Updated November 06, 2017
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Goldman Sachs officially made its debut in the personal lending market this week with Marcus, its long-awaited online lending platform. With Marcus, the 147-year-old investment bank will offer consolidation loans up to $30,000 to credit-worthy consumers.
Goldman Sachs began to expand its audience from the super-wealthy to the average consumer earlier this year when it launched an online savings account with a super low $1 deposit. Named for founder Marcus Goldman, Marcus will offer the average American a way to “save money over high-interest credit cards,” the company says. If this works for the megabank, it could lead to similar changes in the industry, challenging the dominance of credit card issuers.
Another reason this is a big deal: Goldman has a big advantage over Silicon Valley competitors when it comes to funding. As a deposit-gathering bank, Goldman can raise FDIC-insured deposits. But Goldman also has deep relationships with institutional investors who might want to purchase consumer loans. Companies like Prosper use Goldman to help them fund their loans: now Goldman will be competing with its own customers. Plus it has the power of a well-established brand behind it. Marcus could be a major disrupter for developing online personal loan businesses.
In this Marcus by Goldman Sachs review, we will explain:
- Who’s eligible for a Marcus loan
- How to see if you’re prequalified
- How to apply, how long it will take, and what documents you will need
- The terms of the loan offers
- Pros and cons
Who’s Eligible for a Marcus Loan
First you need the “secret” code
Marcus is super exclusive right now. You can only apply if you got a special code in the mail from the firm inviting you to use it. The bank says it’s doing that to get feedback on the service for now, but will offer Marcus to a broader audience in a few months. If you don’t have a code, you can sign up to be the first to know when Marcus expands its service. Also, you can’t apply just yet if you live in Maryland, but the bank says they are working on it.
So, if you received a code in the mail, and you live in one of the qualifying 49 states, you can go to Marcus.com and apply to see your offers for loan amounts and interest rates. The rate you get (6.99% – 23.99%) will depend on your creditworthiness and the length of the term of the loan. The fintech firm bases the amount of your loan offer on your creditworthiness, information in your application, and the company’s review of your ability to pay back the loan.
Goldman says they are looking to service consumers with “prime” credit scores. That distinction usually lands someone at about 660 or higher on the FICO scale. The higher your credit score, the better your chance of being approved.
Having too many recent credit inquiries on your credit report could raise a red flag to their underwriters. Note: A soft pull, like the one used by Marcus to prequalify, will not count as a hard inquiry on your credit report. Although not reported, we expect that Marcus will have credit policy requirements on top of the credit score minimum. For example, people who have missed payments recently will likely be rejected, regardless of their credit score. Marcus will be a way for people with good credit scores to get a lower interest rate.
Debt-to-income ratio under 40%
You can get denied if your debt-to-income ratio is too high. For example, if your total monthly payments (including rent/mortgage and all items on your credit bureau) are more than 40% of your income, you would likely be denied.
If it’s above 50%, you might have a hard time getting approved for credit by most lenders. The ratio is calculated with the monthly payments that show up on your credit report, and other debt that shows up on your bureau. If your total monthly bills are $500, and your total monthly income is $2,500, you would have a 20% debt-to-income ratio.
You must be employed and be able to verify your income to get approved for a Marcus loan.
Marcus will also consider other factors in your loan application, such as your intended use of the loan, to determine how much you’ll be offered. The bank will likely have its own combination of rules and scoring to determine your final offer.
How to See if You’re Prequalified
If you want to avoid a hard pull on your credit report, see if you prequalify for a Marcus Loan here. It is considered a soft pull on your credit and won’t harm your score. Later on in the process — if you decide to get the loan — you’ll get a hard pull on your credit score.
How to Apply
The Marcus site’s layout makes it super easy to apply for a personal loan. Of course, the first step would be inputting that special code you got in the mail. After that, it’s similar to other loan applications.
Step 1: The basics
First up, fill out the basic information in the online application. You’ll be prompted to fill out basic personal and financial information such as your name, address, income, etc. to determine if you qualify. You’ll also be asked for information about how much you’d like to borrow, what you’ll use the money for, among other questions about the loan. The soft pull occurs after you submit that information.
Step 2: Choose from your offers
If you qualify for a Marcus loan based on the information you submitted, you’ll be presented with a list of options for loans, rates, and terms.
Step 3: Submit
If you decide to proceed with the loan, you then have to complete a few more steps. At that point, you’ll add information to verify your identity such as your full Social Security or tax I.D. number or be asked for government-issued photo identification and additional information as necessary. Marcus might also ask for documents to verify your income such as recent pay stubs, bank statements, or a W2. This is when the hard pull happens, which will impact your credit score.
Marcus offers debt consolidation and credit consolidation loans up to $30,000 with an annual percentage rate (APR) that can be low as 6.99% and as high as 23.99%.
You can borrow the money for 2 to 6 years.
There are no fees, and your rate will be fixed for the life of the loan.
You can use a debt consolidation loan to pay off credit card debt, medical bills, or financed purchases such as rings, cars, or furniture. You cannot use a Marcus loan to refinance an existing student loan.
Pros & Cons of Marcus
No origination fee. Because Marcus forgoes an origination fee — a fee you’d pay to receive the loan— the APR is your interest rate, even if you pay it off before the full term has expired. That’s unlike competitors like Lending Club and others that charge origination fees. If you pay an origination fee and end up paying off the loan ahead of time, your actual APR will be higher than stated.
No late fees. If you miss a payment, you won’t be charged a fee, but you will add on to the life of the loan and add more interest, and your final payment will be larger. This doesn’t save you from hurting your credit score, however. Your late payments will be reported to a credit agency, and will negatively impact your score. Eventually, after missed, partial, or late payments, your loan may default, and that will also impact your credit score.
Defer payments after a year of good behavior. If you’ve made payments on time for a full year, Marcus gives you the option to defer one payment. Marcus will also waive your interest payment for that month. The payment will extend your loan by one month, at which point you’ll pay the interest on it. If you miss a payment or make one late payment, you will lose access to the payment deferral feature for the life of your loan.
Marcus is exclusive. At this point, Marcus is extremely exclusive, so you need to be invited to use it to try it out and see if you qualify. You also can’t sign up for it if you live in Maryland.
Lower APR with a balance transfer card. If your goal is to pay down credit card debt, you might be able to find a low or 0% APR balance transfer card and pay less overall. If you don’t have much debt, a balance transfer may be a better option.
Lower APR with SoFi and LightStream. If you want a personal loan without an origination fee, there are other options. SoFi and LightStream do not charge origination fees. They also offer APRs as low as 5.49% and 2.49%, respectively, and both top out around 15% on the high end compared to 22.9% with Marcus. With SoFi, you can check your rate without hurting your credit score. Just be warned: LightStream (which is a division of SunTrust Bank) does not offer soft pull functionality.
Make sure to compare your offer from Marcus with offers from SoFi and LightStream, as you could possibly end up with a lower APR overall. The downsides here would be that LightStream requires a minimum 680 FICO score, so it could be a bit more difficult to qualify for a loan. They also use a hard pull to determine your eligibility. Also, SoFi might take longer than the speedy 1-2 business days that Marcus promises to get your money to you since they have to connect you with other individuals.
Don’t get distracted by “no fees.” It’s easy to get pulled in by the promise of “no fees, ever,” but you should definitely still shop around because you might find a lower rate or better terms.
Several alternatives to Marcus exist to apply for a personal loan. We have compiled a list of the best personal loan companies here.
Every personal loan company has its own pricing model, which means you could get very different interest rates from different companies. It is in your best interest to shop around for the best rate before making a decision.
Some of the best alternatives today include SoFi and LightStream because of the many reasons mentioned above. Competitors such as Santander, Discover, and Best Egg or credit unions like SAFE Credit Union and Affinity, may give you a better offer as well depending on the information you provide. Some may have an origination fee, but use a lower credit score threshold to qualify applicants, or they might offer you a better APR.
We believe that the growth of personal loans is great news for consumers. For people drowning in high-interest credit card debt, a low rate on a structured personal loan could offer significant savings. Marcus is good news for consumers. Goldman Sachs is using its access to low-cost funding as a way to challenge the big credit card companies. Their no-fee, low-interest rate loan could be a great way for consumers to consolidate debt. Unfortunately, it’s pretty difficult to gain access to the platform right now since it’s so exclusive, but we expect that to expand over time.
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