Want a personal loan, but you’re worried about the high-interest rates you might face? There is an alternative: You can enter into an income-share agreement.
Chicago-based Align personal loan Income Share Funding is one source of this type of loan. The company has been providing income-share agreements since its founding in 2011.
These loans are unusual because they don’t come with a set interest rate. Instead, you pay a percentage of your yearly income every year for a set number of years, paying back what you originally borrowed plus more.
In this review, we’ll explain how Align works and whether it might be a good fit for you.
Minimum Credit Score
Align personal loan details
Fees and penalties
- Terms: Align states that its income-share agreements run from 2 to 84 months; however, that may depend on your location. In some locations it states that terms can run from two to five years.
- APR range: Align doesn’t charge traditional interest rates on its loans. Instead, it charges a percentage of your income, no more than 10.00%. Say you make $40,000 a year. You might agree to spend 3 percent of your income each year to repay your loan, or $1,200. If you borrow $4,000 and you sign an agreement to pay back your loan over four years, you’d pay end up paying a total of $4,800, or $800 more than what you initially borrowed.
- Loan amounts: Align will loan you a maximum of $12,500.
- Time to funding: Align says that you once you sign your contract, it can deposit funds in your bank account in one to three business days.
- Hard pull or soft pull? Soft Pull. You can get a quote for an income-share agreement on Align’s website and it will not impact your credit score.
- Origination fee: Align does not charge origination fees.
- Prepayment fee: Align also charges no prepayment fees.
There are no limits on how you can use your funds from an Align income-share agreement. You can use the dollars for everything from consolidating high-interest-rate credit card debt to paying for home repairs or a dream vacation.
Align is flexible, too, when it comes to determining your income. As the company’s Web site says, anything listed in box 1 of your annual W2 form can be considered income.
Align doesn’t say much about the minimum credit scores or debt-to-income ratio you will need to qualify for an one of their income-share contracts. Their site, though, does say that Align looks at your income, creditworthiness, job and location when determining whether to approve your request for funds.
How Align’s income-share agreement works
This yearly percentage is broken up into monthly payments. Say you borrow $8,000 from Align and you earn $30,000 a year. If you agree to pay back your loan at 10 percent of your yearly salary for three years, you’d pay Align $3,000 a year, at $250 a month. After the three-year repayment period has ended, you’d end up paying a total of $9,000, or $1,000 more than you borrowed.
When you set up your contract, you pick a date on which you want to pay each month. Align then automatically deducts that amount from your checking account.
What’s interesting about this is that as your income changes, so can your monthly payment. If your income goes up, the percentage you contribute will remain the same. But because your income is increasing, the overall amount you pay will jump, too.
It works the other way, too. Align says that if your income falls, you will pay less. If you become unemployed and you have no income, your monthly payment could potentially fall to zero. If you become unemployed, you will have to submit proof that you are not working, such a notice from your former employer or documents showing you are receiving unemployment benefits.
Applying for an income-share contract from Align
Applying for a loan from Align is a simple process. Just click on the “Apply Now” button on the company’s home page. Once you do, you’ll be asked to provide your name, date of birth, Social Security number, email address, physical address and phone number.
Align will also ask for your gross yearly income, your income source and the industry in which you work. You’ll also need to provide your education level, your estimated credit score, the amount you’d like to borrow and what you want the money for.
After filling in this information, you then submit your application for an online quote. If you are interested, you can contact Align to speak with a representative who will verify your income, job status and credit. Once this is done, Align will make you an official offer stating how much it is willing to lend you at what percentage of your yearly income. Align will also state how many years you will make payments, and how much you will pay each month and each year to pay off the money it loans you.
If you like the offer, you sign your contract. Align will then deposit your funds into your bank account in one to three business days.
Pros and cons of a Align personal loan
- No interest rates: Align doesn’t charge interest rates for its loans. However, you will have to pay a percentage of your annual income for a set number of years to pay back your loan.
- No origination fees: Applying for a loan at Align is free. The company also doesn’t charge you for the work involved in originating your loan.
- Protection if you lose your job: How much you pay is based on how much you earn, so you won’t have to make any payments if you lose your job and your income.
- Applying is fast: You won’t have to meet in person with a lender to get your money. You can start the process online. You will have to speak with a representative to verify your financial information.
- You might pay significantly more than you borrowed: Because of the payment structure with Align’s loans, if your income rises, you will pay more each month. If your income rises significantly, you could end up paying much more than what you initially borrowed. However, Align does require that you contact the company when your income rises. The company will request your W-2 forms at the end of each year to review your income and to make sure that you are paying the correct amount.
- Uncertainty: Your monthly payment can vary because Align charges you a percentage of your gross income to lend you money. If your income fluctuates, your monthly payment will, too. This can be challenging when you are making a household budget.
- Not everyone is guaranteed acceptance: Align does look at your credit score, income and employment status when determining who qualifies for dollars. There is no guarantee, then, that Align will loan you any money.
- You can break your contract, but it will cost you: You can break your contract with Align before your term ends. This will cost you, though. Align lists in your contract the amount of money you’d have to pay to buy the company out throughout the life of your loan.
Who’s the best fit for an Align loan?
An Align loan can work for people who aren’t afraid of a little uncertainty and are worried about high interest rates. Because Align charges a percentage of your income, your monthly payments can increase or decrease. If you don’t mind this uncertainty, an Align income-share agreement might be a good choice.
This loan type might work, too, if you have a relatively low income. But if your income is high, or if you expect it to rise in the near future, this loan type might not be a good fit — your monthly payment could jump too high.
Alternative personal loan options
Minimum Credit Score
1.00% - 6.00%
LendingClub is a great tool for borrowers that can offer competitive interest rates and approvals for people with credit scores as low as 600.... Read More
LendingClub is an online lender providing personal loans up to $40,000. Unlike Align, LendingClub provides traditional loans with a fixed interest rate. This means that your payments remain the same every month, a benefit when you are making a household budget. LendingClub does not charge prepayment penalties, but it does have an origination fee between 1.00% - 6.00%. Anyone seeking more certainty with their loan payments should explore this option.
Minimum Credit Score
No origination fee
SoFi offers some of the best rates and terms on the market. ... Read More
Fixed rates from 6.990% APR to 14.865% APR (with AutoPay). Variable rates from 6.255% APR to 12.555% APR (with AutoPay). SoFi rate ranges are current as of September 1, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.255% APR assumes current index rate derived from the 1-month LIBOR of 2.08% plus 4.425% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
See Consumer Licenses.
SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
SoFi is another popular source of personal loans. This online lender also provides traditional loans, with interest rates lower than many lenders because it primarily targets borrowers with good credit. SoFi charges no origination fee or prepayment fees and temporarily pauses your payments if you lose your job.
Minimum Credit Score
0.00% - 5.00%
The entire goal of Payoff is to help you pay down your debt and they typically don’t like being described as a loan company. They offer a quick, easy, and digital process for getting a personal loan and consolidating your credit card debt. If you have poor credit, little credit, or are continuing to take on more debt every month, you will find it difficult to get approved.
Another online lender, Payoff lets you apply online for a personal loan. The company charges no application fees, and applying does not impact your credit score. You can choose a loan amount between $5,000 to $35,000 and terms from 24 to 60 months.