount you’d like to refinance
SoFi considers many factors when deciding if you’ll be approved for a refinance loan. Typically, you must be a U.S. citizen or permanent resident, you must have graduated from a Title IV accredited university or graduate program, and you must be employed, have a confirmed job offer for a position that will start within 90 days, or have sufficient income from other sources.
SoFi will also check your credit, and your credit score must be at least 650.
You can fill out the forms to get pre-qualified and estimate your rate within just a few minutes. Then, you’ll select your rate and term from among the options presented to you. To move forward in the application process, you’ll verify the information you provided by uploading screenshots of financial paperwork such as W2 forms or tax returns or a written job offer.
The simple application process, which can be done online within minutes, makes SoFi an attractive option.
LendKey has provided help to 83,000 borrowers and has funded $2.5 billion in loans. However, LendKey does things differently than SoFi. LendKey won’t refinance your loan itself. Instead, it connects you to credit unions and community banks so you can borrow directly from them.
LendKey has partnered with a network of more than 300 credit unions and community banks. When you submit an application to LendKey, you’re able to find the best rates and terms from among all of these different financial institutions that are part of the LendKey network.
Terms, Rates, Fees, and Other Important Details
LendKey offers student loan refinance options with repayment periods ranging from five to 20 years. Just as with SoFi, longer terms mean higher interest rates and more total costs over time.
Variable rate loans obtained through LendKey could have an APR as low as 2.57% with an autopay discount, while fixed rate loans start at 5.38%. Your loan term, amount you’re borrowing, credit, and income all affect the rate you pay.
If you’re not able to qualify for a loan on your own, having a cosigner who agrees to be held legally liable for repayment could help you to qualify with LendKey lenders. Having a cosigner could also help you get approved for a SoFi loan.
And, just as with SoFi, there are no origination fees, application fees, or prepayment penalties with LendKey.
Refinancing with LendKey
When you refinance with LendKey, you’ll input some personal information on their online form to find out your estimated rates. This includes your name and address, citizenship status, annual income, the total amount you owe, and the degree you earned.
Finding out estimated rates by completing LendKey’s pre-approval form won’t impact your credit score. LendKey also has a helpful online calculator so you can estimate how much you’d be able to save by obtaining a refinance loan.
You can obtain a fixed or variable rate loan when you refinance through LendKey, just like with SoFi. After you’ve submitted financial details and info about the loans you’re looking to refinance, LendKey matches you with appropriate lenders.
You’ll select a lender and complete the application process online using LendKey’s platform at every step. LendKey also provides loan consultants to help you — and the customer services provided by LendKey are free of charge.
Because LendKey doesn’t make refinance loans themselves, the process is different than it is with SoFi.
When you apply to refinance with SoFi, SoFi evaluates your qualifications. If it’s willing to make a loan, it tells you what rate you’ll pay depending upon your loan term and whether you choose a fixed or variable interest rate. When you submit your application with LendKey, on the other hand, you’ll see multiple competing offers from different lenders. These offers are pre-screened by LendKey and come from within its network of community banks and credit unions.
You can compare offers and see different interest rates, monthly payments, and repayment plans from different lenders. You’ll then need to select a loan that’s right for you and finish the application process in accordance with that lender’s requirements.
When you’ve chosen your loan, been approved, and provided any necessary verification with the lender, you’ll be issued one loan that can be used to pay back federal and private loans that you wish to refinance.
How SoFi and LendKey Compare
Both LendKey and SoFi are good options if you’re looking to refinance your private student loans, your federal student loans, or both. However, you’ll need to consider the differences between them to decide which is best for your situation.
LendKey and SoFi have some of the same advantages.
- You won’t have to pay any fees
- You have flexibility in your repayment timeline, as you can choose a repayment term ranging from 5 to 20 years
- You can choose either a fixed rate loan or a variable rate loan
- You can check your rates with both SoFi and LendKey without a hard credit check that affects your credit
- Both LendKey and SoFi provide a 0.25% autopay discount for borrowers who set up automatic payment on their loans
Both also require you to be employed or have proof of income, to have gone to an accredited school and obtained at least an associate’s degree, and to be out of school when you refinance.
LendKey and SoFi also have some important differences:
- SoFi makes refinance loans itself; LendKey matches you with lenders. Because LendKey connects you with a network of hundreds of banks and credit unions, you have more options and are more likely to find a lender willing to lend to you.
- SoFi provides a discount of up to 0.125% on other loan products, including personal and home loans, if you refinance student loans with them. Fees to invest with SoFi Wealth, LLC are also waived. LendKey doesn’t provide this benefit since it just helps you to find a lender who will issue you a refinance loan.
- SoFi provides access to career counseling, including resume help and one-on-one career coaching. LendKey doesn’t provide this type of service itself, although you may be able to choose a lender through SoFithat does provide some career assistance.
- It’s possible to get interest-only payments with a loan through LendKey. SoFi doesn’t allow this. Interest-only payments can result in a lower monthly payment, but you’ll pay more over time since you won’t be reducing your balance.
- SoFi has a lower minimum loan repayment of $5,000, compared with $7,500 for LendKey.
As you can see, there’s no one right answer when it comes to whether LendKey or SoFi is the right company to turn to when you’ve decided you want to refinance your loans. Both offer relatively low interest rates and fair repayment terms.
If you want to compare multiple lenders and you have a little higher loan balance, LendKey might be the right choice. If you want the simplicity of applying with just one lender and you’re excited about discounts on other loan products, SoFi may be a better choice for you.
Author: Christy Rakoczy
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