Updated January 24, 2016
Earnest is anything but a traditional lender for unsecured personal loans and student loans. They offer merit-based loans instead of credit-based loans, which is good news for anyone just starting to establish credit. Their goal is to lend to borrowers who show signs of being financially responsible. Earnest is working to redefine credit-worthiness by taking into account much more than just your score.
They have a thorough application process, but it’s for good reason – they consider different variables and data points (such as employment history, education, and overall financial situation) that traditional lenders don’t.
Earnest*, unlike traditional lenders, says their underwriting team looks to the future to predict what your finances will look like, based upon the previously mentioned variables. They don’t place as much emphasis on your past, which is why a minimal credit history is okay.
Additionally, as their underwriting process is so thorough, Earnest doesn’t take on as much risk as traditional lenders do. With their focus on the financial responsibility level of the borrower, they have less defaults and fraud, which allows them to offer some of the lowest APRs on unsecured personal loans.
Personal Loan (Scroll Down for Student Loan Refinance)
Earnest offers up to $50,000 for as long as three years, and their APR starts at a fixed-rate of 5.25% and goes up to 12.00%. They claim that’s lower than any other lender of their type out there, and if you receive a better quote elsewhere; they encourage you to contact them.
Typical loan structure
How does this look on paper? If you needed to borrow $20,000, your estimated monthly payment would be $599-$638 on a three- year loan, $873-$911 on a two- year loan, and $1,705-$1,744 on a one-year loan. According to their website, the best available APR is on a one-year loan.
Not available everywhere
Earnest is available in the following 36 states (they are increasing the number of states regularly, and we keep this updated): Arkansas, Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, Washington D.C., West Virginia, Wisconsin and Wyoming.
Get on LinkedIn
Earnest no longer requires that you have a LinkedIn profile. However, if you do have a LinkedIn profile, the application process becomes a lot faster. When you fill out the application, your education and employment history will automatically be filled in from your LinkedIn profile.
What Earnest Looks for in a Borrower
Earnest wants to lend to those who know how to manage and control their finances. They want borrowers to know the importance of saving, living below their means, using credit wisely, making timely payments, and avoiding fees.
They look at salary, savings, debt to income ratio, and cash flow. They want borrowers with low credit utilization – not those maxing out their credit cards and experiencing difficulty in paying.
Borrowers must be over 18 years old and have a solid education background. Ideally, they attended college or graduate school, have a degree, and have a history of consistent employment, or at least a job offer that gives them the opportunity to grow.
Overall, Earnest wants to make sure borrowers are taking their future as seriously as they are. After all, they’re investing in it! The team at Earnest knows that money often holds people back when it comes to being able to achieve their dreams and goals, and they’re all about helping borrowers get there.
For that reason, Earnest seeks to learn more about those that apply for loans with them. They review every line of your application, and they want to develop a lifelong relationship with their borrowers. They genuinely want to help and see their borrowers succeed.
The Fine Print – Are There Any Fees?
Earnest actually doesn’t charge any fees. There are no late fees, no origination fees, and no hidden fees.
There’s also no penalty for prepaying loans with Earnest – they encourage borrowers to prepay to reduce the amount of interest they’ll pay over the life of the loan.
Earnest states that one of its values is transparency (and of course, here at MagnifyMoney, that’s one of ours as well!), and they are willing to work with borrowers who are struggling to make payments.
Hala Baig, a member of Earnest’s Client Happiness team, says, “We would work with the client to make accommodations that are appropriate to help them through their situation.”
She also notes that if borrowers are late on payments, they do report the status of loans on a monthly basis.
What You Can Do With the Money
The $30,000 loan limit is enough to pay off debt such as an undergraduate student loan, medical debt, or consumer debt, relocate for a job, improve your home or rental property, help you fund a down payment, or further invest in your education.
Earnest’s APR is much, much better than you’ll receive on many credit cards, and it could be a viable way to decrease the burden of debt you’re currently experiencing.
The Personal Loan Application Process
Earnest does a hard inquiry upon completion of the application. They’re very open about this on their website, stating that hard inquiries remain on credit reports for two years, and may slightly lower your credit score for a short period of time.
Compared to Upstart, their application process is more involved, but that’s to the benefit of the borrower. They aim to underwrite files and make a decision within 7 business days – it’s not instantaneous.
However, once you accept a loan from Earnest and input your bank information, they’ll transfer the money the next day via ACH, so the money will be in your account within 3 days.
Student Loan Refinance
When refinancing with Earnest, you can refinance both private and federal student loans.
The minimum amount to refinance is $5,000 – there’s no specific cap on the maximum you can refinance.
We encourage you to shop around. Earnest is one of the best options, but there are others. You can see the best options to refinance your student loans here.
Earnest offers loans up to 20 years. Unlike other lenders, Earnest allows borrowers to create their own term based on the minimum monthly payment you’re comfortable making. Yes, you can actually choose your monthly payment, which means the loan can be customized to your needs. Loan terms start at 5 months, and you can change that term later if needed.
You can also switch between variable and fixed rates freely – there’s no charge. (Note that variable rates are not offered in IL, MI, MN, OR, and TN. Earnest isn’t in all 50 states yet, either.)
Fixed APRs range from 3.75% to 6.74%, and variable APRs range from 2.55% to 6.03% (this is with a .25% autopay discount).
If you refinance $25,000 on a 10 year term with an APR of 5.75%, your monthly payment will be $274.42.
The Pros and Cons of Earnest’s Student Loan Refinance Program
Similar to SoFi, Earnest offers unemployment protection should you lose your job. That means you can defer payments for three months at a time, up to a total of twelve months over the life of your loan. Interest still accrues, though.
The flexibility offered from being able to switch between fixed and variable rates is a great benefit to have should you experience a change in your financial situation.
As you can see from above, variable rates are much lower than fixed rates. Of course, the only problem is those rates change over time, and they can grow to become unmanageable if you take a while to pay off your loan.
Having the option to switch makes your student loan payments easier to manage. If you can afford to pay off your loans quickly, you’ll benefit from the low variable rate. If you have to take it slow and need stability because you lost a source of income, you can switch to a fixed rate. Note that switching can only take place once every 6 months.
Earnest also lets borrowers skip one payment every 12 months (after making on-time payments for 6 months). Just note this does raise your monthly payment to adjust for the skipped payment.
Beyond that, Earnest encourages borrowers to contact a representative if they’re experiencing financial hardship. Earnest is committed to working with borrowers to make their loans as manageable as possible, even if that means temporary forbearance or restructuring the loan.
Lastly, if you need to lower your monthly payment, you can apply to refinance again. This entails Earnest taking another look at your terms and seeing if it can give you a better quote.
Who Qualifies to Refinance Student Loans With Earnest?
Earnest doesn’t have a laundry list of eligibility requirements. Simply put, it’s looking to lend to financially responsible people that have a reasonable ability to pay their loans back.
Earnest describes its ideal candidate as someone who:
- Is employed, or at least has a job offer
- Is at least 18 years old
- Has a positive bank balance consistently
- Has enough in savings to cover a month or more of regular expenses
- Lives in AR, AZ, CA, CO, CT, FL, GA, HI, IL, IN, KS, MA, MD, MI, MN, NC, NE, NH, NJ, NY, OH, OR, PA, TN, TX, UT, VA, WA, Washington D.C., and WI
- Has a history of making timely payments on loans
- Has an income that can support their debt and routine living expenses
- Has graduated from a Title IV accredited school
If you think you need a little help to qualify, Earnest does accept co-signers – you just have to contact a representative via email first.
Application Process and Documents Needed to Refinance
Earnest has a straightforward application process. You can start by receiving the rates you’re eligible for in just 2 minutes. This won’t affect your credit, either. However, this initial soft pull is used to estimate your rates – if you choose to move forward with the terms offered to you, you’ll be subject to a hard credit inquiry, and your rates may change.
Filling out the entire application takes about 15 minutes. You’ll be asked to provide personal information, education history, employment history, and financial history. Earnest takes all of this into account when making the decision to lend to you.
The Fine Print for Student Loan Refinance
There aren’t any hidden fees – no origination, prepayment, or hidden fees exist. Earnest makes it clear its profits come from interest.
There are also no late fees, but if you get behind in payments, the status of your loan will be reported to the credit bureaus.
Who Benefits the Most from Earnest
Those in their 20s and 30s who have a good grip on their finances and are just getting started with their careers will make great borrowers. If you’re dedicated to experiencing financial success once you earn enough money to actually achieve it, you should look into a loan with Earnest.
If you have a history of late payments, being disorganized with your money, or letting things slip through the cracks, then you’re going to have a more difficult time getting a loan.
Amazing credit score not required
You don’t necessarily need to have the most amazing credit score, but your track record with money thus far will speak volumes about how you’re going to handle the money loaned from Earnest. That’s what they will be the most concerned about.
What makes you looks responsible?
Baig gives a better picture, stating, “We are focused on offering better loan alternatives to financially responsible people. We believe the vast majority of people are financially responsible and that reviewing applications based strictly on credit history never shows the full picture. One example would be saving money in a 401k or IRA. That would not appear on your credit history, but is a great signal to us that someone is financially responsible.”
Overall, it’s very clear that Earnest wants to help their borrowers as much as possible. Throughout their website, they take time to explain everything involved with the loan process. Their priority is educating their borrowers.
While Earnest does have a nice starting APR at 4.25%, remember to take advantage of the other lenders out there and shop around. You are never obligated to take a loan once you receive a quote, and it’s important to do your due diligence and make sure you’re getting the best rates out there. If you do find better rates, be sure to notify Earnest. Otherwise, compare rates with as many lenders as possible.
Shopping around within the span of 45 days isn’t going to make a huge dent in your credit; the bureaus understand you’re doing what you need to do to secure the best loan possible. Just make sure you’re not applying to different lenders once a month, and your credit will be okay.
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