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Best Debt Consolidation Personal Loans

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Best Debt Consolidation Personal Loans

Are you stuck under an overwhelming pile of consumer debt? Do you feel like it might be impossible to get out? Fortunately there are tools that can help you get out of debt faster.

A debt consolidation personal loan could be a good answer. With a personal loan, you would use the loan proceeds to pay off credit card debt, medical debt or any other form of debt. You would then have a loan at a fixed interest rate and a fixed term.

Debt consolidation provides three benefits:

  1. Make payments simple: If you owe a lot of lenders and are having a tough time keeping track of all the payments, then consolidating will make your life easier. You’ll only owe one lender and have to keep track of one due date. There’s less of a chance of anything falling through the tracks.
  2. Lower your interest rate: This is where you have to run the numbers to see if debt consolidation makes sense for you. What’s the average interest rate you’re paying on your debt? If it’s quite high (which is likely if you have a lot of consumer debt), you may benefit from consolidating under better terms. Just remember to only use a personal loan if the interest rate is lower than the one you are already paying.
  3. Improve your credit score: If your credit cards are currently maxed out, your credit score will suffer. When you pay off your credit card debt with a personal loan, you will often receive a boost to your credit score, so long as you don't start using your cards again. LendingClub did a study and determined that there is an average score increase of 21 points within three months for people who use loans to eliminate credit card debt.

If you think debt consolidation makes sense for your situation, we have a list of the best debt consolidation loans you can use to refinance your consumer debt. Read on for our recommendations.

Personal Loans to Consolidate Credit Card Debt

Start Shopping Here - LendingTree

At LendingTree, you can make dozens of personal loan companies compete for your business with a single online form. When you fill out the form, LendingTree will do a soft credit pull - which means your score will not be negatively impacted. Dozens of lenders will compete and you may be matched with lenders who want your business. You may be able to compare and save in just a few minutes. We recommend starting here. You can always apply directly to other lenders - but many of the lenders we recommend already participate in the LendingTree personal loan application tool. (Note: LendingTree owns MagnifyMoney)

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Below are some leading lenders you could also consider:

SoFi - Excellent Credit Required

You can borrow between $5,000 and $100,000, which is the most out of the personal loans recommended here. The fixed APR ranges from 5.49% - 14.24% if enrolled in autopay. You can choose a term of up to 7 years. Variable interest rates range from 5.21% - 11.67% APR. Although SoFi does not use FICO, you need to be "prime" or "super-prime" to qualify. That means you must be current on all of your obligations and must never have filed for bankruptcy. There is no origination fee or prepayment penalty associated with a personal loan from SoFi.

SoFi

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Some of the leading lenders for people with less than perfect credit include:

LendingClub - Minimum FICO of 600

This is a peer-to-peer platform, which means individual investors are contributing to your loan. You can borrow between $1,000 and $40,000 with LendingClub, and its APR ranges from 5.99% - 35.89%, depending on the type of loan grade you’re eligible for. Be aware there are origination fees (ranging from 1% - 6%) associated with this personal loan, but there are no prepayment penalties. You can borrow on terms up to 5 years. The minimum credit score needed is 600. LendingClub is not available in Iowa or West Virginia.

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Prosper - Minimum FICO of 640

Prosper offers loans from $2,000 to $35,000, and APR ranges from 5.99% to 35.99%. It offers loans terms of either 36 or 60 months. Your APR is determined during the application process, and is based on a credit rating score created by Prosper. Your score is then shown with your loan listing to give potential lenders an idea of your creditworthiness. Origination fees range from 1% to 5% and are based on your Prosper score. In order to qualify, you must:

Prosper is a flexible alternative with a low-end APR that usually beats a credit card.

[Check out other Personal Loans on Our Comparison Table Here]

A Loan or a Credit Card to Consolidate Debt?

Personal loans can be an excellent way to consolidate your debt. Personal loans are best when you have a lot of debt or your credit score isn't perfect. However, if you have a smaller amount of debt and a great credit score, you can get rates as low as 0% with a balance transfer. If you do have a good credit score, you should apply for a 0% interest balance transfer credit card.

Wait: I Have Student Loan Debt

If you’re thinking about refinancing or consolidating your student loans, there are a couple of things to know.

First, what’s the difference between refinancing and consolidating?

  • Private Loan Consolidation: This involves combining all your loans into one loan so you only owe one lender and have to make one simple payment.
  • Federal Loan Consolidation (Direct Consolidation Loan): Only have Federal student loans? You can combine them through a Direct Consolidation Loan with the government. According to studentaid.ed.gov, “The fixed rate is based on the weighted average of the interest rates on the loans being consolidated.” This doesn’t save you much money, but your payments will be more manageable. For a complete list of Federal loans that can be consolidated, check here.
  • Refinancing: This is when you apply to a completely new lender for new terms – you’ll have a new loan, and your new lender will pay off your old loan.

The difference isn’t all that big – when you consolidate private (or private and Federal) student loans, you’re essentially going through the refinancing process.

If you currently have Federal loans, you need to be aware refinancing or consolidating means giving up certain benefits that come with federal student loans.

That means income based repayment, deferment, forgiveness, and forbearance options disappear. A few of these benefits are forfeited even with the Direct Consolidation Loan. These benefits could get you through an otherwise rough time, so make sure refinancing makes sense beforehand.

If you do have federal student loans, and you’re thinking of refinancing or consolidating, first see if you’re eligible for deferment or forbearance. There’s no reason to go through the process of having your credit checked if you can lessen your student loan burden another way.

If you have private student loans, you can also check with your lender to see if it offers payment assistance. Many lenders are making improvements to their student loan refinance programs and including forbearance and deferment options.

Also, once you consolidate or refinance your student loans, there’s no going back. This applies to the Direct Consolidation Loan as well.

Okay, still think refinancing or consolidating is right for you? You can shop for the best lender to refinance your student loans here.

Shopping Around is a Must When Consolidating or Refinancing

The goal of refinancing or consolidating is to ultimately make your debt less of a burden on you. That means getting the best rates and terms offered. The easiest way to accomplish this is to shop around with different lenders. If you do so within a 45-day window, FICO will not punish you for shopping around. All of your student loan inquiries in the 45-day period will only count as one inquiry. Plus, there are many lenders out there who will give you rates with just a soft credit inquiry (though a hard inquiry is required to move forward with a loan). Always put yourself first, as you’re never obligated to sign for a loan you’re approved for.

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Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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P2P Lending: The Complete Guide for Peer-to-Peer Lending

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Peer-to-peer lending is a modern name for a practice as old as money itself — individuals loaning money among themselves. What’s modern is the scale afforded by technology. Ten years ago, an individual needing a loan to start a business, consolidate debt, or cover unexpected home improvements would have been limited to borrowing from his or her immediate friends, family, and acquaintances outside of a traditional bank loan. Today, online peer-to-peer (P2P) lending platforms connect individuals who need to borrow money with investors willing to lend. Technology now allows perfect strangers to borrow from and lend to each other.

For many people, borrowing from peers can be a great alternative to borrowing from a bank, but it’s not for everyone. We’ll take a look at how peer-to-peer lending works and what you need to know before you apply.

How P2P loans work

The Small Business Administration (SBA) defines P2P lending as, “Individual investors providing small sums to lend personal loans to individuals via internet platforms.” Some of the most popular platforms include LendingClub, Prosper, Upstart and Funding Circle, although there are several others.

Potential borrowers can apply for credit on the platform, and borrower qualifications vary by lender. For example, the interest rate a LendingClub borrower receives depends on an internal score developed by the company, which is one of the largest P2P lenders. “They will give you a grade between A (the best grade, qualifying for the highest amount at the lowest rates) and G (the lowest grade with the highest interest rate),” a LendingClub spokesperson told MagnifyMoney.

LendingClub currently caps its personal loans at $40,000. Prosper caps its loans at $35,000. Typical loan terms range between three and five years.

Who invests in P2P loans

P2P loans may be funded by an individual investor or a group of investors. According to MarketWatch, P2P loans can be a good way to diversify the portfolio of income investors who take time to understand the risks and rewards. Income investing generates a cash income in the form of dividends and interest. In other words, investors don’t buy a stock, bond, or other investment and wait for it to appreciate in value so they can sell it and earn a profit. Simply holding on to the investment generates income.

P2P loans are an income investment because once an investor opens an account and chooses to participate in a loan, principal and interest payments (less fees charged by the platform) are deposited into the investor’s account on a monthly basis.

The investors may be individuals or institutions, such as banks, pension plans, foundations, finance companies, asset managers, insurance companies, broker-dealers, and hedge funds. Individual investors can open an account with Lending Club with an initial investment of $1,000, but other platforms are available only to institutions and accredited investors (those who can demonstrate high-earned income and net worth).

Connor Murphy, a public relations and communications specialist with Funding Circle, says their platform in the U.S. is only open to accredited investors and institutional investors. “We actually use the term ‘marketplace lending’ rather than peer-to-peer lending,” Murphy said, “because investors on our platform globally include large financial institutions and even governments.”

Whether the investor is an individual with $1,000 or an institution looking to invest $250,000, they select loans to invest in and earn monthly returns on. According to Sarah Cain, head of communications at Prosper, borrowers do not know their lenders. “They simply know if their loan has been funded or not,” Cain said.

Why P2P loans?

P2P lending platforms started gaining traction more than a decade ago as a way to bypass banks and use technology to connect investors with money to the borrowers that need it. P2P lenders have claimed their online platforms help them reduce costs, and that, in conjunction with analytics and proprietary algorithms, allow them to offer borrowers lower interest rates or provide loans to individuals who have been refused loans by traditional banks.

LendingClub currently advertises APRs for personal loans from 5.99 percent to 35.89 percent. The company surveyed borrowers during the first seven months of 2017 and found that borrowers who received a loan to consolidate existing debt or pay off credit card balances reported that they saved an average of $287 per month. However, that statistic compares high-interest credit card rates with personal loan rates – not P2P personal loan rates to bank personal loan rates.

As of August 2017, the average APR on credit cards carrying a balance was 14.89 percent, but banks may offer much lower rates for personal loans. Of course, whether you choose a P2P loan or a bank loan, having a high credit score can help you get the lowest rate offers, while a lower credit score will likely stick you with higher interest rates, if you are approved for a loan at all.

Some borrowers just prefer the idea of avoiding large, traditional banks. But as with any borrowing decision, you should compare apples to apples when seeking financing for any purpose and shop around for the best rate.

Applying for a peer-to-peer loan

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To apply for a loan, a potential borrower visits a P2P lending website and fills out an application.

The platform leverages online data and technology to assess risk, determine a credit rating and assign an appropriate interest rate. Applicants may receive offers within a few minutes and can evaluate options without impacting their credit score. Once you select a loan offer, you’re required to complete an online application that gathers information about your income and employment as well as identifying information, such as address and Social Security Number.

You may also be required to provide additional documentation to verify your identity, income, and employment. That may include:

  • Tax forms such as W-2s and 1099s
  • Tax returns
  • IRS Form 4506-T, which is used to request a copy of your tax forms or returns directly from the IRS
  • Recent bank statements or pay stubs
  • Proof of income from alimony or child support, pension or annuity income, disability insurance or workers compensation benefits, if applicable
  • Copies of government-issued photo ID
  • Utility bills

Once you’ve completed the application and submitted the necessary documents, your application is reviewed and the platform matches you with investors to fund the loan. Once the loan is approved, the funds are deposited into your bank account. The process can take anywhere from seven to 45 days.

Each P2P site has its own rules and approval criteria, including minimum credit score, so an application declined by one platform doesn’t necessarily mean that you won’t be approved by the others.

The Financial Industry Regulatory Agency (FINRA) reported that P2P lenders tend to be more forgiving than banks when it comes to short credit histories, but if you’re trying to get a P2P loan with less than stellar credit, don’t expect the lowest rates.

Lending Club states that applicants who qualify for the lowest rates have:

  • An excellent credit score
  • A low percentage of total outstanding debt compared with income
  • A long history of credit with significant successful credit lines

Lending Club

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Upstart looks for borrowers with:

  • A minimum FICO score of 620 (although they do accept borrowers with insufficient credit history to produce a FICO score)
  • No bankruptcies
  • No accounts currently in collections or delinquent
  • Fewer than six inquiries on their credit report in the last six months (other than inquiries for student loans, vehicle loans, or mortgages

Prosper’s minimum criteria include:

  • A minimum FICO score of 640
  • Debt-to-income ratio below 50%
  • No bankruptcies within the last 12 months
  • Fewer than seven credit inquiries within the last six months

While the approval process isn’t without its hurdles, peer-to-peer loans give borrowers another — sometimes less expensive — option for borrowing beyond credit cards and bank loans. Because P2P lenders facilitate borrowing without a bank intermediary, there is less overhead and none of the capital reserve requirements that drive up costs for traditional banks. As a result, the cost of originating and funding loans is lower, providing more competitive rates to borrowers and a faster approval process.

Plus, some borrowers just like the idea of borrowing outside of the traditional banking industry. Cain says although the process is online, P2P lending is not simply a different way of dealing with a faceless lender. “We do have a robust customer service team that is available to help,” Cain said.

What if your loan isn’t funded?

If your loan application is denied, you will receive an adverse action notice that provides the specific reason for the denial.

Cain says it’s hard to say exactly why a loan application would be denied, as every person’s credit profile is unique. However, some common reasons credit applications may be denied even though the borrower has a good credit score include:

  • Problems verifying employment. A stable job and stable income indicate that you’ll be able to pay your lender back. If the lender has trouble verifying your employment history, they may decline your application.
  • Not enough income. If you don’t have enough income in relation to your existing debt obligations to pay back the loan, most lenders will deny credit.
  • Bankruptcy. Lenders are often wary of approving a loan after you’ve declared bankruptcy. A bankruptcy may remain on your credit report for up to seven or 10 years, depending on the type filed.
  • Credit card utilization. If you are using a large percentage of your available credit, you may be seen as a potential risk to lenders.

If your loan application is denied, check your credit report to make sure that there are no inaccuracies that are dragging down your credit score. You can check your credit report with each of the three credit reporting agencies for free once a year at annualcreditreport.com.

Also, review your loan application to ensure you filled it out completely and accurately. If you find any errors in your credit report or application, correct them and apply again. Otherwise, take a look at the adverse action notice and see what you can do to improve your situation.

While there are no quick fixes for a bad credit score, small steps can improve your score over time.

  • Reduce the amount you owe. Stop using credit cards and make a plan to pay down existing balances.
  • Pay your bills on time. Payment history accounts for as much as 35 percent of your FICO score, so set up payment reminders to avoid missed or delinquent payments.
  • Avoid closing unused cards. Part of your credit score depends on the average length of time you’ve been using credit, so closing old accounts can actually hurt your score.
  • Don’t open new accounts too rapidly. A large number of new accounts in a short time frame can make you look risky to lenders, so apply for and open new accounts only as needed.

Shopping around

Each platform has their own lending criteria, loan limits, fees, interest rates, and areas of operation. Take a look at the FAQs and other information on the provider’s website to get an overview of the types of loans they offer, and the rates and fees they charge.

Here are a few to get started:

Lending platform

Loan amount

Terms

Who it’s best for:

Upstart


$1,000-$50,000

3 and 5 years

Borrowers who may not have an
excellent FICO score (or any score
at all) but are good loan candidates
based on other factors such as
education and job history

Prosper


$2,000-$35,000

3 and 5 years

Borrowers interested in a personal
loan to consolidate credit card debt,
fund home improvements, vehicle
purchases or other life events,
or start, or expand a small business

Lending Club


$1,000-$40,000

3 and 5 years

Borrowers interested in a personal
loan for consolidating high-interest
debt, funding home improvements,
or paying for unexpected expenses

Funding Circle


$25,000-$500,000

6 months to 5 years

Borrowers looking for funding to start
or expand their business

Keep in mind that interest rates and other terms can change, so you should compare rates and other terms from a variety of lenders every time you need to borrow.

The P2P lending market is only a little over a decade old, thus P2P platforms have not had the long history of government oversight to which banks and credit unions have been subjected.

And there is reason to be cautious about getting involved in P2P lending. In 2016, the Department of the Treasury released a report, Opportunities and Challenges in Online Marketplace Lending, looking at the opportunities and risks of P2P lending. Their concerns included:

  • The use of data-driven algorithms for making credit decisions has the potential to violate fair lending laws and doesn’t allow applicants to check and correct the data being used.
  • Interest rates may be high. The report acknowledged that the majority of loans are made to borrowers with good credit scores, but some platforms offer loans to borrowers with poor credit (FICO scores as low as 580) at interest rates as high as 36 percent.
  • Borrowers using P2P lending to refinance federal student loans lose the protections available to federal student loan borrowers, including income-driven repayment plans, loan forgiveness, and deferral or forbearance while the borrower returns to school or faces economic hardship or disability.
  • Many borrowers use P2P loans to fund small business development, but it may be difficult to enforce consumer protection laws and regulations, contract law, or fair lending laws with P2P platforms since these platforms are not subject to the same oversight as traditional banks.
  • While many marketplace lenders clearly disclose loan rates and terms, not all platforms are as transparent. The report acknowledged a need for standardized disclosures.
  • Most P2P platforms service loans only until a loan becomes delinquent, at which point collection is outsourced to a collection agency. Not all platforms have plans in place to work with borrowers who are experiencing financial distress or plans to continue servicing loans if the company goes out of business.

However, they are required to follow the same state and federal laws as other lenders. If you encounter any problems with a P2P lender, you should submit a complaint to the Consumer Financial Protection Bureau.

The CFPB began accepting complains about P2P lenders in March of 2016. We reviewed the complaints database in December of 2017 and counted more than 300 complaints about some of the largest P2P lenders. Consumers who submit complaints assign categories themselves and can opt not to have their complaint narrative published, so it’s difficult to parse the top complaints, but they include:

  • Having difficulty getting the loan
  • Problems making payments
  • Problems with the payoff process
  • Being charged interest or fees that aren’t expected
  • Inaccurate information reported to the credit bureau

These problems aren’t unique to P2P lenders, given that borrowers from traditional banks can face similar frustrations. Still, it’s important to know what other borrowers have experienced if you’re thinking of pursuing a P2P loan.

Lending Club and Prosper are the most popular platforms, but experts expect the industry to grow, so it’s worth expanding any comparison shopping beyond the biggest players. Just do your research before providing your personal information.

  • Search for the lender online. Is the platform mentioned in roundups of the best P2P platforms from reputable financial websites? Do your search results include consumer complaints?
  • Check the platform’s rating with the Better Business Bureau.
  • Make sure the platform takes steps to protect your personal data. They should have security and privacy certification from a company like TRUSTe or Symantec.

Alternatives to a P2P loan

It makes sense for anyone interested in a P2P loan to also compare alternatives before committing to a loan:

  • Community banks
  • Credit unions
  • Friends and family

Peer-to-peer lending can be a less expensive alternative to high-interest credit cards and easier to get than a bank loan. But, like all borrowing decisions, it needs to be carefully considered for your individual financial circumstances. The bottom line is that P2P is another option, and more options and increased competition are always good for borrowers.

Janet Berry-Johnson
Janet Berry-Johnson |

Janet Berry-Johnson is a writer at MagnifyMoney. You can email Janet here

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What Is a Loan Agreement and What Does One Look Like?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

what is a loan agreement
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If you’re at the point of taking out any kind of loan, you should be familiar with the contract that will dictate the terms of that loan. Your loan agreement will tell you about responsibilities and expectations on both the lender and borrow sides.

What is a personal loan?

You can get a personal loan from a bank, credit union, or online lender. Personal loans can be used for a variety of purposes like consolidating debt, renovating a home, or covering emergency expenses. Some personal loans have stipulations (usually stated in the agreement) on what you can and cannot use the money for.

These types of personal loans are generally unsecured loans. Unlike a home loan or car loan, these loans are not secured by any type of collateral. These loans are also different from credit cards because you receive a lump sum of borrowed money upfront, and there is a fixed amount of time in which it has to be paid off. When dealing with a bank or finance company for a personal loan, you must sign a loan agreement before you receive the money you’re borrowing.

“Personal loan” may also refer to borrowing money from a private party, like a loan between family members or friends.

How can I get a personal loan?

As mentioned, unsecured personal loans are usually not backed by an asset, meaning the lender could not seize an asset and sell it to recoup the loan amount, in the event you fail to repay the loan. If you do not pay back the loan, the lender could lose its money.

To mitigate this risk, personal loan lenders often set strict borrower criteria and qualifications. Personal loan companies will look closely at your credit score, existing debt obligations, and income history during the application process.

Some lenders will allow you to see loan rates you might qualify for by doing a soft pull on your credit report (soft pulls don’t affect your credit). Other lenders may generate a hard inquiry record on your credit report, which could negatively affect your credit score. Make sure you know whether the lender is conducting a soft or hard pull on your credit before you request a rate quote.

What is a personal loan agreement?

You’ll have to sign a loan agreement in order for a loan company to disburse funds to you. This agreement may also be called a promissory note as well.

The loan agreement is a legal contract that specifies the responsibilities and expectations of both the lender and borrower in the transaction. It is important to understand the terms and conditions of the loan to avoid getting into a precarious financial situation after taking it out.

Brian Locker, partner at Fowler St. Clair in Mesa, Ariz., practices civil litigation and regularly represents consumers with claims against lenders and businesses. “A loan agreement is important because it defines the legal terms and relationship you have with your lender,” he explained.

The importance of these agreements is that they will also be a guide in the case of a breach or violation on either side. Locker added, “In the event of any conflict between you and the lender during the term of the loan, the resolution will almost certainly be dictated by the terms of that agreement.”

For example, there may be steep penalties for missing payments or provisions in an agreement that allow the lender to sue you in court and require you to pay the legal fees in case of default.
These are very serious repercussions, so it’s best to know if you are exposing yourself to these risks before signing your name on the dotted line.

Why do you need a loan agreement?

Though the general public can be distrusting of lenders and especially wary of the contracts they’ll sign to borrow money, rest assured that your loan agreement can actually give you rights in the lending process, as well.

Rebecca Neale of the Personal Finance Lawyer is a family law attorney whose work often intersects with consumer law issues. “Contracts are an important way to manage the expectations of both parties.

“Just because a loan contract specifies what happens in case of default doesn't mean that the lender expects you to default,” said Neale. “The purpose is to inform both parties of their responsibilities and liabilities in case of default.”

Loan agreements, in part, make sure banks can lend money affordably. To do so, they must manage the risk of default by giving borrowers clear, consistent terms for repayment.

Loan agreements should also be in place when lending money to friends and family. You may think a formal document isn’t needed for a “casual” transaction, but the IRS has restrictions on money flowing between individuals. According to the gift tax, individuals are allowed to give $14,000 or less each year before tax implications kick in (in 2018, the limit is $15,000).

Your loan agreement for private party loans will prove to the IRS that the money is not a gift and therefore not subject to the gift tax (which the giver usually pays). Plus, a loan agreement with clear terms and repayment guidelines can help save personal relationships that could otherwise be ruined by money misunderstandings.

These personal loan agreements between private parties are not hard to find at all. You can do a quick search online for “personal loan agreement templates,” or ask an attorney to draw one up for you. The cost may be well worth it to have a clear understanding of each person’s responsibility in a personal loan situation.

What is contained in a loan agreement?

When it comes to dealing with commercial entities like banks or financial companies, most lenders have a standard personal loan agreement that serves as a binding contract for borrowers.
Here are the standard sections and items you’ll see in your personal loan agreement:

Principal loan amount

This is how much money you are borrowing. Personal loans typically range from $5,000-$100,000.

Borrower, cosigner, and lender information

This will contain personal identification information for borrowers such as name and address. The lender’s information will also be in the contract.

Interest amount, calculation method, and rate type

There are many combinations of interest types and rates possible for personal loans. Most personal loans are amortizing, which means payments are equally spaced with a simple (not compound) interest rate. This rate is often expressed as an annual percentage rate (APR, explained below.) But there are other options and terms you should know about when it comes to these loan variations:

  • Compound interest: Interest charged on a total outstanding loan balance, including the principal and previously accrued interest.
  • Simple interest: Interest charged on a principal balance that is not then added to the principal balance.
  • Variable interest rate: An interest rate that changes over time, often based on prevailing market interest rates.
  • Fixed interest rate: An interest rate that does not change over time.
  • APR (annual percentage rate): The cost of borrowing money over the course of a year, including interest and fees, expressed as an interest rate.
  • Interest rate: The cost of borrowing money, expressed as a percentage of the loan amount.

If you are unsure of how the terms will affect your monthly payment, check the Truth in Lending Disclosure for your loan, which will give you a summary of your loan agreement for review purposes. It’s usually given to by the lender before you officially accept the loan by signing the agreement. This disclosure is not your loan agreement, but is useful for knowing upfront the costs of borrowing money before entering into the loan contract.

Date of loan transaction

This serves as the first date of your loan term.

Loan repayment term length

The term is how long you will take to pay the loan back. Terms for personal loans vary and are often between 6 months and 84 months.

Loan payment method and due date

This section informs you of where to send your payment and the date it is due each month. If you don’t send your payment in accordance with the contract, your payment could be considered late or missed. Furthermore, changing repayment methods could add processing payment that increases your initial APR (i.e. paying with a check versus automatic [ACH] withdrawal.)

Return payment fees

If for some reason your payment is returned, this is the fee you will be charged.

Origination fees

Some lenders charge fees to process a loan application. This can be expressed as a flat fee or a percentage of your loan amount. The origination fee is often deducted from your initial loan disbursement from the lender.

Prepayment fees and penalties

You may be subject to penalties or fees for paying off a loan before the loan term is over.

Application of payment

This explains how your payments are applied and in what order they are applied to the principal, fees, interest, etc.

Penalties for missed and/or late payments

This section will tell you what exactly constitutes a late or missed payment.

State law notices

Contains special notices and legal provisions for residents of certain states.

What happens if the loan contract is violated?

A loan contract can be violated in a number of ways. On the borrower side, a violation may occur when a lender determines that the borrower is in default. Default can happen for a variety of reasons, from missing payments to misusing loan funds.

In this case, the lender can demand funds repaid in full. In addition, the borrower may have to agree to paying all costs of collecting delinquent payments and reasonable attorneys’ fees. J.R. Skrabanek is a consumer law attorney and senior counsel at The Snell Law Firm, PLLC, in Texas. He says that when consumers violate a loan contract, there may be recourse if they actually show up in court. “In general, courts may be more willing to forgive unsophisticated consumers for mistaken contract violations than large companies. However, contracts are usually enforced as written, and you very often have to go to court to enforce your rights,” he said.

On the lender side, it is rare that loan agreements are violated. However, lenders that engage in predatory lending practices or illegal debt collection practices could be violating state and federal laws that expressly forbid these kinds of activities. Skrabanek said such things may not violate the loan contract but may be punishable under regulations like the Fair Debt Collection Practices Act.

Common legal terms

  • Usury and predatory protections: Laws that protect consumers from illegal and harmful lending practices.
  • Mandatory arbitration: A clause that requires borrows to agree to an arbitration process to settle disputes over a loan agreement.
  • Breach or default: Failure to fulfill a contract obligation.
  • Contract length and amortization: Defines the loan term and whether or not loan payments are fully or partially amortized over that term.
  • Choice of law: States the jurisdiction under which the provisions of the loan agreement will be governed.
  • Severability clause: States if some parts of the loan agreement are found to be illegal or otherwise unenforceable, the remaining provisions are still valid and enforceable.
  • Entire agreement clause: States that the loan agreement presented is complete
  • Default provisions: Defines criteria that constitute a default event for borrowers.
  • Loan security: The collateral (some type of assets) pledged for a loan.
Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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Personal Loans

Where to Get the Best Personal Loan Rates Online

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Where to Get the Best Personal Loan Rates Online

Updated January 02, 2018

If you want a personal loan to pay off credit card or other debt, the absolute fastest and most effective way to lower the interest you pay is to apply for a balance transfer, with a 0% rate. You can read our guide to balance transfers to learn about their pros and cons.

But a balance transfer isn’t for everyone, especially if your credit score isn't perfect or if you need to borrow cash.

A personal loan with a set payoff period a few years from now is often the next best thing with these advantages:

  • One monthly payment
  • A set rate
  • You don’t need absolutely perfect credit
  • You can check your rate without touching your score

There are more attractive deals than ever thanks to some new online lenders and you can see sample rates below for excellent credit and good credit.

Tip: Apply for several loans to check rates. Every lender has different approval criteria and different pricing models - and the difference in rate between lenders (even for people with excellent credit) can be significant. So long as you shop with lenders that use a soft credit pull, you can check your rate without negatively impacting your credit score.

Start Here - Multiple Lenders at Once

LendingTree

LendingTree

Dozens of lenders participate in LendingTree's personal loan shopping tool - including all of the lenders listed on this page. (Full disclosure, LendingTree is our parent company.) With one online form, LendingTree will perform a soft credit pull (with no impact to your score) and match you with multiple loan offers. This is our favorite (because it is easy) way to get multiple offers from lenders in minutes. For people with excellent credit, you could get an interest rate below 6%. For people with less than perfect credit, there are many lenders participating with more liberal acceptance criteria.

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Why is this a good way to save?

Banks don’t care much for personal loans because the lower rates earn them less profit than credit cards.

Fortunately, some new companies believe you should be able to get a competitive rate without dealing with credit card intro offers, even if your credit isn’t perfect.

They’re doing it by lending online only without the overhead of branches.

They pass the savings on to you through better rates, and you can check up on them below.

Personal loans for Excellent Credit

The following providers are for you if you want the absolute lowest possible rates that reward a record of no late payments and good income, even though you have some high rate debt you want to clean up.

Unless you get a rate of 5% or less, you’re probably better off with balance transfer deals, but the convenience of a fixed payment and walking away from credit cards makes personal loans appealing.

SoFi

SoFi

SoFi offers some of the lowest interest rates available if you’re looking to refinance your credit card debt or borrow cash. You’ll need to have a good record of paying your bills on time, but they’re willing to offer rates that are very competitive without an origination fee.

Sofi’s believes if you’ve graduated college or went to grad school you’ll be a more responsible borrower, so they may be more likely to give you a better rate, even if your credit history is limited.

For example, if you have $10,000 in credit card debt, good income, and great credit, their best rate could save you as much as 0% balance transfer deals once you factor in the fees for each.

What we like best about SoFi is that they offer no origination fee and no prepayment penalty. If you think you may be able to pay off your loan earlier (or want the flexibility to do that), SoFi is the only lender we reviewed that charges no fee at all. Given their very low rates, we think anyone with good credit should start with SoFi first, and then compare their offer to the rest of the providers.

Rates: 5.49% -14.24%, fixed*, with AutoPay. You can also select a variable interest rate. With AutoPay, the variable rates are from 5.21% - 11.67%*. Rates are based upon 1-month LIBOR.

Upfront fee: 0% - No origination fees, no prepayment fees and no balance transfer fees

Amount: $5,000 - $100,000

Period: 3 - 7 years

Available states: All states except Tennessee and Nevada.

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on SoFi’s secure website

Marcus by Goldman Sachs®

Marcus by Goldman Sachs®

If you want to work with a traditional bank, Marcus by Goldman Sachs® can be a great option. With rates as low as 6.99% APR and flexible terms ranging between 36 to 72 months, they offer a competitive personal loan option that is backed by the security and peace of mind that comes with using a bank that has been in business for 148 years.

While Marcus does not state a required minimum credit score, they do seek out people with prime credit, which usually falls above 660 or higher on the FICO scale. Those that meet the requirements will be able to borrow up to $40,000 for debt consolidation and credit consolidation loans.

Terms of loan – 36 to 72 months

APR range – 6.99% to 23.99%

Origination fee – No origination fee.

Credit score – No Minimum FICO Score (For borrowers with prime scores)

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on Marcus By Goldman Sachs®’s secure website

BestEgg

BestEgg

BestEgg is an online personal loan company that offers low interest rates and quick funding. BestEgg is one of the fastest growing personal loan companies in the country, largely because it has been able to provide one of the best combinations of interest rate and loan amount in the market.

You can check to see your interest rate without hurting your score, and they do approve people with scores as low as the mid-600s. If you have an excellent credit score, BestEgg will be very competitive on terms.

Upfront fee: 0.99% - 5.99%

Amount: up to $35,000

Period: up to 5 years

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on BestEgg’s secure website


Lightstream

LightStream

Lightstream is a great choice for people with excellent credit. It is actually part of a bank you might have heard of, SunTrust Bank. They were recently set up to offer some of the best personal loan rates available, and they are delivering. The interest rate you are charged depends upon the purpose of the loan. Interest rates can be as low as 2.49% for a new car purchase (and Lightstream does not put their name on your title. They just put the cash in your bank account, and you can shop around and pay cash for the car). Home improvement loans start at 4.99% APR with AutoPay , making them cheaper and easier than a home equity loan.

They’ll also approve and deposit your money fast, often the same day, and give extra consideration if you have money in your 401K or equity in your home.

LightStream has created an exclusive offer, just for MagnifyMoney readers. (This offer went live in January 2016). Credit card consolidation loans for MagnifyMoney readers are now as low as 5.49% fixed. The highest fixed rate is 14.44%. Just beware: LightStream does a hard credit pull.

Upfront fee: None

Amount: $5,000 - $100,000

Period: 2 – 7 years

Available states: All


Personal Loans for Good Credit

These providers may be able to help you out if you’re not approved for the very best rates or a 0% balance transfer offer. Check those deals first, there’s no real harm to do that, but if they fall through, give these a try.

LendingClub*

Lending Club

You might not have heard of LendingClub yet, but they are a big player in online loans. And they offer a wide range of rates and terms based on your credit profile and needs. Generally you’ll need a score of about 600 or higher to get approved.

Rates: 5.99 – 35.89% fixed APR

Upfront fee: 1 – 6%

Amount: up to $40,000

Period: up to 5 years

Available states: All except Iowa and West Virginia

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on Lending Club’s secure website


BestEgg

BestEgg (reviewed earlier in this post) will approve people with credit scores as low as the mid-600s. If you have good credit and are looking for a loan, you should consider BestEgg.

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on BestEgg’s secure website


Upstart*

Upstart

Upstart offers loans that look a lot like the ones from the bigger online lenders like LendingClub or Prosper.

They’ll let you borrow up to $50,000 for 3-5 years. But the key is they will take into account the schools you attended, your area of study, the grades you earned in school, and your work history to see if you can get a better rate.

So while the range of rates Upstart offers is similar to the bigger guys, if you did well in school, you might find the rate you actually get is lower than what the others will offer you, so it’s worth trying.

You’ll need a 640 or better FICO and your monthly payments can’t be more than 55% of your monthly income.

Rates: 9.56% -29.99%

Upfront fee: 3.655% – 8%

Amount: $5,000 - $50,000

Term: 3 & 5 year loans available

Available states: All


PenFed

Previously, PenFed offers a fixed rate of 9.99% interest rate for 5 years. Veterans get extra special attention so it’s worth checking this online only offer. You have to be a member of the PenFed credit union, but that’s easy and anyone can do that online as part of the process.

Rates: 9.99% fixed APR

Upfront fee: None

Term: 5 years

Available states: All


Personal Loans for Bad or Minimal Credit

Avant*

APRs range from 9.95% - 35.99% and there is no prepayment fee. Checking your Loan Options will not affect your credit score. Just one warning: if you are willing to borrow money at 35.99%, then you really need to step back and think about building a longer term financial plan. You can download our free Debt Guide, which will help you put together a plan so that you never have to pay interest rates this high again.

Avant's platform offers access to loans from $2,000 to $35,000, with terms from 2 to 5 years. The minimum credit score varies, but we have seen people with scores as low as 580 get approved.

The good thing about Avant is that these loans are amortizing. That means it is a real installment loan, and you will be reducing your principal balance with every payment.

Rates: 9.95% - 35.99% APR

Upfront fee: 4.75%

Amount: up to $35,000

Period: up to 5 years

Available states: All except: Colorado, Iowa, West Virginia, and Vermont.

For Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.

APPLY NOW Secured

on Avant’s secure website

Avant branded credit products are issued by WebBank, member FDIC.


OneMain Financial

OneMain Financial offers personal loans through its branch network to people with less than perfect credit. You can start your application online. If you qualify, you will have to visit a branch to complete the application. Once in the branch, if you have all of the required documents, you can receive you loan proceeds immediately via check.

You can borrow from $1,500 to $25,000. The interest rates are not low, and can go up to 36%. They will also charge an up-front origination fee that is not refundable. You should definitely shop around at other lenders first, given the high cost of the loan and the need to visit a branch.

Rates: 25.10%-36.00% APR

Upfront fee: Varies

Amount: Up to $25,000

Period: Up to 5 years

APPLY NOW Secured

on OneMain Financial’s secure website


As these new companies evolve, expect even more attractive options to emerge, so when you think about lowering your rates, don’t just look to the banks you know.

Give an online lender a chance. You may be rewarded with lower rates, good service, and faster freedom from debt.

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* We'll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations You can learn more about how our site is financed here.

Got questions? Get in touch via Twitter, Facebook or email (info@magnifymoney.com)

Brian Karimzad
Brian Karimzad |

Brian Karimzad is a writer at MagnifyMoney. You can email Brian at brian@magnifymoney.com

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Personal Loans

No Credit? Personal Loans and Other Loan Options

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

no credit loans

What is credit and why does it matter?

A good credit score can have a positive impact on your life in many areas, such as purchasing a house, car or even getting a lease on a new apartment. Your credit score is a number that helps businesses make decisions about whether or not to grant you a loan — and, if so, how much risk they are taking on in the process.

Your score can also impact the terms of the loan, such as how long you have to pay back the balance and what interest rate you’ll have to pay.

The standard FICO score, which is the most widely used among lenders, can range anywhere from 300 to 850. The higher that number, the higher the likelihood that you’ll get better terms. A higher score indicates to lenders that you’re perceived as less of a risk, so companies are more willing to give you more favorable terms for loans. If you’re considered a high risk to a lender, you may find it difficult to get loans and may find yourself stuck with the worst rates.

Experian breaks down score bands by score range well in this graphic:

A credit score of 700 or higher is usually considered a good credit score and a score 800 or above is considered excellent. People who have fair or poor credit may start to find it hard to get competitive rates on loans.

What if you have no credit or a thin credit file?

People who have thin credit files or no credit history at all might find it difficult to qualify for loans, credit cards or a mortgage, among other things. Because credit reports are used by lenders often to tell whether or not an individual is a responsible borrower, if that report is empty or nearly empty, it’s difficult for them to make a call one way or another.

That’s because without a credit history, lenders won’t be able to give you a credit score. Yes, there’s a big difference between your credit score and your credit report.

To think of it a different way, imagine that you’re a college student. Each of your exams is one part of your credit report and your credit score is based on how your perform on all of your exams so far. If it’s your first day on campus and you haven’t taken any exams yet, it would be very difficult for someone to determine whether you’re a good student or not.

“The problem is if a person hasn’t borrowed money, he or she can't get a credit score,” Jennifer Hemphill, AFC® says. “It’s hard because you’ll end up either getting denied outright or pay absorbent interest rates even if you can get a loan.”

The more often you use credit, the richer your credit report will be. The information recorded in your report includes the types of loans you have, how much you owe and whether or not you make timely payments. With that information at hand, lenders then can calculate your credit score and grant you access to loans.

The key measures lenders use to calculate your credit score are as follows:

  • Are you making on-time payments? (35% of your score)
  • How much credit debt are you using compared to the credit that’s available to you? (35% of your score)
  • How long you’ve been using credit (15% of your score)
  • How many different types of credit you have used (10% of your score)
  • How many times you apply for new credit (10% of your score)

If you’re more of a visual person, here’s how it breaks down in a chart, courtesy of MyFICO:

Jennifer suggests that to build up your credit, you need to understand factors that determine your credit score and make sure to follow them.

“Your payment history, number of loans, how many inquires you’ve had and the length of credit history all play a part in determining your credit score,” she says. “If you make sure you pay your loans on time and not take out too many loans, you’ll be able to get a good score much faster.”

Keep in mind that there are different credit rating bureau, meaning that your score could be different depending on the bureau lenders look at. This is because credit bureaus don’t necessary share information with each other. Furthermore, your lender is required to report accurate information to any one of the three major credit bureaus (Experian, Equifax, TransUnion) but they don’t need to report it to all three credit bureaus. If this happens, there may be a delay in the types of information shared which could affect your credit score.

Loan options for people with no credit score

If you have a thin credit file, don’t worry. Everyone starts from somewhere.

To start building a good credit history, you’ll need to apply for credit. There are lenders who are willing to approve loans for people with no credit, but your options will be more limited. Here are some options on how to get a loan with no credit:

Secured credit cards

A secured credit card requires a deposit upfront. Then, you’ll make monthly payments for a certain period of time. Those payments will be reported to a credit bureau and your score should improve so long as you make all your payments on time and keep your utilization low. Just be careful to pay the card off each month, because you don’t want to get stuck paying high interest fees on top of it. Some secured card lenders will upgrade you to a regular credit card after you’ve proven you can manage a secured card. This option is best for those who want a credit card and have exhausted all options for unsecured credit cards.

Student credit cards

Many lenders offer students credit cards despite their thin credit files in the hopes they’ll become lifelong customers. All you need to is to show you have some income to make the monthly minimum payments. However, you may only get a low credit limit and high interest rates. Check out our list of the best student credit cards here.

Retail credit cards

Retail cards are generally fairly easy to get approved for, because retailers know that the harder it is for people to apply for credit, the less money they stand to earn from credit card users. It’s no secret that retail credit cards often come with scarily high interest rates. So we’ll offer a word of caution: If you do apply and get approved, be sure you’re only using it a credit building tool. That means you’re spending only what you can afford to spend and you pay it off in full each month. The downside of retail cards is that you may not be able to use them anywhere except for the retailer itself, but you may find co-branded cards out there that have wider acceptance.

Joint credit cards

Those who want to build their credit scores could benefit from a joint credit card. For example, two spouses could apply for one card but both hold responsibility for payments. If the two people are responsible, great. But there’s a risk, too. It also means if one or both of you aren’t making on-time payments, both of your scores could suffer.

Becoming an authorized user on a credit card

If your partner or family member has good credit, you might want to be added on as an authorized user on their card to build up your credit. The primary cardholder holds liability for making on-time payments, while your score will benefit from their good behavior. However, the primary cardholder can remove you from the account at any time.

Personal loans for those with poor credit

Getting a personal loan is another way to build up your credit score. The following lenders works with those who are applying for loans with no credit:

  • OppLoans - This is an online lender who works with people who don’t have robust enough credit histories to have a credit score yet. Their online application process takes minutes and you can find out if you’re approved for a loan up to $5,000 without impacting your credit score. Keep in mind that their loans aren’t available in all states. Depending on location, their rates start at 36% with terms from 9 to 24 months.
  • Upstart - This lender will consider applicants who don’t have a score. You may be able to borrow from $1,000 to $50,000 with three or five year terms. Their APRs range from 9.56% to 29.99% as of Dec. 15, 2017. Most applicants are able to get funds after one business day once they accept their terms.

Before you apply for credit, you should request a free annual credit report from all three credit reporting agencies. Even though you may not have enough information to generate a credit score, you never know if there is an error in your credit report. Things like a lender reporting incorrect transactions, mixing up identities or someone trying to steal your identity could happen, so dispute any errors if you see any.

To get your free credit report, visit AnnualCreditReport.com or call 1-877-322-8228

Get prequalified. You should also check to see if a lender offers a pre-approval form, which only requires a soft credit pull and won’t harm your credit. A positive pre-approval doesn’t 100% guarantee you’ll ultimately be approved, you can at least take a calculated risk before you apply for credit full-stop, since that will trigger a hard pull on your credit report and could hurt your score.

If you’d rather get a personal loan than a credit card, here are more options to check out:

  • LendingTree. Lending Tree, which is the parent company of MagnifyMoney, partners with many different lenders. By filling out a short online form on the personal loan page, you may receive quotes from several lenders, including lenders who may be willing to work with people with poor credit or very little credit history. Pick and choose ones with better rates or terms.
  • LendingClub. This is a peer-to-peer marketplace lender. Borrow up to $40,000 and receive your money in as little as seven days. Fixed APRs range from 5.99% to 35.89%, however, if your poor credit you likely will be stuck with the highest rates. You can choose between a three or five year term with no prepayment penalties. LendingClub does charge an origination fee, however, which will be charged as a one-time fee of 1-6%. And since it’s charged when you receive your loan, it’s deducted from your loan balance, which means you’ll get the amount you applied for, less the origination fee.
  • Avant. Borrow from $2,000 to $35,000 with fixed APRs ranging from 9.95% – 35.99% and loan terms of 24 to 60 months. Not available for Colorado, Iowa, West Virginia, and Vermont residents.
  • Prosper - Prosper is similar to LendingClub and is also a peer to peer lender. Borrow anywhere from $2,000 to $35,000. Fixed APRs range from on 5.32% to 35.97% on 3 and 5 year terms.
  • Credit unions and local banks. Don’t forget to check credit unions to see what they could offer you. Theses institutions may have competitive rates and offer smaller loan amounts for its members. Loan officers may even more be willing to work with you on getting a loan compared to bigger companies.

How to build your credit score

Building your credit score doesn’t have to be hard. It will not be a quick process, but as long as you are consistent and exhibit all the signs of a trustworthy borrower, you’ll be able to build a good credit score.

Make payments on time. First and foremost, making payments on time will significantly impact your credit score. You want to show lenders that you can make at least the minimum payments every month. Any late payments will most likely show negatively on your report.

Keep your balances low. You should strive to pay as much of your balance off each month as possible. You can get away with making minimum payments, but you won’t help your utilization rate that way, and utilization rate is also a large component of your credit score, as we discussed in beginning of this post. The closer your balances are to your credit limit, the more negatively it’ll impact your score.

Don’t open too many new accounts in close succession. You’ll also want to consider how often you apply for credit. Every time you apply for a loan, you’ll get what’s called a hard inquiry on your report. One or two credit inquiries may not affect your score significantly, but if you apply for multiple loans or credit within a short period of time, your credit score may fall.

If you follow these steps consistently, over time you’ll be able to build your credit score.

Things to watch out for

Just because there are many products and services to help you build your credit, doesn’t mean they’re all equal. No check or instant approval credit loans such as payday, title or no check credit loans may seem like a good idea as they offer access to cash quickly. However, they often come at a steep price.

Payday loan companies have you write a check for however much you want to borrow in addition to a set fee. You’ll borrow that amount and hold onto the check until your loan’s due date which is usually your next payday. The problem is that they come with high rates and you could find it hard to pay back the loan. If this happens, you’ll pay more fees to extend the loan and pay even more in interest.

Title loans are often no better. Instead of using your paycheck as collateral, you put up your car’s title as collateral for a loan. The loan amount is usually the equivalent of your vehicle’s appraised value. The term is typically around 30 days and also come with high APRs. If you can’t pay back to loan, you’ll end up paying more fees or run the risk of having your car repossessed.

These options aren’t a good idea if you want to build a good credit score. All of these loan options are extremely expensive for borrowers and have severe consequences for delinquent payments. If you don’t have credit, you can use options that are much cheaper and with more favorable terms.

Sarah Li Cain
Sarah Li Cain |

Sarah Li Cain is a writer at MagnifyMoney. You can email Sarah Li here

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Personal Loans

SoFi Review: Personal & Student Loans with Low Rates and No Fee

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

SoFi Review: Personal & Student Loans

SoFi is an online loan company that offers student loan refinancing options, mortgages and personal loans. SoFi offers some of the lowest interest rates and the best consumer experience in the market. We have researched thousands of products from hundreds of companies, and SoFi is one of our favorites. However, they have strict credit criteria and target people with good jobs, good income, a proven ability to manage a budget and good credit history. If SoFi* approves you, you will probably have a difficult time finding a lower interest rate anywhere else.

In this post, we will review both Student Loans and Personal Loans. (They have just launched mortgages, and we will be updating this post later with a review of that product). For each, we will discuss:

  • The details of the product: how much can you borrow, and at what price
  • Approval criteria: how does SoFi underwrite, and who are they likely to accept

In addition, at the end we will give you more details of SoFi, including who funded them, how big they are and their reputation.

SoFi’s student loan refinance offerings

SoFi Student Loan Refinance: At a Glance

Variable APR

2.58% – 7.07%*

Fixed APR

3.25% – 7.25%*

Terms available

5, 7, 10, 15, or 20 years

Balance range

$10,001 – No max

*These rates are available so long as you enroll in auto-pay.

*Rates current as of Dec. 21, 2017.

SoFi has just reduced the minimum loan amount. You can now refinance as little as $5,000 of student loan debt. There is no cap on how much you can refinance. Based upon your cash flow, SoFi will try to provide an option to refinance all of your student loan debt.

There is no origination fee and no prepayment penalty. It offers some of the lowest rates out there. Fixed APRs range from 3.25% – 7.25%*, and variable APRs range from 2.58% – 7.07%.* with auto-pay These rates are available so long as you enroll in auto-pay. Given that interest rates are at an all-time low, you should think carefully before signing up for a variable interest rate. If you can pay off your loan in a short period of time, you could save a lot of money. If it will take you longer, you may not want to take the interest rate risk.

You can refinance on a 5, 10, 15, or 20 year term.

For example, if you borrow $30,000 on a 10 year term at an APR of 4.615%, your monthly payment will be $312.58. Under those terms, you’re paying back a total of $37,509.60 (120 payments). If you borrow the same amount, but have a 6.8% APR, your monthly payment is $345.24, paying back a total of $41,428.80. In this case, SoFi’s low rates have the potential to save you nearly $4,000.

SoFi will refinance both private and federal student loans. However, if you refinance a federal loan you will give up all federal protections and programs, including income-based repayment programs. SoFi is unique among private lenders because it offer unemployment insurance, free of charge. If you lose your job for no fault of your own (you can’t quit), SoFi will suspend your monthly payments until you find a new job. You can do this for up to 12 months. The interest that accrues during this period would be added to the loan.

SoFi also offers an entrepreneur program to help graduates who dream of owning a business.

Under this program, loans can be deferred for six months so borrowers can focus on growing their businesses. SoFi provides access to networking events, mentors, and investors.

The downsides of refinancing with SoFi

Refinancing with SoFi isn’t an option for everyone. First, refinancing is currently unavailable to those residing in Nevada, and variable rate options aren’t available to those in Ohio or Tennessee.

Second, SoFi has a list of available schools and programs it services. If your school or program isn’t on that list, you won’t be eligible to refinance.

Third, SoFi typically requires applicants to have excellent credit. It occasionally accepts co-signers – you must call to review your situation with a representative. However, there’s no co-signer release if you move forward with one on your loan.

Eligibility requirements

To be eligible to refinance your student loans with SoFi, you need to meet the following requirements:

  • You must be a U.S. citizen or permanent resident 18 years or older
  • You need to have a 4-year undergraduate or graduate degree from a Title IV accredited institution
  • You have to be employed or have an offer of employment starting in 90 days from the time you apply
  • You need to be in good standing on your current student loans
  • You should have a good, stable employment history
  • A strong monthly cash flow is a must
  • An excellent FICO score will improve your chances of being approved

How to apply

The application process is straightforward and SoFi’s pre-approval should take you less than 15 minutes to complete. You likely won’t need most of the documents listed below until you’re ready to move forward with a loan, but they’re good to have on hand while you’re shopping around.

  • Existing student loan information (SoFi will need your account information for the loans you wish to finance)
  • Employment information – salary, offer of employment, length of employment
  • Most recent pay stubs as proof of income and employment (if you’re currently employed)
  • Diploma or transcript in the event SoFi needs to verify your graduation

It’s good to note SoFi accepts screenshots from your PC and pictures taken from a phone, so if you don’t have access to a scanner, there’s no need to worry.

If you’re ready to get started, you can apply for a refinance and check your rate by clicking the button below.

APPLY NOW Secured

on Sofi’s secure website

SoFi medical residency refinancing

According to The Association of American Medical Colleges, 75% of medical school graduates in 2016 had loans with an a median debt load of $192,000. In October 2017, SoFi launched its Medical Resident Student Loan Refinancing product to go along with existing offerings of student loan refinancing, personal loans and mortgages. The Medical Resident Student Loan Refinancing program can be used to lock-in a lower monthly payment or pay off your existing medical loans sooner. There are no origination fees or prepayment penalties.

SoFi Medical Residency Refinancing: At a Glance

Variable APR

3.000% - 7.470%*

Fixed APR

3.500% – 7.870%*

Terms available

5, 7, 10, 15, or 20 years

Balance range

$10,000 – No max

*Includes AutoPay discount.

*Rates current as of Dec. 1.

Highlights

SoFi’s sales point on Medical Resident Student Loan Refinancing is that participating students can avoid compounding interest on their debt for up to 54 months of residency. Minimum payments are only $100 a month. Like many lenders, SoFi offers a 0.25% interest rate reduction on loans if you agree to have monthly payments automatically deducted from your bank.

Applicants may use refinancing to consolidate qualified public and private medical school loans into a single rate and payment. But take heed, per SoFI: “Upon completion or departure from your residency program, your loan will re-amortize and your payment amount will increase according to a fully amortized loan schedule.”

Lowlights

SoFi refi loans are private loans and do not offer the repayment options of federal loan programs. For example, there are no SoFi equivalents that peg monthly payments to your family’s income and family size, like the federal Income-Contingent Repayment Plan (ICR Plan), Income-Based Repayment Plan (IBR Plan) or Pay as You Earn Repayment Plan (PAYE Plan). Also, private education loans are ineligible for federal loan repayment remedies, such as Public Service Loan Forgiveness.

SoFi doesn’t offer these loans in every state, either.

Residents of Nevada, Mississippi, Montana and the District of Columbia are not eligible. Minimum loan amounts in Pennsylvania are $25,001, and $15,001 in Connecticut and Kentucky.
Eligibility requirements

  1. You must be a medical resident or fellow with no more than four years remaining in your program.
  2. You must have more than $10,000 in federal or private student loan debt.
  3. You must be a graduate of a Title IV-accredited university or graduate program within the United States.

How to apply

Start the process at SoFi’s Medical Resident and Fellow Student Loan Refinancing homepage. You can see if you are preapproved by using this online form. Since it’s only a soft pull on your credit report, it won’t affect your credit score. When you officially apply for refinancing, however, there will be a hard credit pull.

SoFi personal loans

At SoFi, you can borrow between $5,000 and $100,000.

There is no origination fee, no prepayment penalty and no balance transfer fee. They are truly unique in this regard.

You can borrow the money for 3 - 7 years.

In addition, SoFi offers unemployment protection. Unlike traditional personal loan companies, they are not looking to make money from unemployment insurance. Instead, they are offering it as a feature and a brand promise. And the insurance is generous. If you lose your job through no fault of your own, you will be given a payment holiday. Interest will continue to accrue on the loan (and be added to the balance), but no payment will be due and your loan will continue to be reported as current to the credit bureau. You can have 3 consecutive months of payments made at a time, and you can have up to 12 months of payments made during the life of the loan. That offers great flexibility. In addition, they offer job placement services to help you find a job.

Fixed interest rates range from 5.49% to 14.24%* – but you have to sign up for auto-pay in order to get these rates. In addition, SoFi offers variable interest rates from 5.21% – 11.67%* with auto-pay. The rates are based upon 1-month LIBOR and are capped at 14.95%.*

You can use the loans for almost any purpose: pay off credit card debt, home improvement, or anything else because the money can be deposited as cash in your checking account.

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Eligibility requirements

In order to be approved for a loan, you must at least meet the following requirements:

  • You are a US citizen or permanent resident
  • You are at least the age of majority in your state (typically 18)
  • You are currently employed
  • You have graduated from a selection of Title IV accredited universities or graduate programs (only for the student loan product. For personal loans, there is no university requirement).

Personal loans are not available to residents of the following states: Mississippi, Nevada and Tennessee.

If you fail to meet the above criteria, you will be rejected. However, just because you meet these criteria does not mean that you will be approved. SoFi will:

  • Perform an analysis of your ability to repay. They do a “cash flow analysis” looking at your income and expenditure, making sure you can pay
  • Perform an analysis of your history with credit. Missed payments and defaults will most likely get your rejected. You need to have a strong history of repayment. Although they are not a FICO-driven lender (because they look at education, employment and cash flow), the following people will likely have a difficulty getting approved:
    • People who do not have excellent credit. In particular, if you have missed payments or have rapidly built up debt, you could find it difficult to qualify.
    • If you have a “thin credit file”, you will still have a good chance of getting approved. A thin file means that you do not have much information in your credit report. Although that could be a problem with traditional credit scores, SoFi might still be willing to work with you.
    • People with collection items, judgments or other negative legal action

SoFi offers some of the lowest interest rates out there, and they are picky about who they approve. If you have a good degree, a good job and a history of making payments on time, you will likely be able to benefit from SoFi.

And here is the best news: you can check to see if you will be approved, and the interest rate you would receive, without hurting your credit score. SoFi uses what is called a “soft pull” to determine your interest rate and your loan amount.

Given how low the interest rates are at SoFi, if you have a college degree you should take the 3-4 minutes to see if you can be approved. The only cost is your time.

Screen Shot 2015-02-26 at 6.49.15 PM

Remember that you’re in no way obligated to take a loan once you apply.

Unless you accept the loan and go through with the hard credit inquiry, SoFi doesn’t hold you to taking the loans presented to you.

Learn more about SoFi

SoFi is a very well funded start-up, having raised $164 million from some of the biggest and most influential venture capital firms in the Silicon Valley.

They have also built a very strong relationship with investors, and have funded more than $2 billion in loans to date.

SoFi was created with a mission to revolutionize the way we borrow in this country. In particular:

  • They want to make it easy for people to shop for a loan, believing that you should be able to get your interest rate without hurting your score
  • They want to create an easy, seamless experience with a great user experience
  • They want to cut out the costs of the big banks, giving lower interest rates to borrowers and higher interest rates to lenders
  • They want to create a different type of borrowing experience, by providing unemployment insurance as a free benefit.

Their mission, and their personal loan product, align to the vision of MagnifyMoney. When we created MagnifyMoney, we hoped to find lenders like SoFi, and are pleased to award them an A+ Transparency Score.

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We only have one criticism: their underwriting criteria is very tight right now. Hopefully, over time, they will be able to expand the criteria and be able to provide the great experience to people who may have experienced some financial difficulties in the past.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Personal Loans

Is it Possible to Refinance a Personal Loan?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Trapped in a personal loan with a high interest rate or a massive monthly payment? It is possible to refinance to a loan that better suits your financial needs. We’ll explain how to refinance a personal loan and pitfalls to avoid when refinancing unsecured debt.

Is it possible to refinance a personal loan?

Refinancing a personal loan involves taking out a new loan to pay off an existing personal loan. Some people will refinance by negotiating new loan terms with their existing lender. However, many people refinance by taking out a new loan from a different lender. They use the proceeds of the loan to payoff their current loan.

It’s important to note that many lenders don’t advertise personal loan refinancing. However, you shouldn’t necessarily exclude them from your loan refinance search.

For example, a company spokesperson from SoFi (one of our top-rated personal loan issuers) explains that it treats all personal loans like incremental debt. If the company believes you can handle the payments on both your existing loan and your new loan, you may qualify for the new personal loan. On the other hand, Lightstream, a division of SunTrust Bank, specifically offers personal loan refinancing. Lightstream prices loans differently based on their intended use. Either company could be a great option to refinance your personal loan.

Depending on your income, your credit score, and your credit usage you may find a great rate at any number of personal loan companies.

When does it make sense to refinance a personal loan?

Refinancing your personal loan generally makes sense when the new loan comes with better terms or you need to refinance in order to remove a cosigner.

For example, your credit may have improved or your income increased significantly enough that you may qualify for a loan with a better APR. On the other hand, you may be struggling to meet your monthly payments and want to take out a new personal loan with lower monthly payments and a longer loan term.

“It could make sense to refinance almost any time if you can get better terms,” says Todd Nelson, business development officer for Lightstream, a division of SunTrust Bank. “Less interest is always a good thing.”

How to refinance a personal loan

No matter your goal, you’ll want to take a few steps to make sure that you get the best possible deal on your new loan.

Understand your existing loan

Before you pay off an old loan, check whether your loan has prepayment penalties, so you can factor any penalties into your loan analysis. Most banks do not charge prepayment penalties for personal loans, but those that do will typically charge a set fee for paying off a loan early. The terms and conditions of your loan will outline whether or not you have to pay a prepayment penalty. If you don’t understand the terms, you can talk to your lender to clarify the rules.

In addition to understanding your prepayment penalties, you’ll want to know your interest rate, the time remaining on your loan, and the required monthly payment. Refinancing your loan may affect all three of these numbers.

Get your credit in order

Once you understand your existing loan, you’ll want to check your credit score. You may need to make some efforts to clean up your credit before applying for a loan refinance. In particular, removing errors from your credit report and paying down credit card debt may help to improve your odds of approval. If possible, avoid applying for additional loans for three to six months before you refinance your personal loan. Applying for multiple lines of credit in a short time period makes you look like a worse credit risk according to the Fair Isaac Corporation, which creates the FICO® scores that are widely used in lending decisions.

Although your credit score matters, it’s not the only factor lenders will consider when setting your loan rate. “A great credit score doesn’t mean you’ll get the best rate,” Nelson cautions. Lenders will also consider your existing debt load, your income and how you’ve used debt in the past.

Prepare a budget

Refinancing a debt means your monthly payment will change. You’ll want to be sure that you can handle the change by preparing a budget. You need to know how much you can realistically pay each month, so you can continue to make timely payments every month.

Start shopping around for a new loan

Once you have your finances in order, you’ll want to start shopping for new loans. A great place to start is with LendingTree, where you can fill out a short online form and potentially get quotes from several lenders at once. LendingTree is the parent company of MagnifyMoney.

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If you don’t see banks offering better terms, you may want to stick with your current loan until you pay it off.

Apply for multiple loans

When you see the potential for savings, start applying for new personal loans. When you apply for a new personal loan, you will see a hard credit inquiry on your credit report. The more places you apply, the more credit inquiries you’ll see.

However, multiple credit inquiries won’t destroy your credit if you apply within a few weeks.
According to the credit reporting bureau Experian, “Generally, credit scoring models will count multiple hard inquiries for the same type of credit product as a single event as long as they occur in a short window of a few weeks.”

When you apply for a personal loan refinance, you’ll need all your personal identification documents, and you may need proof of income (such as a pay stub, W-2 form or a tax return).

Check out our list of the best personal loans for 2017.

Choose the best offer

Once you have a few offers in hand, you’ll want to compare them to see which is the best deal for you.

You can use this calculator to compare the interest you expect to pay on your existing loan (use your current balance, current interest rate, and current monthly payment at the top) with the interest and fees you’ll pay on a new personal loan.

When you find the best offer, you can accept the loan terms with your new lender.

Pay off your old loan

The process for paying off your old loan will vary by lender. According to Nelson from Lightstream, lenders who work with high-credit-score applicants will generally deposit the funds into your checking or savings account. Then it’s up to you to pay off your existing debt.

In general, you can close your old debt by making a payment through the Bill Pay portal on your lender’s website. After you make the payment, you should see a balance of $0. You can call your lender to be sure that the final payment is processed and the loan is closed.

Lenders that work with subprime borrowers may pay off the old debt directly. In those cases, you should still call the lender to confirm that your old debt is closed.

Shopping for lower interest rates

If you’re looking for a lower interest rate, you’ll probably find a better personal loan in one of two circumstances. First, you may find a better interest rate if your credit score improved since taking out the loan. The more your credit score improved, the more likely you are to see great refinancing options.

You may also find a better interest rate if you didn’t originally shop around. In this situation, it may pay off to compare personal offers from a few different lenders. You may be surprised by how low your rate can go.

Of course, a lower interest rate doesn’t mean you’ll necessarily save money when you refinance your personal loan. You will want to do the math the following to see if you will actually save money with a refinance. If the origination fees and the total cost of interest are lower than the remaining interest on your loan, it makes sense to refinance the loan.

Finding lower monthly payments

Anyone looking to lower their monthly payments will usually want to refinance to a longer loan. While credit score improvements may lower your monthly payment a little, spreading the payments over a longer period lowers the payments even more.

If you’re facing a pinched cash flow, refinancing to a longer loan may make sense (especially if you can combine it with a better interest rate). The problem with refinancing to a longer loan is that you’ll generally pay more interest in the long run. Use this personal loan calculator to see how much more you’ll pay over time.

Taking out a larger loan

Some people consider refinancing a personal loan when they want to take on a bigger loan for an upcoming expense, or to consolidate additional debt. Refinancing makes sense if the new loan has a lower interest rate. In general, you want to keep your loan at the lowest interest rate possible, even if that means having two payments. If you want to take on more debt, be sure your budget can handle the added expense. Create a debt payoff plan before you take on any new debts.

When to avoid refinancing a personal loan

Even with lenders offering tantalizingly low interest rates, refinancing a personal loan doesn’t always make sense.

Refinancing isn’t cost-effective

For example, you don’t want to choose a new loan if it won’t save you money. This calculator can help you compare your current costs to the interest and fees you’ll pay if you choose to refinance. High origination fees may keep an otherwise attractive offer from being cost-effective.

Aggressive debt payoff

Refinancing a personal loan may backfire if you’re on an aggressive debt payoff plan. A loan with an origination fee may require several months of standard payments to reach a break-even point. This refinance calculator can help you determine how long it takes to reach the break-even point. (Use a tax rate of 0 percent.)

When you don’t have a debt payoff plan

Some people feel tempted to refinance a personal loan when their budget gets tight, and the monthly payments feel high. A personal loan refinance could be a smart financial move, but the refinance needs to be part of your comprehensive money management strategy. Before refinancing, create a realistic debt payoff plan.

Things to watch out for

In general, personal loans are straightforward, but you should beware of these personal loan traps (especially if you’re trying to refinance a subprime personal loan).

Prepayment penalties: Most major banks don’t charge prepayment penalties, but before you refinance, you’ll want to check your existing loan, too, to make sure one isn’t lurking in the fine print. A prepayment penalty may negate some of the savings you get from lowering your interest rate.

Credit insurance: Some lenders will try to get you to buy life insurance to cover the cost of the loan if you die. In general, this is not a good value. In fact, the Consumer Financial Protection Bureau (CFPB) has adopted measures that restrict the sale of credit insurance. However, you may still hear a pitch for the product.

It makes a lot of sense to have some level of insurance in place to cover your debts if you’re married, lose a job, etc. However, an inexpensive term life policy is a far better value than a loan specific policy. Job loss credit insurance may be a more compelling product, but it can be very expensive. Be sure to weigh the cost of the insurance before purchasing it.

Origination fees: Many personal loans come with origination fees, which can be as high as 8 percent of the loan’s value. That makes taking out a new loan an expensive proposition. Compare the remaining interest on your loan to the cost of the origination fee plus the interest cost of the new loan before deciding to refinance.

Late payment fees: Some lenders will charge you a late fee if you miss your payment date. Late fees can drive up your loan costs in a hurry. Anyone who has struggled with payments in the past will want to check this fee before refinancing.

Alternatives to refinancing a personal loan

Refinancing a personal loan to another personal loan isn’t always the cheapest option. If you’ve got great credit, or you own a home you might find cheap options to eliminate your debt.

Balance transfer credit cards

Some credit card companies will allow you to transfer a personal loan balance to a promotional 0 percent intro APR balance transfer credit card. This can be a quick way to drop your interest rate in a hurry.

Before you apply for a balance transfer credit card, you’ll want to check on a few things. First, you won’t want to apply for a credit card from a bank that holds your debt. For example, you won’t want to opt for the Citi Simplicity® credit card if a Citi Affiliate owns your debt.

It’s also important to clarify that the credit card company will allow you to transfer a personal loan balance to your credit card. For example, the Chase Slate® card does not allow you to transfer personal loan balances to your credit card.

You can generally learn more about a lender’s balance transfer policy by reading their terms and conditions page in a section entitled Balance Transfers. However, if the terms aren’t clear, you should take the time to call a bank representative before applying.

A balance transfer credit card is an appropriate solution for people who can pay down their personal loan debt before the introductory rate expires.

HELOCs

Homeowners who have equity in their house may also find that a HELOC, or home equity line of credit, offers better terms than their existing personal loan. A HELOC has tax-deductible interest, and it operates like a line of credit. You can use a HELOC to pay off higher interest debts, or to pay for other important expenses. However, you need to be careful not to treat a HELOC as free money. You still need to pay off your HELOC in time.

Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah at hannah@magnifymoney.com

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Using a Cosigner to Get a Personal Loan

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

personal loan cosigner

Life can get expensive, whether it’s paying for a child’s wedding or unexpectedly buying a new furnace when yours breaks in the middle of winter. Personal loans can be a quick and easy way to borrow the money you need — if you have good credit — as you can get a lump sum in a variety of amounts that you can use at your discretion.

Some borrowers, however, may have trouble qualifying for a personal loan. This often happens due to a low credit score, past bankruptcies or the lack of a credit history. In these cases, one way to increase your chances of qualifying for a personal loan is to persuade a friend or family member with good credit to serve as your cosigner.

What is a cosigned loan?

When lenders assess loan applications, they are looking at applicants’ financial histories to determine how likely they are to repay what they borrow. Lenders may turn down applicants who have a poor credit score, lack a steady income or don’t have much of a credit history. To a financial institution, people with those attributes may pose too great a risk.

But a cosigner gives applicants a way around these circumstances.

A personal loan cosigner is someone who agrees to assume equal responsibility for the loan, which means that if you can’t make the payments, the cosigner must. Typically, a cosigner for a personal loan has a good credit score and and the ability to repay the loan, based on his or her income and other debt obligations.

You can benefit from a cosigner in two ways. First, a cosigner’s good credit score and financial history may help you — an otherwise unqualified borrower — get a personal loan. Secondly, a cosigner can assist you in receiving a significantly lower interest rate.

Pros and cons of a cosigned loan

Pros:

  • A cosigner can help you qualify for a personal loan or get a lower interest rate you wouldn’t otherwise get because of poor or thin credit or insufficient income. A cosigner also can increase the number of loan offers you receive, according to a spokesperson for LendingClub, an online lender.
  • A personal loan with a cosigner can provide you with much-needed cash, whether it’s to pay off high-interest debt or fund home repair.
  • If you’re determined to improve your credit, you can use a cosigned personal loan to build your credit rating by making regular, on-time payments until the loan is paid off.

Cons:

  • The account will show up on your credit report, but also on the cosigner’s. If you miss a payment, both you and your cosigner will see your credit suffer.
  • If the cosigner applies for a mortgage or other loan, the cosigned personal loan could show up on his/her credit report as a monthly obligation and lower that person’s debt-to-income ratio — even though the cosigner is not making the payments on the personal loan.

Cosigner versus coborrower

The person who agrees to apply for a personal loan can take on one of two roles in the process: cosigner or coborrower. Both roles require taking full responsibility for the loan if the you default on payments.

Coborrower: A coborrower, also called a joint applicant, acts like a partner in the transaction, accepting equal responsibility for paying off the loan and allowing his/her income and assets to be considered on the loan application. The coborrower’s name will appear on loan documents.

Coborrowers are entitled to a share of the loan’s proceeds and share in the obligation to repay the loan.

Cosigner: A cosigner’s name also appears on loan documentation, but rather than sharing ownership in the loan, the cosigner agrees to repay the loan if you cannot make the payments. The cosigner serves as a guarantor of the loan and is only liable if the applicant fails to make payments.

How to get a cosigned personal loan

Income requirements

Most lenders will look at an applicant’s work history and current employment when determining whether he/she is likely to repay the loan. While a lender may not require a minimum income, the applicant will need to demonstrate that there will be a secure income over the life of the debt.

Credit requirements

Because the personal loan market has grown more competitive, lenders offer a range of interest rates based on the amount and length of the loan and the borrower’s credit history. Most lenders only will consider good or excellent credit, although there are options for people with bad credit. Here are the best personal loan rates available now, for a variety of credit levels.

How to get the best personal loan rate

One advantage of personal loans is that they are simple financial products, which means borrowers only need to compare loans’ interest rate and fees. Personal loans are approved for a certain amount, which the borrower receives upon loan approval. The borrower then makes fixed payments at a fixed interest rate until the load is repaid.

If you want to get the best rate possible or want to get a loan without a cosigner, there are several actions you can take to improve your financial standing.

Improve your debt-to-income (DTI) ratio

Lenders use DTI to figure out what percentage of your income is spent on paying debts. It’s determined by dividing your monthly debt payments, including credit cards, vehicle loans and student loans, by your gross monthly income (income before taxes). Lenders look for a low DTI, which indicates better financial health.

Lenders often look favorably on applicants with DTIs in the 30s. For example, Wells Fargo lists on its site that a DTI of 35 percent or less shows that the borrower likely has money to save after paying bills. A DTI between 36 and 49 percent indicates that the borrower may struggle to handle unforeseen expenses, and lenders may look at other eligibility criteria for borrowers in this range, according to Wells Fargo.

A DTI of 50 percent or higher shows that most of a borrower’s income is going toward paying off debts, leaving little or no money for unexpected expenses. Lenders may be unlikely to consider applicants in this category.

If your DTI is too high, with time and financial discipline you can improve the picture. You’ll need to reduce your total monthly debt payments, which you can do by paying off loans or refinancing or consolidating loans for a lower interest rate and/or monthly payment.

Increase your credit score

According a November 2017 analysis of personal loan offers aggregated by MagnifyMoney, lenders require credit scores ranging from minimums in the mid-500s to 720. A higher credit score will typically result in a lower interest rate on a personal loan.

Here are the best ways to increase your credit score, according to credit scoring giant FICO:

  • Pay your bills on time.
  • Reduce the amount of debt you owe, which you can do by make extra payments toward your debts and curbing your spending to keep your credit card balances low.
  • Check your credit report for errors that could be hurting your score.

Shop around for rates

A number of lenders have entered the personal loan market, and it’s worthwhile to check offers online. LendingTree, our parent company, is a good place to start comparing personal loan offers.

Be sure to examine each loan’s repayment terms and rates, as they could differ — even from the same lender. Additional charges can include personal loan origination fees that can range from 0.99 to 8 percent of the amount of the loan (although some lenders don’t charge this fee), late payment fees, check processing fees and penalties for paying off the loan early.

Lenders that allow cosigned personal loans

Here are three lenders from our list of best personal loan rates that offer loans with cosigners.

Lightstream: Lightstream is the online lender of SunTrust, and if offers a streamlined application process that can result in funding in one business day. For a $10,000, 36-month personal loan, Lightstream offers an interest rate of 3.24 percent for applicants with excellent credit and rates up to 7.34 percent for applicants with credit as low as the minimum score of 680. Lightstream does not require an origination fee, but it does adjust its terms based on the intended use of the personal loan. The online lender rates well for its transparency with its terms, and it does not charge additional fees.

LendingClub: LendingClub offers an easy online application process that will provide you with a table of loan options based different amounts, lengths of the loans and interest rates. The lender will offer loans as high as $40,000 for up to 60 months, and interest rates are determined by LendingClub’s internal scoring system. Scoring is based on the applicant’s DTI ratio (it should not be above 50 percent excluding mortgage payments), a credit report with few hard inquiries, a credit score of at least 600, and evidence of some credit history. LendingClub charges an origination fee of 1-6 percent of the amount of the loan.

Note that LendingClub does not offer loans to residents of Iowa and West Virginia.

OneMain: While OneMain will offer personal loans to applicants with credit scores of 600 and same-day financing, the tradeoff is high interest rates and stricter personal requirements. Applicants must have a job and verifiable income, no bankruptcy filings and some credit history. Interest rates will range between 17.59 percent and 35.99 percent, and OneMain offers personal loans up to $25,000. The lender does not offer loans for tuition or businesses expenses. OneMain does not charge an origination fee, but lenders likely will try to sell you unemployment, life or disability insurance when you apply for a loan.

Finding a cosigner

Approaching a trusted friend or relative about cosigning a personal loan can be touchy; you are asking them to risk their credit and finances for you to borrow money.

Most importantly, your cosigner should be financially stable and have enough money to repay the loan should you be unable to do so. A spokesperson for LendingClub said many borrowers asking about loans often bring up the idea of asking a close friend or family member to cosign. “Be sure your cosigner has a solid financial history and a strong credit profile,” the spokesperson said. These factors will play a significant role in the rates and offers you’ll get for a personal loan.

Even with all of those factors in place, be prepared for everyone you ask to say no. Cosigning a loan presents a significant risk that some people — no matter how much they like you — won’t be willing to take.

When it comes to repayment, it is vital that you make every monthly payment on time. Missed payments will show up on your cosigner’s credit report, which will hurt that person’s credit as well as yours. If someone trusts you enough to risk his or her good financial standing, rise to the occasion and do whatever it takes to pay off your cosigned personal loan responsibly and on time.

If you’re the one considering cosigning a loan, the Federal Trade Commission recommends you ask the creditor to notify you if the borrower misses a payment — get the agreement in writing. The FTC also encourages you to get copies of all documents pertaining to the loan and keep them for your records.

Can I remove my cosigner from the personal loan in the future?

The option to release a cosigner varies by lender. Some lenders, such as LendingClub, will not allow you to remove a cosigner from a loan at any point, while others may allow you to release a cosigner after the primary borrower has made a certain number of on-time payments. Before you commit to a loan, ask if removing a cosigner is an option and, if so, how to go about it when the time comes.

Personal loans with cosigners can greatly benefit borrowers, but it’s important to keep in mind that cosigners are putting their finances on the line to help you. Borrowers can best protect their cosigners by making sure they are vigilant about keeping a steady income, making payments — and yes, using the loan responsibly.

Marty Minchin
Marty Minchin |

Marty Minchin is a writer at MagnifyMoney. You can email Marty here

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Can I Get a Holiday Loan?

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If you’re stressed over the possibility of racking up holiday debt this year, you may be right to worry. In our 2016 holiday debt survey, 65.2 percent of respondents who added debt during the holidays said they did so unexpectedly and didn’t budget for the extra expenses.

This just goes to show what can happen if you take on debt without a plan. If you charge holiday purchases and don’t have a plan to pay them off, you can wind up making monthly payments for longer than you think — and fork over lots of interest payments along the way.

While most people said credit cards were the main source of their debt, nearly 9 percent said they used personal loans to finance their holiday spending, making it the third most popular borrowing option overall.

If you’re considering using a personal loan to fund your holiday shopping this year, it’s important to know the pros and cons first.

First up … what’s a holiday loan?

A holiday loan is simply a personal loan issued by a financial institution, like an online lender, bank or credit union. While these loans are intended to cover holiday expenses, they are not the same as other short-term loans such as payday or cash advance loans.

Since holiday loans are unsecured, you can borrow money without putting up anything as collateral. But because the lender is assuming more risk this way, these loans can carry very high interest rates. That being said, if you have good credit, relatively low levels of debt and sufficient income, you might qualify for lower rates.

Generally speaking, you can get a holiday loan (or other unsecured personal loan) in amounts up to $35,000 with several lenders. However, some may let you borrow quite a bit more. Your interest rate can vary depending on your creditworthiness, and the amount of time you have to repay your loan depends on how much you borrow and the loan terms you select. Personal loans are issued with a fixed repayment period, which can last up to 84 months.

Why get a loan for the holidays?

While some people budget throughout the year, setting aside money for the holiday season, there are plenty of ways to get off track. It’s possible that other expenses will pop up and cause your savings plan to go awry, or that you’ll need to pay for holiday travel or to get your home ready for guests.

Applying for a personal loan may be a good way to bridge the gap between the money you have and the money you need, says Jeff Rose, a certified financial planner and Discover Personal Loans partner. “Borrowing a set amount of money with a fixed repayment term and fixed rate can help you meet your financial obligations over the holidays while having a set budget with a clear payoff schedule, resisting the temptation to rely on revolving debt.”

Rose says he has seen situations where a holiday loan made sense. In one situation, an acquaintance of his was desperate to return home for the holidays to see his dying father on what could be his last Christmas. In that case, taking out a personal loan to travel home was “one of the best investments they’ve ever made,” Rose tells MagnifyMoney.

But, holiday travel isn’t the only reason to take out a holiday loan.

For example, the holidays are a popular time to propose, and “engagement rings can get expensive,” says Rose. You might even find the perfect ring that costs more than you have saved, but the time is ripe for asking.

“That’s where a personal loan can be a financially responsible tool to help you make this purchase,” he adds.

Or, perhaps you want to borrow money to cover the costs of holiday gifts, replace the appliances in your home or make a special purchase for your family.

What it takes to qualify

Getting a personal loan to cover expenses during the holidays is no different than getting a personal loan any other time of year, notes Rose. “Different lenders have different qualifications for loan approval and offer different rates, so my advice would be to research and find what fits your financial situation,” he says.

Generally speaking, however, some typical minimum requirements for a personal loan include being a U.S. citizen or permanent resident, being at least 18 years of age, and having a low debt-to-income ratio.

Your credit score may also impact your ability to get a personal loan. While it’s possible to get a personal loan with a FICO score of 500 or above, the best loan rates and terms go to those with good or excellent credit.

In addition to your credit score, another important requirement for getting a personal or holiday loan is that DTI — debt-to-income ratio — says San Diego financial adviser Taylor Schulte. To calculate your debt-to-income ratio, add up your monthly debt obligations (i.e. mortgage, auto loan) and divide that by your monthly gross income.

“Some experts say a debt-to-income ratio higher than 36 percent can dramatically reduce your chances of getting a loan or increase the interest rate to an unreasonable number,” he says. To improve your debt-to-income ratio, try paying down your existing debts,, picking up extra work to bring in additional income or putting on your game face and asking for a raise.

Schulte also notes that, if all else fails, you could ask a family friend or family member to cosign for your loan. While this can help you get a lower interest rate and better terms, this also means your cosigner is jointly responsible for repayment.

Holiday loans versus credit cards

While a holiday loan can be a good option for consumers who need cash to cover end-of-year or holiday expenses, some consumers also turn to credit cards to meet their needs. This strategy can be advantageous since some credit cards may offer a 0 percent intro APR on purchases for 12 months or longer. But, before you decide between a holiday loan and a 0 percent intro APR credit card, it’s important to note how each one works — and the reasons one option might work better for you than the other.

If you’re considering a personal loan, know that these financial products typically have a fixed interest rate and are structured with equal payments made over a specified time period. In that respect, a personal loan may be easier to pay off in a timely manner since you know exactly when your last payment will come due.

With a credit card, on the other hand, you’ll get access to a line of credit you can use to charge purchases. Because the amount you borrow may vary, you may not know your exact monthly payment. Plus, your monthly payment will increase as you use your card to charge more purchases.

While many cards offer 0 percent intro APR on purchases for more than 12 months, your APR, or interest rate, also resets after the introductory offer is over. If you don’t pay off your balance before that happens, you could wind up paying a hefty interest rate on your balance that is higher than what you would pay on a personal loan.

Things to watch out for

While borrowing money for the holidays can make sense, that doesn’t mean this option is foolproof. There are plenty of risks that come with borrowing.

Risk #1: Borrowing without a plan

Whether you decide to take out a holiday loan or charge your holiday purchases on a credit card, Rose recommends making sure you have a clear plan for the funds you borrow and a true need, along with the ability to repay the loan.

“Also, consider the repayment timeline and total cost of the loan, including any fees, from the start to ensure you can afford the monthly payments,” he adds

Any time you borrow money, you should also make sure you’re not borrowing to buy things you can’t truly afford — or just being wasteful in general. “Around the holiday season, it can be easy to spend more than you planned,” says Rose.

If you rack up too much debt and don’t have a clear plan to pay it back, you could wind up spiraling into more and more debt or taking years to pay it all off. And obviously, more debt inevitably leads to more interest charges layered on top.

Risk #2: Too many fees

Look for personal loans that do not charge additional fees — examples of these would be origination fees and prepayment penalties.

And understand other potential traps, such as with personal loan companies that precompute interest or ask you to pay for unnecessary insurance. In a precomputed loan, the total amount of interest that you would pay during the entire term of the loan is calculated and added to the balance up front.

Risk #3: Not shopping around

Another major risk of personal loans is that you won’t take the time to shop around, Schulte says. Through his personal experience, Schulte has seen how many people wrongly assume their primary bank is the best place to get a loan — even when that’s not even close to being accurate.

“It doesn't hurt to start with your primary bank to see what they can offer,” says Schulte. “But, failing to shop around could literally cost you thousands.”

Schulte suggests shopping around with at least three to five lenders before making a decision. Fortunately, it’s fairly easy to get multiple loan quotes online.

We recommend you shop online to find lenders without those tricks and traps. A good place to start the search is with LendingTree, MagnifyMoney’s parent company. With a short online form LendingTree will perform a soft credit pull (with no impact to your score) and match you with multiple loan offers.

Because dozens of lenders participate in LendingTree’s program, you may also find lenders willing to accept borrowers with less-than-perfect credit.

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Tips for financial success during the holidays

There are a number of things you can do throughout the year to help yourself financially when the holidays roll around, Rose says. If you’re eager to make the most of this holiday season, or at least escape the holidays with minimal financial damage, consider these suggestions:

  • Save for the holidays all year long.“If each month you put a portion of your income in a separate account designated for holiday spending, you should have a nice amount of money set aside when the season arrives,” says Rose. While it may be too late to start saving for this year’s holiday season, it’s never too early to start saving for next year.
  • Set appropriate expectations for your family.Whether you’re worried you’ll have a skimpier array of gifts under the tree or not, Rose says it’s important to have an upfront conversation with your family (spouse and children) about how many gifts they are going to receive and how much you’re going to spend. “It’s easy to get caught up in the season and start adding more and more to the pile and buying stuff you don’t need,” he says.
  • Stock up on gifts all year long.“You can also take advantage of buying gifts when retailers are having big sales,” says Rose. On Cyber Monday, you can typically get huge savings on everything from clothes to electronics. Buying in advance on these type of sales is huge, and right after this year’s holiday season can be a great time to stock up on next year’s gifts.
  • Opt out of gift exchanges.If you’re involved in multiple gift exchanges or “Secret Santa” arrangements, opting out for the year can help you save some cash. By not participating in these holiday "extras," you can save money for the gifts that are most important.
Holly Johnson
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Holly Johnson is a writer at MagnifyMoney. You can email Holly here

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PNC Personal Loan Review

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Updated November 08, 2017
With about 2,800 branches in 19 states and the District of Columbia, PNCis the fifth largest bank in the United States. It’s primarily located in the eastern half of the US, with most of its branches and its headquarters being in the northeast.

If you’re looking for a personal loan from a trustworthy, familiar source, PNC might be your answer. It offers an unsecured personal loan on par with most lenders, as well as a secured loan that allows up to $100,000 to be borrowed.

Most traditional banks haven’t been able to compete with online-only lenders in the personal loan space, so let’s see how PNC compares.

Personal Loan Details

PNC has three personal loan options – secured and unsecured installment loans, and a line of credit. For the purpose of this review, we’ll be focusing on the installment loans.

Most online lenders only offer unsecured loans. In case you’re not sure of the difference:

  • Secured loans require an agreement to let your creditor use your assets as collateral in the event you default on your loan. This protects the creditor as it can sell your assets and recoup the cost of the loan.
  • Unsecured loans are the exact opposite – there’s no collateral involved. There’s less risk for the borrower and more for the creditor.

While secured loans seem to take the creditor’s side, the bonus is they often have more favorable terms because creditors are taking on less risk. You may have access to better interest rates or more money.

A simple example of a secured loan is a mortgage loan. Your home (property) is used as collateral. If you don’t pay your mortgage, your mortgage lender can seize the property and sell it.

Now that you know what it means to have a secured or unsecured loan, we’ll take a look at the differences between the details.

PNC’s unsecured personal loan allows you to borrow between $1,000 and $25,000 on a variety of terms: 6 months, and 1, 2, 3, 4, and 5-year options are available.

PNC’s secured loan allows you to borrow much more – between $2,000 and $100,000. The collateral required for this loan is non-real estate (a vehicle, for example).

Both the unsecured and secured loans have fixed interest rates.

Unfortunately, you can’t check APRs or sample payments for secured loans online, and when we called, we were told they vary based on your credit. They were unable to give any APR range.

The APR for unsecured loans varies by the loan amount:

  • For a $5,000 loan, the APR ranges from 9.49% - 21.99%
  • For a $10,000 loan, the APR ranges from 6.74% - 19.24%
  • For a $15,000 loan and up, the APR ranges from 5.99% - 18.49%

A payment example: if you borrow $20,000 on a 5-year term with an APR of 7.74%, your monthly payment will be $403.04.

The Pros and Cons

Applying for a personal loan with a bank is typically a bit more time consuming than applying with an online-only lender. This is because banks are thorough with the documentation they request.

However, PNC states the application should take no longer than 15 minutes online.

Unfortunately, if you’re looking at the secured loan option, you can’t apply online. You can only apply by phone, or in person at a branch. You can apply online with the unsecured loan option.

PNC’s APRs are also quite high, especially for the loan amounts. Many online-only lenders are offering better rates starting in the 5% range.

An additional negative might be that PNC only offers fixed rates. While variable rates aren’t stable, they’re usually lower than fixed rates. If you’ll have the ability to pay the loan off soon after it’s disbursed, having the lower variable rate can be beneficial.

If you fall on hard times, there’s a possibility that PNC will allow you to defer your payments, but this is reviewed on a case-by-case basis.

PNC urges borrowers to contact the bank at the first sign of trouble – before their payment is due.

Application Process and Documents Needed to Apply

If you’re applying for an unsecured loan, you can easily apply online and be done within 15 minutes. PNC recommends having the following information ready:

  • Your photo ID
  • Annual income, plus any other sources of income you have
  • Employer information (if you’ve been working there for less than 2 years, have your previous employer information as well)
  • Address/proof of residence (if you’ve been living there for less than 2 years, have your previous address ready)
  • If you’re applying with a co-applicant, you’ll need the same information for them
  • If you’re applying for a personal loan to consolidate debt, you’ll need account statements as PNC needs to know your account number, monthly payment, and outstanding balance

PNC’s application is straightforward, and it also has a checklist available for you on the application in case you need to reference it.

PNC will use a hard credit inquiry when applying for a loan with them.

Who Qualifies for a Personal Loan With PNC?

To have the best chances of being approved for a loan with PNC, you need very good and established credit, along with a reasonable debt-to-income ratio. Your loan terms greatly depend on these two factors. Being a customer with PNC doesn’t increase your chances of getting approved.

Just a note – if you choose the secured loan and want to use your vehicle as collateral, it must be less than 8 years old and have less than 80,000 miles on it.

Who Benefits the Most from a Personal Loan With PNC?

Borrowers looking for a larger loan amount would benefit from the secured personal loan with PNC.

SoFi is the only other personal loan lender offering that much money, and while the loan is unsecured, it doesn’t have any physical locations. If you feel more secure applying in-person and receiving assistance from a trusted bank, you might prefer to go with PNC.

However, most borrowers will benefit from going elsewhere to get an unsecured personal loan.

The Fine Print

There is no prepayment penalty for either loan, so you can pay your loan in full at any time.

There’s no origination nor annual fee for the unsecured personal loan.

When called, a PNC representative wouldn’t disclose any other fees associated with the loan (late fees, returned payment fees, etc.).

Transparency

Since there is so little information on its website about the secured loan, it was important to find out as many details as we could from a call.

Unfortunately, the PNC representative that answered the call wasn’t very helpful. The most she could offer was that the loan rates and terms were dependent upon credit, and that the credit score and debt-to-income ratio of an applicant was extremely important.

When asked about late fees for the loan, she said “another department” handles that, and was unable to transfer the call to the appropriate personnel, as you need to have a loan with PNC before fees can be discussed.

This was rather disappointing. Most lenders are open to discussing these details with potential borrowers – fees can make a huge difference when considering loan options. To be one of the few lenders unwilling to discuss fees and rates beforehand kicks PNC’s transparency down a notch.

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Alternative Personal Loan Solutions

As mentioned, SoFi* is the closest competitor as it allows borrowers a maximum of $100,000 as well. The minimum you can borrow is $5,000. Most personal loan lenders have limits of around $25,000 - $35,000.

SoFi offers fixed rates and variable rates, while PNC only offers fixed rates for its installment loans. SoFi’s fixed APR ranges from 5.49% - 14.24%, and its variable APR ranges from 5.21% - 11.67%, if you're enrolled in autopay (with a cap of 14.95%).

There are no fees associated with SoFi’s personal loan except for a late fee, which is 4% of the amount due or $5 – whichever is less.

You can borrow funds on 3, 4, 5, 6 or 7-year terms, and personal loans are available in 46 states, including the District of Columbia.

SoFi also offers unemployment protection. If you lose your job through no fault of your own, you can apply for payment assistance.

SoFi uses a soft credit inquiry when you first apply to get your rates, which means your credit score won’t be affected. If you choose to move forward with the loan, a hard credit inquiry will be used.

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If you want to get a personal loan from a more traditional lender, Marcus by Goldman Sachs®. Is a great option. Goldman Sachs Bank USA has been around for over a century and Marcus is one of their brands that offers no-fee, fixed-rate personal loans, along with high-yield online savings accounts and certificates of deposit. Getting a personal loan through Marcus is an entirely online experience, making it easy to get the money you need from the comfort of your home.

Marcus personal loans have rates that range between 6.99% to 23.99% APR, with terms between 36 and 72 months.

There are a lot of perks that come with getting a personal loan through Marcus. First, there are absolutely no fees.Marcus doesn’t charge an initial origination fee for their personal loans and you won’t have to pay a late payment fee if you end up paying late or missing a payment, though, that payment will accrue additional interest and your total payment will be larger. Marcus also offers the chance to defer payments after you have made on time payments for a full year.

There is a only a soft pull on your credit when you initially apply for the loan, so you can compare rates and terms without the worry of your credit score being affected.

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If you’re looking for good alternatives to PNC’s unsecured loan, take a look at Earnest. You can borrow between $2,000 and $50,000 on a 1, 2, or 3-year term.

There are no hidden fees associated with Earnest’s personal loan, and it’s offered in 23 states plus the District of Columbia.

You’ll need a minimum credit score of 720 to be eligible for approval with Earnest, and a minimum of 700 to be approved with SoFi, but both lenders take other factors into account, unlike PNC. Your employment history, education, and salary matter as well.

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It Pays to Shop Around

While it would be convenient to have the first lender you apply with be the best solution, that’s not always the case, even with a trusted lender like PNC. Personal loans from bigger banks are falling by the wayside as online-lenders are offering much better rates and terms. Do yourself a favor and shop around to get the best rates, even if you have a prior relationship with the bigger names out there. If you shop around within a 30-day window, your credit won’t take a big hit.

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Erin Millard
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Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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