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Pay Down My Debt, Personal Loans

Personal Loans for People with Bad Credit

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 Loans for People with Bad Credit

Updated July 20, 2016

When your credit is less than satisfactory, it can be difficult to find a lender willing to give you a personal loan. That doesn’t mean it’s impossible to find one – there are more options available now than ever before to get a personal loan with bad credit. What’s better is you can easily apply online to see the rates for which you qualify - without hurting your credit score.

In recent years, lenders like Avant and LendingClub have been making loans to people with less than perfect credit. They each have lower credit thresholds and none rely solely on your FICO score when deciding to lend to you, making it easier to qualify.

Even though you might have a poor credit score, your actual credit history may not be that bad. Your credit file could be thin because you didn’t start building any credit until recently, or maybe you’ve only ever had one open line of credit. Whatever the reason, just because your score is low doesn’t mean you’re not creditworthy, and these lenders know that.

Therefore, it’s worth making sure you’re still getting a decent deal on personal loan terms. It can be easy to think that because your score is low, you’ll be approved for a less than ideal interest rate, but you shouldn’t accept the first offer that comes your way.

Start Shopping for a Loan Here - LendingTree


With LendingTree, you can shop for a loan through dozens of lenders with a single online form LendingTree will perform a soft credit pull - which means your credit score will not be harmed . Lenders will compete for your business and will let you know how much you can borrow. You will also be told the interest rate. Because LendingTree works with so many lenders, this is a good place to start if your credit isn't perfect. Rather than taking time to apply (one at a time) to multiple lenders, a single online form can save you a lot of time. (Note: LendingTree is the parent company of MagnifyMoney).


Avant Personal Loan

You could borrow anywhere from $2,000 to $35,000 with a personal loan through Avant. Specific rates and terms vary depending on your state of residence, but in general APRs range from 9.95% to 35.99%.

Checking your Loan Options through Avant will not affect your credit score – it’s initially just a soft pull. On its FAQ, it states most customers have a credit score ranging from 600 to 700, though you can still qualify with a lower credit score.

Its customer service team is on staff seven days of the week to assist you in case you have any questions. It’s also possible to receive your funds as soon as the next business day.

There is no prepayment fee. Loans are available in all states except Colorado, Iowa, West Virginia, and Vermont.



on Avant’s secure website

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

LendingClub Personal Loan

LendingClub* is different than Avant because it’s a peer-to-peer lender. Individual investors can choose to put their money toward your loan – the money isn’t coming from a bank.

You can borrow anywhere from $1,000 to $40,000 with LendingClub. You can borrow for up to 5 years. Its APR ranges from 5.99% to 35.89%.

For example, if you borrow $20,000 on a 5 year term at an APR of 8.91%, your monthly payment will be around $185.24. That’s including an origination fee of 3% (or $600), so the total amount you receive would be $19,400.

There’s no prepayment penalty , but you need to watch out for the origination fees. These range from 1% to 6%, depending on your loan grade. Remember to factor this in when receiving offers, because being charged an origination fee lessens the amount of money you actually receive.

To be eligible for a loan with LendingClub, you must be 18 years or older and have a verifiable bank account. You must be a U.S. citizen, permanent resident, or have a valid long term visa. Your credit score should be at least 600 to qualify.

LendingClub does not offer loans in Iowa and West Virginia.

When determining creditworthiness, it takes the following into consideration:

  • Debt-to-income ratio
  • Credit score
  • Length of credit history
  • Number of open accounts
  • Usage and payment history
  • Other credit inquiries over the past 6 months

It has an A+ rating with the BBB and has been accredited since 2007

Lending Club


on Lending Club’s secure website

*referral link

OneMain Financial Personal Loan

OneMain Financial offers personal loans  ranging from $1,500 to $25,000. You can apply for a secured or unsecured loan. You can also apply online and have a decision within a day.

OneMain Financial has been around for over 100 years. It is a brick-and-mortar bank locations in 44 states.

The APR range is 17.59% to 35.99, and 12, 24, 36, 48, 60 month term lengthsare offered.

What would an example loan look like? If you borrow $6,000 on a 60 month term, at an interest rate of 24.99%, your monthly payment will be around $193.68.

You can check to see if OneMain Financial has a pre-qualified offer for you, as it doesn’t affect your credit score. If you do accept its offer, then a hard credit inquiry occurs.


on OneMain Financial’s secure website

*referral link

Which Lender is the Best Choice?

It’s largely going to depend on the rates you receive. Luckily, with Avant and LendingClub, you’re able to apply without a hard inquiry on your credit, which allows you to shop around without worry. It’s smart to start with these two lenders and see which of the two offers you better terms.

Here’s a side-by-side comparison of the rates and terms offered by all 3 lenders:


OneMain Financial



Amount Borrowed

Up to $25,000 Up to $35,000 Up to $40,000

APR Range

25.10% - 36.00% 9.95%-35.99% 5.99% -35.89%

Length of Loan

Up to 5 years Up to 5 years Up to 5 years

Min. Credit Score

600 580 600

Your best option is to shop around. You can apply to LendingClub, Prosper and Avant without hurting your score. We recommend you start there first.

If you need the money today and live near a OneMain Financial branch, that is your best option. But if you can wait a day, Avant is able to get the funds to you in one business day.

We’ll receive a referral fee if you click on the “Apply Now” buttons in this post. This does not impact our rankings or recommendations You can learn more about how our site is financed here.

Customize your personal loan offers with comparison tool

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at

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Featured, Personal Loans, Reviews

Marcus by Goldman Sachs Review: GS Bank Takes on Online Savings, CDs, and 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.

Marcus by Goldman Sachs

Most Americans probably think of fancy white-collar stock traders on Wall Street when they think of Goldman Sachs, a global investment firm that’s been around since the late 19th century.

In recent years, Goldman made a major pivot, launching a new arm of the company called GS Bank, which would provide internet-only savings accounts to the masses.

They also launched Marcus by Goldman Sachs®, a line of personal loans. Eventually, they decided to rebrand their savings account business, putting it under the Marcus umbrella as well.

Today, through Marcus, you’ll find three product offerings: personal loans, savings accounts, and CDs.

In this article, we’ll take a deep dive into all three products. We’ll tell you what you need to know before opening an account, including what rates they are offering.

All rates are current as of February 14, 2018.

Marcus by Goldman Sachs savings account

A very high interest rate and no fees make this one of the best savings accounts out there.


Minimum Balance Amount



  • Minimum opening deposit: None. However, you’ll need to deposit at least $1.00 if you want to earn any interest.
  • Monthly account maintenance fee: None.
  • Overdraft fee: None.

This is a great account for almost anyone. However, before you click that “Learn More” button below, there are a couple of things to know.

No ATMs. First, Marcus by Goldman Sachs doesn’t offer ATM access to your savings account. You’ll either need to deposit or withdraw money by sending in a physical check, setting up direct deposits, or by moving the money to and from your other bank accounts via ACH or wire transfer.

No checking account. Second, Marcus does't offer a corresponding checking account. That means you can only use this account as an external place to park your cash from your everyday money flow.

Keeping a separate savings account does have its benefits. For example, it’s harder to tempt yourself to withdraw the cash if you’re a chronic over-spender. But, it also means that there might be a delay of a few days if you need to transfer the money out of your Goldman Sachs online savings account and into your other checking account.

How to open a Goldman Sachs online savings account

It’s really easy to open an online savings account with Marcus by Goldman Sachs. You can do it online or over the phone as long as you’re 18 years or older, have a physical street address, and a Social Security Number or Individual Taxpayer Identification Number.

You’ll be required to sign a form which you can do online, or by mail if you’re opening the account over the phone.

on Goldman Sachs Bank USA’s secure website

Member FDIC

How their online savings account compares

Marcus’ online savings account can easily be described with one word: outstanding.

You’ll get a relatively high interest rate with this account, which is among the best online savings account rates you’ll find today. In fact, these rates are currently over seven times higher than the average savings account interest rate.

Even better, this account won’t charge you any fees for the privilege of keeping your money stashed there. It’s a tall order to find another bank that offers these high interest rates with terms this good.

Marcus by Goldman Sachs CD rates

Sky-high CD rates, but watch out for early withdrawal limitations.



Minimum Deposit Amount

6 months



9 months



12 months



18 months



24 months



3 years



4 years



5 years



6 years



  • Minimum amount to open account: $500
  • Minimum amount to earn APY: $500
  • Early withdrawal penalty: For CDs under 12 months, 90 days’ worth of interest. For CDs of 12 months to 5 years, 270 days’ worth of interest. For CDs of 5 years or over, 365 days’ worth of interest.

Marcus’ CDs work a little differently from other CDs. Rather than having to set up and fund your account all at once, Goldman Sachs will give you 30 days to fully fund your account.

Once open, your interest will be tallied up and credited to your CD account each month. You can withdraw the interest earned at any time without paying an early withdrawal penalty, but heads up: If you withdraw the interest, your returns will be lower than the stated APY when you opened your account.

If you need to withdraw the money from your CD, you can only do so by pulling out the entire CD balance and paying the required early withdrawal penalty. There is no option for partial withdrawals of your cash.

Finally, once your CD has fully matured, you’ll have a 10-day grace period to withdraw the money, add more funds, and/or switch to a different CD term. If you don’t do anything, Marcus will automatically roll over your CD into another one of the same type, but with the current interest rate of the day.

How to open a Goldman Sachs CD

Marcus has made it super simple to open up a CD. First, you’ll need to be at least 18 years old, and have either a Social Security Number or an Individual Taxpayer Identification Number.

You can open an account easily online, or call them up by phone. You’ll need to sign an account opening form, which you can do online or via a hard-copy mailed form. Then, simply fund your CD account within 30 days, and you’re all set.

Member FDIC

How their CDs compare

The interest rates that Marcus offers on their CDs are top-notch. In fact, a few of their CD terms are among the current contenders for the best CD rates.

If you’re interested in pursuing a CD ladder approach, Marcus is one of our top picks because each of their CD terms offer above-average rates. This means you can rest easy that you’ll get the best rates for your CD ladder without having to complicate things by spreading out all of your CDs among a handful of different banks.

The only downside to these CDs compared with many other banks is that you can’t withdraw a portion of your cash if you need it. It’s either all-in, or all-out. However, once out, you’re still free to open a new CD with the surplus cash, as long as it’s at least the $500 minimum deposit size.

Marcus by Goldman Sachs personal loan

Personal loans offered by Marcus have low APRs, flexible terms, and no fees.



Credit Required


Max Loan Amount

36-72 months





Marcus by Goldman Sachs personal loans can be used for just about anything, from consolidating debt to financing a large home improvement project. They offer some of the best rates available, with APRs as low as 6.99%, and you’ll not only be able to choose between a range of loan terms, but you can also choose the specific day of the month when you want to make your loan payments.

While there are no specific credit requirements to get a loan through Marcus, the company does try to target those that have “prime” credit, which is usually those with a FICO score higher than 660. Even with a less than excellent credit score, you may be able to qualify for a personal loan from Marcus, though, those that have recent, negative marks on their credit report, such as missed payments, will likely be rejected.

Applicants must be over 18 (19 in Alabama and Nebraska, 21 in Mississippi and Puerto Rico) and have a valid U.S. bank account. You are also required to have a Social Security or Individual Tax I.D. Number.

No fees. Marcus charges no extra fees for their personal loans. There are no origination fees associated with getting a loan, but there are also no late fees associated with missing payments. Those missed payments simply accrue more interest and your loan will be extended.

Defer payments. Once you have made on-time payments for a full year, you will have the ability to defer a payment. This means that if an unexpected expense or lost job hurts your budget one month, you can push that payment back by a month without negatively impacting your credit report.

How to apply for a Marcus personal loan

Marcus by Goldman Sachs offers a process that is completely online, allowing you to apply, choose the loan you want, submit all of your documents, and get approved without having to leave home. Here are the steps that you will complete to get a personal loan from Marcus:

  1. Fill out the information that is required in the online application, including your basic personal and financial information, as well as how much you would like to borrow and what you will use the money for.
  2. After a soft pull on your credit, and if you qualify, you will be presented a list of different loan options that may include different rates and terms.
  3. Once you have chosen the loan you want, you will need to provide additional information to verify your identity. You may also be asked for information that can be used to verify your income and you will need to provide your bank account information so that the money can be distributed.
  4. You will receive your funds 1 – 4 business days after your loan has been approved.


on Marcus By Goldman Sachs®’s secure website

How their personal loans compare

Marcus offers low APRs and flexible terms with their personal loans, but their main feature is that they have no fees. If you are looking for a straightforward lending experience with no hidden fees or costs, Marcus will be perfect for you since you won’t even have to worry about late fees if you happen to miss a payment.

While Marcus offers some great perks, you may be able to get a lower rate if you choose to go with another lender, such as LightStream or SoFi. Both of these lenders offer lower APR ranges and they don’t charge origination fees, though, LightStreamwill do a hard pull on your credit to preapprove you.

LendingClub and Peerform both have lower credit requirements than Marcus, but they also charge origination fees and, being P2P lending platforms, you will need to wait for your loan to be funded and you run the risk that other users might not fund your loan.

Overall review of Marcus by Goldman Sachs' products

Marcus has really hit it out of the park with their personal loans, online savings, and CD accounts. Each of these accounts offers some of the best features available on the market, while shrinking the fees down to a minuscule, or even nonexistent, amount. Their website is also slick and easy to use for online-savvy people.

The only thing we can find to complain about with Marcus is that they don’t offer an equally-awesome checking account to accompany their other deposit products. Indeed, it seems like Marcus has turned their former hoity-toity image around: Today, they’re a bank that we’d recommend to anyone, even blue-collar folks.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here


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Personal Loans

Requirements to Get Your Personal Loan Approved

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.


For the right consumers, personal loans can be a quick way to get much-needed cash for anything from a home repair to a college tuition. With the right qualifications, you can be approved for a personal loan in the morning and have the cash deposited into your account in as little as one day depending on the lender.

While applying is easy, qualifying for a personal loan may be more difficult. Here’s what you need to know about personal loans and how to get approved for one.

What is a personal loan?

A personal loan allows a consumer to borrow a lump sum of money for personal use and pay it back in fixed monthly payments over a set amount of time.

One significant difference between unsecured personal loans and other types of loans is that they don’t require collateral. When you buy a car, for example, the car serves as collateral and the lender can repossess it if you fall behind on your mortgage payments. To get an unsecured personal loan, you just have to qualify.

Personal loans come in a wide range of amounts and interest rates. The terms of personal loans vary by lender and range from six months to 84 months as of Feb. 2, 2018. They can be for as little as $2,000 and as much as $100,000, although the majority of personal loans are for much less. Ritterbeck said that Best Eggs’ loans average between $13,000 and $14,000.

What are personal loans used for?


Unlike a mortgage, which is a loan for a house, or an auto loan, which must be spent on a vehicle, personal loans can be used for almost anything.

“People use it for a ton of reasons, from home repairs to medical [expenses] to all kinds of major purchases,” Ritterbeck said. People most commonly take out personal loans, however, for debt consolidation. In this process, borrowers use a personal loan to pay off other high-interest debts, which can simplify and reduce their monthly debt payments.

Alia Dudum, millennial money expert at LendingClub, said that LendingClub encourages anyone who needs credit to think about personal loans as “a responsible way to pay for something expensive,” whether the expense is planned or unexpected.

“You can’t always control when you have a major expense, but you can make good decisions,” she said. LendingClub’s borrowers primarily use personal loans to pay off high-interest debt, unexpected expenses such as medical bills or car repairs or a planned expense such as a vacation or home remodel.

How do I qualify for a personal loan?

Most lenders will look at two factors when you apply for unsecured personal loans: your credit history and your ability to repay the loan. Borrowers don’t have to provide collateral, such as a house or car to back their loan, nor do they need a cosigner (unless a cosigner is needed to strengthen your odds of getting approved).

Instead, lenders will look at your personal credit history and other factors, such as your income.

“That makes it easier for us to provide you quicker and easier access to your loan in comparison, to say, a mortgage loan that requires an appraisal of your home,” Dudum said.

Here’s a breakdown of how lenders determine whether you qualify for a loan.

Credit score

Each lender will determine its minimum credit score for receiving a personal loan, and some are more lenient than others regarding what scores they will accept. For Best Egg, for example, the average credit score for qualified applicants is 710. Ritterbeck said that most conservative financial institutions are comfortable issuing personal loans to applicants with scores around 680 and above.

Your credit score matters because it is a reflection of your ability to repay a loan. The score is compiled from information gleaned about how you handle credit, which could include:

  • Types of credit or loans you’ve carried (revolving, like credit, or non-revolving, like a mortgage)
  • The amount of each loan or the credit limit for each credit card you own vs. how much of that balance you are using from month to month
  • Whether you paid on time
  • Collections activity, bankruptcies, foreclosures or other negative marks

There are three federal credit reporting agencies that compete to compile American consumers’ credit histories: Equifax, Experian and Transunion. While each agency collects about the same information on each consumer, their credit score calculations may differ because the agency may not have collected the exact same information or it may store or display the information differently than the other agencies.

It’s important to note that your credit score will change over time as credit reporting agencies collect more information and tweak their calculation models. That means your score could be different from one month to the next.

Get your credit report and score for free

Each of the three reporting agencies will provide one free credit report a year, which you can get by visiting or calling 1-877-322-8228.

There are lots of ways to get your credit score or credit score estimate for free these days. The Discover Scorecard, for example, offers a free FICO score.
Here’s our guide on getting your free credit score >

How to improve your credit score to get better loan terms


First, look for errors on your credit report, where you may find information that is inaccurate or wrong. If you find errors that could have lowered your credit score, dispute the error with the appropriate credit bureau. Check all three reports.

Then, take a look at your financial situation and make some changes.

  • Lower your debt: Stop spending on credit cards and come up with a strategy for paying down your balances.
  • Pay your bills on time: As much as 35 percent of your credit score could be based on your payment history, so make sure you pay all of your bills on time. If you are forgetful, set up automatic payments or monthly reminders.
  • Don’t close your unused credit card accounts: Unless your credit cards carry expensive annual fees, there’s no real benefit to closing them even if you aren't using them. Your credit score will take into account the average length of time you’ve been using credit, so holding an account for a long time could actually benefit your score.
  • Don’t open new credit: As you rein back your spending, avoid the temptation to apply for more credit cards. Lenders may consider you risky if you open a lot of new accounts in a short amount of time.

The length of time it takes to improve your credit score depends on why your credit score is low in the first place. In any case, the personal financial discipline you develop as you work to improve your score will leave you with better spending and saving habits.

Debt-to-income ratio (DTI)

Your DTI is the amount of monthly debt obligations you have, including credit card payments, auto loans and student loans, divided by your monthly gross income. The calculation shows lenders the percentage of your income that you use to pay off debts.

“Lenders see this as an indicator of your ability to comfortably take on and pay off more debt,” Dudum said.

Wells Fargo lists a DTI of 35 percent as “looking good” and indicating that your debt is manageable in relation to your income, and that you likely have spending money left over after you pay your bills.

If you have a DTI between 36 and 49 percent, you may want to improve your financial situation so that you are in better shape to handle extra expenses. If your DTI is in this range, lenders
may look at additional eligibility criteria, like your income or whether you have a cosigner.

Credit utilization rate: This rate is calculated by dividing how much credit you’re using (the statement balance for each of your accounts) by the amount of credit you have
access to. “If it’s higher than about 30 percent, many financial companies see this as an indicator that you might not be as responsible as you could be,” Dudum said.

Credit history: How you’ve managed debt in the past can be a good determinant for how likely you are to pay back a personal loan. That means if you have little or no credit history, lenders may not approve your personal loan application.

“If you don’t have a track record with credit, it’s difficult for lenders to guess how you might handle paying your debts,” Dudum said.

Cosigner: If you have trouble meeting personal loan requirements, which could happen if you have a low credit score, no credit history or a bankruptcy in your past, you may need a cosigner.

Typically, cosigners are trusted friends or family members with good credit who will agree to take responsibility for the loan if you can’t make the payments. Lenders will factor in your cosigner’s credit history and credit score rather than yours when determining whether you qualify for the loan, which will up your chances of qualifying and securing a good interest rate.

Proceed with caution when considering a cosigner. If you don’t make your loan payments, you could ruin your cosigner’s credit history, stick them with the balance of the loan, and wreck your relationship with your cosigner.

How to apply for a personal loan

The application process for an unsecured personal loan is simple and fast.

“The old way is you’d walk into your local bank, wait in line to speak with a loan officer and apply that way,” Ritterbeck said. “In a lot of cases today you can still do that, but you also can go online, and in some cases call, and get a decision in a couple of minutes of what options are available to you.”

Online lending platforms will first ask you to fill out an application to check your credit rate. The personal loan industry can often show you your personal loan options without running a “hard” credit inquiry that would impact your credit score. These are typically called pre-approvals or prequalification checks but they aren’t final. When you are ready to apply for the loan, it will result in a hard credit inquiry. You may be able to get free quotes from LendingTree’s personal loan marketplace by filling out a short online form. LendingTree is the parent company of MagnifyMoney.

After you receive options for a personal loan, including the amount you qualify for and the interest rate, you can choose one to apply. “Generally speaking, the better your credit profile, the lower the rate of interest you’ll be charged in exchange for borrowing,” Dudum said. “That said, there are many other factors we take into consideration. One number couldn’t tell your whole financial story.”

Interest rates vary, but they can be as high as each state allows. OneMain, for example, can offer interest rates as high as almost 36% on personal loans, and Best Egg’s highest rate is 29.99%.

Once you decide which loan to apply for, you’ll need to submit proof of employment and income, such as a pay stub, said Kim Wijkstrom, chief marketing officer for OneMain Financial. Decisions on the loan can come within the hour, and the money could be deposited in your account the same day.

Lenders with alternative qualifications

Not all lenders follow the typical formula for personal loan requirements. OneMain, for example, uses credit scores as a guideline that gives a picture of a consumer’s credit history and focuses more on the applicant’s income and debt obligations, Wijkstrom said.
Here are others:

SoFi: SoFi is strict about approvals, as it prefers applicants with a good job and a history of on-time payments. It also does not allow cosigners or joint applicants. SoFi is unique in that it does not charge origination fees and has additional perks like loan forbearance if a borrower loses a job through no fault of his or her own. Interest will continue to accrue and is added to the loan balance, and SoFi will not report your payments to a credit bureau as being overdue.
Read our review of SoFi here.



on SoFi’s secure website

Upstart: While Upstart initially focused on helping graduate students with significant debt, it now also offers loans to consumers with a strong credit history. Upstart’s formula for calculating approval is unique and considers an applicant’s career, education, job history and standardized test scores.
Read our review of Upstart here.



on Upstart’s secure website

Earnest: Unlike most lenders, Earnest uses a merit-based system for determining who qualifies for a loan. Recent graduates and others who are starting to build credit history may qualify for these loans, which offer some of the most flexible terms along with customized loan and repayment plans.



on Earnest’s secure website

What if you are rejected for a personal loan?

You may not qualify for a personal loan the first time you apply, but it is possible to improve your financial position and successfully qualify later.

“People are of course usually very disappointed if they don’t get a loan, and the first thing to address is the emotional response,” Wijkstrom said. “Don’t be defeated when rejected.”

At OneMain, financial advisers will talk with clients about why they were not approved and what they can change. Sometimes that means fixing their credit history, such as paying bills on time for a set period. Others may find errors on their credit report that hurt their chances of qualifying for a personal loan.

You may also want to look into other options for credit, such as equity in your home that could help you get a different kind of loan, Ritterbeck said.

When used wisely, personal loans can help you get out of debt and manage large expenses. Regardless of when you need a personal loan, it’s never too early to integrate good habits into your financial life to ensure that when you do apply for a personal loan, you will qualify for the amount you need.

Kim Wijkstrom, OneMain chief marketing officer
Contact Erica Greenfield,

Bobby Ritterbeck, Best Egg chief marketing officer
Contact Alison Guzzio, 484-459-3243,

Alia Dudum, Millennial Money Expert at LendingClub
Contact Adrianna Abreu,

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Marty Minchin
Marty Minchin |

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


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Personal Loans

Paying for Plastic Surgery: How to Borrow Smart

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.

Americans underwent 17.1 million plastic surgery (aka “cosmetic”) procedures in 2016 alone, more than double the number of procedures in 2000, according to the latest data from the American Society of Plastic Surgeons. That work doesn’t come cheap either — we spent a total of $16.4 billion on cosmetic procedures that year.

Due to the high costs of some types of plastic surgery, not everyone has the cash to pay for the look they want. That’s when some folks might consider taking out plastic surgery loans – financing options that let you borrow the money you need for cosmetic surgery and pay it back slowly over time.

Of course, there’s more than one way to set up plastic surgery financing, and there’s more than one way to pay down your balance after surgery is over. The key to successfully financing plastic surgery, according to the experts, is making sure you choose the right loan and having a financial plan to pay it off.

This guide will highlight the different cosmetic surgery financing options available as well as their pros and cons. With this information at your fingertips, you’ll be in a position to make an informed decision.

What does plastic surgery cost?

Before you can set up financing for plastic surgery, it’s crucial to find out how much it costs. At the end of the day, the amount of money you need will depend on several factors – the procedure you hope to plan, where you live and the pricing of the doctor you choose to perform the procedure.


National average (2016)

Breast augmentation


Breast implant removals


Breast reduction


Buttock lift


Eyelid surgery


Tummy tuck






Source: American Society of Plastic Surgeons/2016 Plastic Surgery Statistics Report

If you want averages, check out the ASPS report, which comes out annually and clocks national averages for certain procedures.

But because geography plays such an important role in the cost of medical procedures, you may find prices are much different when you start weighing the costs of a procedure in your area.

In that case, we’d suggest using this tool from the American Board of Cosmetic Surgery, which lets you see what procedures might cost based on your zip code. The organization also offers some of the best information to help you estimate the costs of the procedures you want.

For example, a tummy tuck in Indiana could cost $4,000 to $18,000 depending on where you live. Likewise, liposuction could cost $1,000 to $20,000 depending on your zip code and how much of the procedure you need performed.

A breast augmentation can range from $3,000 to $12,000 nationally as well. These wide ranges of pricing are why, ideally, you’ll want to get quotes for plastic surgery in your area before you nail down costs or set up financing.

Because costs vary so widely, Clint Haynes, a Kansas City-based financial adviser suggests getting three quotes from different doctors you’ve vetted in your area to ensure you’re getting the best deal. Obviously, paying less for a high-quality cosmetic procedure will let you take out a smaller loan, and that will make it easier to pay down your balance faster.

How to pay for plastic surgery

Once you have an idea how much your cosmetic procedure will cost, it’s smart to consider all the financing options available along with their advantages and disadvantages.

Of course, nothing beats paying in cash and walking away debt-free.

But if you’re determined to finance your procedure, you should at least know all of your options and the pros and cons.

Here are the main plastic surgery financing options available, along with how they work:

Personal loans

A personal loan is a type of loan that is unsecured. As a result, these loans don’t require collateral. Personal loans also come with fixed interest rates and a fixed term, meaning you’ll pay the same monthly payment for the life of the loan.

To qualify for a personal loan with the best terms and rates, you typically need good or excellent credit (a FICO score over 740), although some personal loan companies will approve you with a credit score as low as 580.

You’ll also need proof of ability to repay your loan (i.e. income) and a low debt-to-income ratio (ideally 36% or lower). It may be possible to qualify for a personal loan if you don’t need these requirements, however, and that’s especially true if you have a cosigner who has good credit and a solid income.

Pros and cons of personal loans

No collateral required. According to Dan Matysik, vice president of Discover Personal Loans, some of the main advantages of personal loans are in the way they are set up. The fact these loans are unsecured means you don’t have to put up collateral to qualify, and you can typically secure funds within the week and sometimes the next business day.

Fixed rates. Personal loans also have fixed interest rates, a variety of term options (three- and five-year terms are common, but you can get shorter or longer ones) and loan amounts big enough to cover the costs of many plastic surgeries. Discover Personal Loans, for example, lists $35,000 as its maximum personal loan amount, while SoFi offers personal loans up to $100,000.

Can help or hurt your credit. So long as you make on-time payments, you could see your credit score improve. But if you don’t keep up with your monthly payment, you’ll damage your credit score.

Spending beyond your means. Personal loans may make it easy to spend more than you can afford if you don’t have a budget in mind. Only borrow what you need and are sure you can pay off.

May carry fees. While many personal loans also have no fees over the life of the loan as long as you make your monthly payment on time, watch out for loans that carry origination fees or prepayment penalties (that’s a fee they charge if you pay off your loan early).

Medical credit card

Medical credit cards like Care Credit offer financing options for regular health care procedures as well as cosmetic procedures. This option works similarly to a personal loan in that you can borrow for a set length of time of up to 60 months.

To qualify for a medical credit card, requirements are similar to personal loans. You typically need good credit, proof of your ability to repay and a low debt-to-income ratio to qualify.

Pros and cons of using a medical credit card
They can be a great deal so long as you can afford to pay them on time.

CareCredit does offer some pretty compelling 0% intro APR offers that would make your plastic surgery financing essentially free so long as you pay your balance in full before the promotional offer ends — but that’s the catch. You have to pay your balance in full before that promo period ends, or you could face deferred interest charges.

For example, CareCredit doesn’t charge interest on purchases of $200 or more if you select a repayment option of 6, 12, 18 or 24 months, and pay the amount due by the end of the promotional period. But if you don’t pay your entire bill off during that time, interest is charged from the original purchase date at a rate of 26.99% for new accounts.


Do the math. If you can only afford to make minimum payments, you may not be able to pay it off before that promo period ends. If that’s the case, you’re better off using a different financing option.

Credit cards

Credit cards are another plastic surgery financing option to consider. Unlike personal loans, however, credit cards come with variable interest rates and no fixed term, meaning your debt can be paid off quickly or slowly depending on how much you pay each month.

Another important factor to consider with credit cards is how much interest you’ll pay overall. While some cards offer 0% intro APR deals for up to 18 months, other credit cards come with higher revolving rates that can make repaying your balance more expensive.

Pros and cons of using a credit card
Obviously, the biggest advantage of using a credit card comes when you are able to secure a 0% intro APR offer for purchases. If you are able to qualify for one of these offers, you’ll pay no interest for your card’s introductory offer, then your card’s standard variable interest rate thereafter. If you’re able to pay your balance off completely during the introductory offer, you could even pay zero interest altogether.

On the flip side, this doesn’t mean credit cards are always ideal. They have no set payoff date and may carry variable interest rates that can be higher than personal loan rates. Because of this, credit cards in general can make overspending easy and may cause you to spiral into debt if you’re not careful.

Home equity loans or lines of credit

A home equity loan lets you borrow a fixed amount of money against the equity you have in your home. These fixed-rate installment loans let you pay fixed monthly payments for a set length of time – usually around 15 years. A home equity line of credit (HELOC), works similarly in the fact it lets you borrow against the equity in your home. However, these lines of credit are revolving, meaning there is no set loan amount, payment or payoff date. Also, HELOCs usually have variable (fluctuating) interest rates.

Pros and cons of using home equity
Your home’s on the line. Because home equity loans and lines of credit are secured with your home, they usually feature lower interest rates and longer loan terms than personal loans. If you’re trying to save money on interest and pay the lowest monthly payment, this could be advantageous.

On the other hand, the fact you’re securing this loan with your home could spell trouble if you cannot repay your home equity loan. If you fall into default, you could potentially lose your home – a concept that seems troubling for any surgery, but especially a voluntary cosmetic procedure.

Also, as North Dakota financial advisor Benjamin Brandt points out, home equity loan interest is no longer tax-deductible due to the new tax laws in place in 2018. Further, you may not qualify for this type of loan unless you have considerable equity in your home.

Cash-out refinancing

It’s possible to refinance your home and take cash out provided you have enough equity in your property to do so. Let’s say you own a $300,000 home and owe only $200,000.

If you qualify for a cash-out refinance, you could refinance into a larger mortgage and take the difference out in cash. Typically, you’ll need good credit score, proof of income and a low debt-to-income ratio to qualify for a cash-out refinance with the lowest interest rate and best terms. Further, you can typically only take 80-90% of your established equity out as cash with this method.

Pros and cons of using home cash out refinancing
According to Haynes, this option could be advantageous since a new mortgage might offer the lowest interest rate provided you have good credit. Once again, however, “you would be using home equity to pay for plastic surgery,” he said. “Unless it is a health emergency that isn't covered under health insurance, I would not recommend it.”

Also, keep in mind that refinancing your home typically involves paying closing costs. Further, you’re also letting go of home equity you’ve worked hard to accrue and lengthening the amount of time if takes to pay off your mortgage with this option.

Cash savings

Since plastic surgery is typically voluntary and not emergent, taking the time to save up for your procedure is a smart idea. Just don’t drain your rainy day fund.

“As long as it is not emergency savings and not earmarked for another reason, this would be the logical choice to pay for plastic surgery,” said Haynes. Also keep in mind that if you don’t have the money saved up for plastic surgery now, you can always start saving monthly until you save up the amount you need to pay for your surgery in cash.

Pros and cons of using savings
The main advantage of using savings to finance plastic surgery is that “you’re not going into debt,” said Haynes.

By saving up the cash ahead of time, you’ll never have to pay monthly payments or interest for your surgery. Of course, like Haynes said, you do have to make sure the savings you use for plastic surgery isn’t required for other important expenses in your life.

Doctor payment plans

Matysik notes that it may be possible to work out a payment plan or partial payment plan with your doctor. These arrangements can vary in detail and scope, however, so it’s best to check with your doctor’s financing office to see what options may be available.

Pros and cons of using doctor payment plans
While the pros and cons of doctor payment plans depend on the details you agree on, there is one main disadvantage that comes with financing plastic surgery directly with your doctor – the fact you won’t build your credit score.

Since other financing options like personal loans and credit cards will report your monthly payments to the three credit reporting agencies – Equifax, Experian and TransUnion – they can help you build credit or improve your credit score over time if you use them responsibly.

401(k) loans

It may be possible to borrow against your own 401(k) to cover the costs of plastic surgery. A 401(k) loan is taken directly out of your retirement plan balance, and you typically pay it back via automatic payroll deduction within five years or less.

Typically speaking, 401(k) loans allow you to borrow the lesser of $50,000 or 50% of your 401(k) balance.

Pros and cons of using a 401(k) loan
The main advantage of using a 401(k) loan is the fact you’re borrowing money you already have. Because of this, there is typically no credit check required to get a 401(k) loan. Interest rates may also be low, as the typical rate for these loans is the prime rate plus 1%.

But, there are notable disadvantages that come with using a 401(k) loan, including the fact that your spouse often has to sign for you to use them. Also, if you leave your job for any reason, the remaining balance is typically due within 60 days.

Last but not least, taking money out of your retirement account will likely set your retirement goals back, says Haynes. If the money isn’t there, it won’t grow. “There is opportunity cost since that money is no longer invested,” he said.

Jon Luskin, a financial planner with Define Financial is adamantly against borrowing against your retirement.

“The only time you should pull money out your 401(k) for plastic surgery is usually never,” he said. That’s because 401(k) plans “are absolutely fantastic because they offer tax-advantaged investment growth.” Options for getting tax-advantaged investment growth outside of your 401(k) are also limited, he says. So, ideally you’ll want to fund your account and keep funding it without taking cash out.

Family and friends

If none of these other financing options work, you could always borrow money from your family and friends if they are willing and able. Haynes says you’ll likely get a good interest rate this way, and you may be able to negotiate the exact repayment terms you want. Obviously, the details of this setup (monthly payments, interest rate, payoff date) will depend on what you negotiate on your own.

Pros and cons of borrowing from family and friends
While borrowing the money from someone you know might sound ideal, one big disadvantage that comes with this option is plain old guilt, says Haynes. Knowing that you actually borrowed money from a friend or family member for plastic surgery is a big downside, he says. And if you can’t pay it back for any reason, you could be putting your relationship on the line.

On the other hand, this option may be the only option for people who have bad credit and can’t qualify for other financing options.

Borrowing responsibly

Borrow what you can afford to repay. As with any type of loan, the key to borrowing responsibly is only borrowing what you know you can afford to pay back. Before you borrow, make sure you will have an affordable monthly payment you can easily cover along with a plan to cover your loan payments in both good times and bad.

And, if financial peril is even a question when it comes to plastic surgery, “then you can’t afford it,” said Haynes. If you are putting your ability to pay other bills or save for important goals on the line to cover a cosmetic procedure, then you should consider other options – or at least wait a while to think it through before you move forward.

If you’re even a little bit worried about what borrowing money could do to your finances in the future, it may also make sense to save money for plastic surgery for a while as you think it through.

Also it may be worth it to check in with the administrators at your doctor’s office, says Matysik, as “they may be able to offer you payment plans, financing options or other incentives and deals.” These benefits or options could decrease the overall amount you need to borrow, and should be factored into the loan amount you take out.

Get the best deal on your plastic surgery loan

Get quotes from doctors. We already mentioned Haynes’ suggestion of getting at least three quotes from doctors before you get plastic surgery. Getting multiple quotes can ensure you’re not overpaying while helping you borrow less overall.

Get quotes from lenders, too. Getting a lower interest rate and having the lowest fees possible attached can cost you a lot less in the long run, he says. This is why, in addition to getting multiple quotes for plastic surgery, you should also get more than one loan quote. By shopping around for the best loan with the lowest interest rate, you can make sure you’re getting the best deal you can qualify for.

Read the fine print. In addition to your loan amount, you can save by reading the fine print for fees, interest rates and other costs. “You want to focus on the full cost of the loan and account for additional fees, such as an origination fee,” said Matysik.

The bottom line

While borrowing money for voluntary procedures may never be ideal, there are times when you don’t have the cash for what you want. In these cases, your best bet is either saving up the money you need or at least making sure you’re borrowing smart.

“It’s only recommended to use one of these borrowing options if you have a plan to pay back the loan on time, in a way that works for your budget,” said Matysik.

If you can’t do that, well, you may be better off skipping plastic surgery loans altogether.


Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Holly Johnson
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Holly Johnson is a writer at MagnifyMoney. You can email Holly 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 February 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



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.


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 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.


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 24.99%

Origination fee – No origination fee.

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


on Marcus By Goldman Sachs®’s secure website



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


on BestEgg’s secure website



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 3.09% 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 14.69%. 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.


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


on Lending Club’s secure website


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.


on BestEgg’s secure website



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: 7.43% -29.99%

Upfront fee: 0.00% – 8%

Amount: $5,000 - $50,000

Term: 3 & 5 year loans available

Available states: All


on Upstart’s secure website


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


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.


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


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.

* 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 (


Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Brian Karimzad
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Brian Karimzad is a writer at MagnifyMoney. You can email Brian at


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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)



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.



on SoFi’s secure website

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.

Lending Club


on Lending Club’s secure website

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, “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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Can I get an Unsecured Loan After Bankruptcy?

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.


If you’ve just gone through a bankruptcy, you might feel a little vulnerable financially. You’ve been promised a clean slate, but your credit score has taken a hit and it could take months or even years to get to a point where you can qualify for a loan that isn’t highly expensive.

You need credit to build credit though, and one way to start building your credit after you’ve gone through bankruptcy is through a personal loan.

Yes, it is possible to get a personal loan after bankruptcy. But in order to find one that isn’t predatory in nature, it’s important to understand where you stand, how to properly prepare, and where to look.

Part I: How personal loans after bankruptcy can help you build credit

As you work to get your credit back on track after bankruptcy, a personal loan could certainly help. That’s because the most important factor in your credit score is your payment history, and making on-time payments on your personal loan after bankruptcy helps establish a positive payment history.

What is a personal loan?

An unsecured personal loan is a loan that doesn’t require collateral that the lender can repossess if you default on your payments.

What are my odds of getting approved?

Many lenders don’t offer unsecured loans for people who have a bankruptcy on their record, but there are a handful who specialize in exactly this type of loan. The trick is finding one that isn’t predatory in nature.

“When a person files for bankruptcy, they are seeking a debt solution that results in partial or complete liquidation of the debt they owe,” says Bruce McClary, Vice President of communications for the National Foundation for Credit Counseling.

“This leads to a financial loss for their lenders,” he adds. “Because of that fact, and that the set of circumstances leading to their bankruptcy may not be completely resolved, lenders will continue to view bankruptcy filers as a risk.”

There are two types of consumer bankruptcy: Chapter 7 and Chapter 13. Each has a different impact on your credit and your chances of getting approved for after-bankruptcy loans.

Chapter 7 bankruptcy

With a Chapter 7 bankruptcy, you’re required to sell off certain assets to pay off eligible outstanding debts.

A Chapter 7 bankruptcy gives you more of a clean slate, so to speak, than a Chapter 13 bankruptcy. But it remains on your credit report for longer — up to 10 years, according to McClary.

McClary also warns that lenders may look less favorably on a Chapter 7 bankruptcy because it doesn’t involve a repayment plan like a Chapter 13 bankruptcy. As a result, it may be tougher to get a personal loan after Chapter 7 discharge.

You don’t have to wait the full 10 years for your credit score to improve though. As you start establishing positive credit habits, and as your bankruptcy moves further into the past, the positive habits will gain in importance and the negative impact of your Chapter 7 bankruptcy will fade. So the sooner you start rebuilding your credit, the better.

Chapter 13 bankruptcy

While a Chapter 7 bankruptcy eliminates your eligible debts entirely, a Chapter 13 bankruptcy calls for a reorganization of your debts and finances.

You’ll set up a repayment plan through the court system, typically over a three to five year period, during which you’ll make payments to a trustee who then distributes the payments to creditors who have filed claims against you. Unlike a Chapter 7 bankruptcy, Chapter 13 doesn’t require you to sell off any personal property to pay down your debts.

People typically opt for a Chapter 13 bankruptcy when they don’t meet the eligibility requirements for a Chapter 7 bankruptcy.

While you’re stuck making payments for a few years, however, a Chapter 13 bankruptcy won’t remain on your credit report as long as a Chapter 7 bankruptcy.

“Anyone who files and successfully completes a Chapter 13 can see the bankruptcy information on their credit report for seven years,” says McClary

And since it takes much longer than a Chapter 7 bankruptcy, which can be processed in months, McClary says that you may be able to apply for a loan before the bankruptcy is discharged.

But as with a Chapter 7 bankruptcy, your Chapter 13 bankruptcy won’t ruin your credit for the full seven years. If you manage to get approval for a loan during your repayment period, you can start establishing a positive payment history sooner rather than later.

Part II: Applying for a personal loan after bankruptcy

How to prepare your loan application

If you’re interested in getting a personal loan after bankruptcy, it’s critical that you present yourself in the best way possible.

Get a copy of your credit reports
You can get a free copy of your credit reports once per year from all three credit bureaus — Equifax, Experian, and TransUnion — through Once you have your credit reports, you can check to see if the information is accurate and up-to-date.

For example, if you filed Chapter 7 bankruptcy, make sure that all your eligible debts were included in the bankruptcy and that they’re now showing a zero balance. If you filed Chapter 13, check to see that your payments are being applied correctly.

If any information is inaccurate, you can file a dispute to have it corrected or removed from your credit report altogether.

Make sure your income is accurate
Your credit report and score are just two that factors lenders consider. In some cases, proving that you have sufficient income to repay a loan can make you appear less risky.

Your reportable income is based on your current income, so if you’ve received a raise recently, make sure to include that in your calculation. Also, include any other income that you have reasonable access to, such as cash you’ve earned from a side business or a spouse’s income.

Be prepared with the right documents to prove your income. This may include pay stubs, bank statements, a W-2, or tax returns.

Be ready to make your case
If your application gets denied off the bat, you may still have a chance to make your case. Be ready to explain what led you to declare bankruptcy and your commitment to building better credit habits. There’s no guarantee that doing this will overturn a denial, but it doesn’t hurt to try.

Part III: Shopping for an unsecured personal loan after bankruptcy

Finding a lender who’s willing to offer personal loans for discharged bankruptcies can be hard, but it may be worth the effort.

“Although lenders will view a recent bankruptcy filer as a risk, they may still be willing to approve them for financing,” says McClary. “Most lenders will offset the risk with higher interest rates and additional fees, which makes it costlier for the borrower.”

Here are a few options to consider.

Your bank

If you already have an established relationship with a community bank, you may have a better chance of getting approved, especially if you’ve been with the bank for years and know someone at the local branch.

Big banks often don’t specialize in personal loans after bankruptcy, however, so you might not find success going this route.

A local credit union

Credit unions are different from banks in that they’re not-for-profit organizations owned by their members. As a result, credit unions are generally more focused on serving the community than generating profits and may be more lenient with bad credit.

That said, credit unions often require that you become a member before you can apply for a loan. And if you’re a new member without a history with the credit union, it may be more difficult to secure a loan.

Online lenders

There are several online lenders that specialize in loans for people with bankruptcy or generally poor credit.

LendingTree, which owns MagnifyMoney, can help you find these lenders. If you fill out a short online form, you may be able to get some quotes from lenders based on a soft credit check. That way you can compare offers to determine which one best suits your needs and your budget.

Peer-to-peer lenders

Lenders like LendingClub and Prosper are unique in that instead of lending you money directly, they act as an intermediary between individual lenders and individual borrowers.

Since some individual lenders may be willing to invest in higher-risk loans, you might have an opportunity to get approved even with a bankruptcy.

Other options if you’re rejected for a personal loan

While you may be able to get an unsecured personal loan after bankruptcy, but there’s no guarantee you’ll be approved. Each lender has a different set of criteria, and they consider several factors before making a decision.

So, if you do end up getting denied, it’s important to know what your alternatives are. Here are some of the major options to consider.

Find a co-signer

While it can be difficult to get approved for a personal loan after bankruptcy on your own, you’ll have a much better chance if you can manage to find someone to cosign the loan with you.

This could be a family member or close friend. Keep in mind, however, that cosigning means that they’re lending more than just their good name. Your co-signer will be equally responsible for repaying the debt, and it could hurt their credit if you default.

You may want to avoid this option if you think that something could go wrong and harm your relationship.

Apply for a secured personal loan

If an unsecured personal loan isn’t available, you might have some luck putting up collateral for a secured personal loan. Some examples of eligible collateral include:

  • Vehicles
  • Real estate, such as equity in your home
  • Investments
  • Insurance policies

Before you choose this option, you should understand the risks involved. Your collateral may be worth more than the loan itself, and you could lose your collateral if you default, which could cause more financial problems.

Apply for a secured credit card

Secured credit cards are similar to secured personal loans in that you need to put up collateral to get approved. The difference is that your collateral is a cash deposit, typically equal to your desired credit limit.

Other than the security deposit, a secured credit card functions the same as a conventional credit card. One big benefit of using a secured card to rebuild credit is that as long as you pay off your balance in full each month, you don’t ever have to pay interest.

That said, some secured cards charge annual fees, as well as high APRs, so they’re not ideal if you plan to carry a balance.

Part IV: How to rebuild your credit after bankruptcy

As you’re working to get your credit back on track, it’s important to know how your actions affect your credit score.

Here’s a list of factors that FICO uses to calculate your credit score, along with how important they are:

  • Payment history (35% of your score)
  • Amounts owed (30%)
  • Length of credit history (15%)
  • Credit Mix (10%)
  • New credit (10%)

The most important thing you can do to boost your credit score is to make payments on time. By applying for an unsecured personal loan after bankruptcy, you can get an account with a lender who will report your monthly payments.

How much you owe is also important, so avoid borrowing more than you need. Consider applying for a secured credit card and maintaining a low balance. This will help you maintain a low credit utilization rate, which is an important element of the “amounts owed” factor.

Having both a secured credit card and unsecured personal loan can help diversify your credit mix, but you should be careful about submitting too many applications; too much new credit can hurt your score.

The bottom line

If you’re looking to rebuild your credit after a bankruptcy, using an unsecured personal loan can be a great way to re-establish a positive payment history.

It’s important to understand, however, that these unsecured personal loans can come with high interest rates. Do the math to make sure it’s worth the cost by considering the fees and interest involved, as well as your monthly payments.

It’s best to use a personal loan after bankruptcy if you have a legitimate need for the money. Borrowing and paying interest is a more costly way to build credit than, say, using a secured credit card and paying your balance in full each month, thereby avoid interest payments altogether.

Take your time to consider all of your options before making a decision. Shop around to make sure you’re getting the best deal. It’s not a guarantee that you’ll get a low interest rate, but you can avoid loans with the highest interest rates if you do it right.

Finally, don’t take it personally if you get denied. Lenders often don’t know you personally; all they see is what’s on the paper in front of them. So, if you do get denied, start working on an alternative and improve your credit to increase your chance of getting approved in the future.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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Should You Use Your Assets to Get a Collateral Loan?

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If you need a loan for any reason, whether you’re refinancing high-interest debt or paying for home improvements, you may be considering a personal loan. However, qualifying for an unsecured personal loan can be difficult if you don’t have a stellar financial history, credit score or debt-to-income ratio.

If that’s the case, you might be tempted to apply for a secured loan instead. We’ll tell you everything you need to about collateral loans here.

What is a collateral loan?

A secured loan, or collateral-backed loan, is one backed by your assets, which could include things like a vehicle, a savings account or a piece of property, or real estate.

A person with less-than-stellar credit might have a better chance of qualifying for a collateral loan because the lender knows they can seize that person’s assets if he or she defaults and misses payments on the loan.

Many people may not have heard the term collateral loan in everyday life, but that’s because they’re rarely called by that name specifically. Chances are you’re familiar with some of the most common collateral loans — a home loan (aka a mortgage) and car loans. These types of loans are generally secured by the asset being purchased with the loan.

It’s also not uncommon for people to take out a collateralized personal loan using an asset they’ve already owned for some time. For example, you’ve probably heard of a title loan, which is a type of loan that requires the title of a paid-off vehicle as collateral to back it.

How a collateral loan works

Collateral loans and unsecured loans work primarily the same way. You’ll be required to fill out a loan application detailing how much funding you’re requesting, what it will be used for and sharing your personal and financial details, like your employment history, proof of income and authorization to pull your credit score and history.

After you are approved for your loan, you’ll receive the funds and you’ll be on the hook to make monthly payments until the end of the term, or until the loan is paid off in full. After the loan is paid off, the term of your loan ends, even if you pay it off early.

The main difference between a secured collateral loan and an unsecured loan is that the asset you’ve pledged can be repossessed by your lender if you default on the loan. For example, if you put your car down as the asset against your loan and you stop making your payments, a tow truck can show up in your driveway to haul your car away.

Qualifying for a collateralized loan is easier than qualifying for an unsecured loan because the approval of your application is based on both the value of your asset and your credit worthiness says Michael Dinich, a Registered Financial Consultant from Sayre, Pa.

With an unsecured loan, your credit worthiness is mainly used to evaluate your application. This makes a collateral loan a better option if you don’t have a strong credit score.

You will have to prove the value of your asset to be used for a collateral loan and be able to prove ownership with a title for vehicles or property, or by having your name on the account if you pledge savings or an investment portfolio.

Dinich says specific criteria needed to qualify for a collateral loan will vary by lender and the amount of money you are attempting to borrow.

Types of collateral you can use to secure loans

As mentioned, there are many different types of collateral loans you can apply for different purposes.

Below is a list and summary of some of the most popular types of collateral loans, categorized by the asset used to back them.

A home

Using your home as collateral for a loan is common. A few types of loans that may use your home as collateral include:

  • A new mortgage loan
  • Refinancing an existing mortgage
  • Taking out a second mortgage
  • Home equity line of credit (HELOC)

Home loans such as these can be obtained at most brick-and-mortar banks, or even online by filling out an application and going through the mortgage or HELOC processes.

Loan terms on a traditional mortgage or mortgage refinance can vary from 15 to 30 years. The length of the loan, along with many other factors, will affect the interest rate you receive.

Using your home to secure a loan is something that should be carefully considered to ensure you have the ability to pay the loan payment each month. If you default and your home is foreclosed on, you could find yourself living on the street.

A vehicle

Auto loan. Most commonly, your car will be used to secure the auto loan against its purchase. But, if your car is already paid off, you may be able to use it as collateral against a personal loan instead.

The value of your car will help determine how much funding you can receive when you are using your car as the collateral for a personal or auto loan. The value of your car will be determined by the lender. It may be based on an estimate from a website like Kelley Blue Book, or by finding the sales prices on similar vehicles in your area.

Shop around at several different banks and credit unions to get the best interest rate and terms for your auto or personal loan. The rates can vary quite a bit depending on the lender’s policies.

Terms for auto loans can be as long as seven years, which will lower your monthly payment, but cost more in interest over the life of the loan.

Title loan

Car title loans are also secured using your car as collateral. But in this case, you have to surrender the title of your car to the lender in order to get your funds for a short term of 15 to 30 days. The interest rates on car title loans tend to be very high, in the triple digits, so you should avoid them if possible.

Investments and savings

Using your investment account as collateral on a loan can be a bit more tricky, especially if you want to use a tax-deferred investment, like an annuity, as collateral for a loan.

“Before you use your annuity, ask the bank how they will file the paperwork, and check with your annuity to make sure you can use it as collateral,” said Dinich.

The reason is because tax-deferred investments may be subject to tax penalties if they are used as collateral on a loan.

“That would be a double whammy,” said Dinich. “You’d be paying interest to the bank, as well taxes on the annuity interest.”

That said, banks and credit unions do offer loans on nonqualified investments, such as:

  • Savings and Certificates of Deposits (CDs)
  • Annuities
  • Mutual Funds
  • Money Markets
  • Qualified investments, which are pre-tax investments like 401(k)s, 403(b)s, IRAs, etc.

Dinich said one reason people may get a loan against their savings or investments is to help build their credit history.

Life insurance

Similarly, Dinich says you may be able to borrow against the cash value of your life insurance policy.

“Some people buy cash-value life insurance just to have the option to borrow against it later,” says Dinich.

According to Dinich, this concept is also known as “infinite banking”. The interest paid during the loan term will be put back into the cash value of the insurance policy.


Although it may sound counterproductive at first, banks and credit unions will also loan money against your savings account balance as collateral.

“Some people wonder why you should borrow against your savings if you have the money,” says Dinich. “But, there are a few instances where it makes sense.”

One example given by Dinich is if your bank or credit union offers perks based on your savings account balance, such as a lower rate on a mortgage loan if your savings balance is $20,000 or greater.

Later, if you’re in a cash crunch, you may not want to take money out of your savings account if it would put you below the $20,000 threshold. Instead, you might decide to take out a loan against your savings as collateral.

Dinich says taking a short-term loan against your savings could also be a way to build or establish credit.

Your paycheck

Future paychecks are most often used as collateral for payday loans. This is the most costly type of collateralized loan available.
According to Dinich, the interest rates can be as high as 400%.

“People get stuck in a cycle of being behind when they take out payday loans,” he said. “Then they have to pay fees on top of the interest in order to continue extending the term of their loan.”

Dinich said payday loans should only be used as a last resort in an emergency. If you must use your future paychecks to secure a payday loan, you should shop around to find an honest and reputable lender, and not be afraid to ask questions.

“The commission rate paid to sales people for payday loans is high, which can make them become pushy and try to hide the fine print about interest rates and fees,” said Dinich.

As an alternative, Dinich says to ask friends and family for a short-term loan, or seek assistance programs available from some employers who may give an advance on your paycheck.

Alternatives to secured personal loans

In addition to secured personal loans and the other types of loans listed above, you may consider trying to improve your credit history and reapply for an unsecured personal loan.

Keep in mind that an unsecured personal loan may have a higher interest rate than a secured loan, and you may be limited to borrowing a smaller amount of money. This is because unsecured loans are riskier for lenders.

If your credit card has a high enough limit, you may also be able to use it instead of taking out a new loan. However, the interest rate on your credit card is likely to be higher than most secured loan options. If you have poor credit, you may be able to qualify for a secured credit card to help build your credit history.

Another option to consider is to take out a loan from your 401(k) directly. This is not a collateralized loan in the sense that you will forfeit your 401(k) assets if you don’t pay back the loan. You are effectively borrowing from yourself. This can be advantageous because the interest paid on the loan will be put back into your 401(k) as you’re paying yourself to borrow money. However, there are other risks to consider. You’re going to miss out on potential growth for any funds you pull out your 401(k) and if you’re fired or leave your job, your loan will likely come due immediately.

Borrowing smart

Before you opt for any of the choices in this article, make sure you’re being smart with your borrowing. Don’t take on more debt than you afford to pay. Missing payments will not only harm your credit score and make it more difficult to qualify for a new loan in the future, but if you have a collateralized loan, your assets could also be seized to help pay back the loan.

You should also take your time to shop around for the best lender and product to fit your needs. Don’t be afraid to ask questions about any loan product before you apply. If any lender is too pushy, it’s a red flag.

The bottom line

Collateral loans aren’t your only option for getting funding. But, if you can’t qualify for an unsecured personal loan, they may be a good thing to consider.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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

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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


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


on Lending Club’s secure website

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



on Upstart’s secure website

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

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


Who it’s best for:



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



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


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


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.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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

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.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Aja McClanahan
Aja McClanahan |

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


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