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Sued by a Debt Collector? Follow These Steps

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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Key takeaways:

  • Before taking action, ensure the validity of the debt complaint against you by reviewing the debt validation letter.
  • Learn your rights and report any violations by the debt collector.
  • Respond to the lawsuit; failing to do so may result in the debt collector winning the case, which can have severe financial consequences.

Typically, in a debt collection case a creditor will sell unpaid debt to a debt collector. The debt collector will then try to get you to repay the owed amount. If their collection attempts fail, the debt collector may choose to sue you to get you to pay.

Debt collection cases often involve unpaid balances of less than $10,000 and include credit card balances, auto loans, medical bills and other consumer debt. If you have unpaid debt and are being sued by a debt collector, there can be harsh financial consequences such as wage garnishment, if you ignore the lawsuit or lose in court.

Here’s what you should know about debt collection lawsuits, your rights and options if you can repay the debt.

What to do if a debt collector sues you

1. Gather details on the lawsuit

If you’re sued by a debt collector, the best thing to do is to gather as much information as you can, such as:

  • Who is suing you
  • What debt balance they are suing you for
  • The deadline you have to respond
  • Confirm debt collector has a debt validation letter which will determine the validity of the complaint

At this point, you don’t want to share too much or act too quickly without understanding the scope of the lawsuit.

When a debt collector proceeds with litigation against you, they must properly “serve” you with a summons. A summons is an official notice of the lawsuit which will arrive in paper and will be delivered by the process servers. Your summons papers will include information about who is suing you and a deadline for when you must respond by. Until you have the formal complaint in hand, you don’t have to go to court and no judgment has been entered against you.

Is the lawsuit legitimate?

If you receive a phone call or an email stating that you’re being sued, there’s a chance it could be a scam. You can verify the debt collector’s legitimacy by researching them online. For example, you can double-check their contact information online and read articles or consumer reviews that may or may not confirm their legitimacy.

Being pressured to immediately repay a debt, especially through an unusual method like a money order, are a red sign of a scam or that your rights are being violated. All information should be in writing and you should be given a certain amount of time to respond. If you feel as though you are being pressured, request a debt validation letter or proof of the lawsuit before proceeding with anything else.

2. Review your rights under the Fair Debt Collection Practices Act (FDCPA)

To eliminate abusive, deceptive and unfair debt collection practices, the Fair Debt Collection Practices Act (FDCPA) provides guidelines for debt collectors to follow and is enforced by the Federal Trade Commission (FTC).

Under the FDCPA, credit card debt, medical bills, student loans, mortgages and other household debts are covered. It’s important to note, business debt or other debt owed to another business isn’t covered under this law.

Prohibited practices include:

  • Harassment or abusive practices: Debt collectors may not harass, oppress or abuse any borrower. Some examples of this may include threatening a borrower with violence or other criminal conduct, using obscene or profane language, or making repeated contact via phone to annoy you.
  • False or misleading representation: Debt collectors may not use any false, deceptive or misleading information when collecting any debts. Some examples of this may include misrepresenting the total amount of debt you owe, lying about being an attorney or that they are communicating with one, or falsely claiming you’ll be arrested, or other legal action will be taken against you if it’s not true.
  • Engage in unfair practices: Debt collectors may not use unfair practices when collecting or attempting to collect a debt. Some examples of this may include attempting to collect additional fees, interest or other charges that are not stated in your original contract, depositing a post-dated check before the deposit date, or taking or threatening to take the property if the debt collector cannot legally do so.

What to do if your rights were violated

If you discover a debt collector is violating your rights, you can report the violation to your state attorney general’s office, the FTC or the Consumer Financial Protection Bureau (CFPB). Keep in mind, every state may have a different set of laws for debt collectors, so your attorney general’s office can help you verify if they are violating the law.

Also, you can take your debt collector to federal court within a year of the violation. If you can prove your damages such as lost wages due to the violation, you may receive up to $1,000 plus attorney and court fee reimbursement.

3. Determine whether the debt collector has the right to sue

To defend yourself against the complaint you must use an affirmative defense that has to be proven. Depending on your situation and the state you live in, you may have several affirmative defenses you can use. Some common defenses include:

  • Statute of limitations: The statute of limitations is the amount of time a party has to bring a legal claim against you. Once this time has expired, they can no longer make a claim. If it has been many years since your last payment, this might be a valid defense. Keep in mind, the statute of limitations can vary by state.
  • Accord and specification: If you have already paid off the debt to their original debt collector’s stratification, you can use this as a defense.
  • Inadequate evidence: This defense applies to complaints that don’t have enough evidence to support the case. For example, only the party who owns the debt can sue you. Therefore, the debt buyer might fail to provide evidence that they own your debt.
  • The plaintiff lacks standing: Debt buyers must have the right to sue you. Again, if they don’t actually own your debt, they don’t have a case.

Many different affirmative defenses may apply to your case. With this in mind, it’s wise to consult with your attorney to determine which defense applies to your case.

4. Contact a debt collection attorney, if needed

If you have verified the legitimacy of the lawsuit, you can either decide to represent yourself or hire an attorney. If you decide to represent yourself in the case, you must follow the same rules an attorney follows; not understanding the rules will not be excused by the court.

Although most consumers don’t seek legal representation when being sued, it might behoove you to do so; consumers with legal representation in a debt claim are more likely to win their case outright or reach a mutually agreed settlement with the plaintiff.

Therefore, you might want to consult with a lawyer who specializes in debt defense. To find a reputable lawyer, try asking your friends and family for a referral. You can also visit The American Bar Association’s lawyer referral directory to find a lawyer in your area.

Usually, consumer law attorneys offer free consultations that can provide consumers with advice and their options for moving forward. Many consumer attorneys who represent debtors often find that the debt collection company doesn’t have the appropriate documentation to back up the lawsuit.

Even if you don’t think you can afford an attorney, try asking around to find one who might take on your case for a low fee or a contingent fee.

5. Respond to the lawsuit

When you’re given a summons, you will have a specific amount of time to respond to the case. For example, in the state of New York, if you were personally handed the summons, you have to respond to the complaint within 20 days. If the summons wasn’t directly handed to you, you have 30 days to respond.

After you have carefully read the complaint, you will want to complete the forms in your summons, which generally include:

  • Answer and Affirmative Defense form
  • Notice of Appearance
  • Certificate of Service

In your Answer and Affirmative Defense form, you will have to provide a written response to the court either agreeing, disagreeing or informing them you have no knowledge of the case. If you hire a lawyer, they will help you respond to the complaint.

Once all forms are complete, you will sign and date and make two copies of each form, one for you and one for your attorney. You will then either hand deliver or mail the documents. If you decide to mail them, they must be in the mail three days before the deadline. Ask your local post office for tracking and delivery confirmation so you can confirm they were sent ahead of time.

Lastly, you’ll need to send your Certificate of Service form to the Plaintiff (debt collector) or Plaintiff’s attorney.

Failing to respond can lead to a default judgment

Because debtors rarely respond when they are being sued for a debt, many lawsuits end in a default judgment, according to the Pew Charitable Trusts. When a court rules a default judgment, consumers may have to pay accrued interest, court fees or experience other harmful consequences such as garnishment of wages or bank accounts, seizure of personal property, or even incarceration.

With this in mind, even if you don’t agree with the lawsuit, if it’s legitimate you must respond to avoid the chance of a default judgment.

6. Attend your hearing

After you file your answer agreeing or disagreeing with the case, the debt collector will either proceed with taking the case to trial or dropping the case completely. Sometimes debt collectors will drop the lawsuit once they complete a cost-benefit analysis to determine if the proceeding is worthwhile monetarily.

However, others may decide to move forward and go to trial. Most debt collector cases are handled in small claims court and follow a standard process:

  • The debt collector presents evidence of the complaint.
  • You have the opportunity to cross-examine witnesses they call to the stand.
  • You then present your evidence sharing your affirmative defense.
  • The plaintiff may cross-examine your witnesses.
  • Lastly, both sides make their closing argument.

7. A judgment is made

Once the judge reviews each argument, they will make their final decision. If you win, by law you are no longer responsible for the debt. That doesn’t mean you’re free and clear of dealing with other collection activities, however. Sometimes, the debt is sold to another debt collection agency who is unaware of the judgment made in your favor. They may try to collect on the debt again but you may countersue if this happens because they have violated the law.

On the other hand, if you lose the judgment, the debt collection agency has the authority to immediately begin collection efforts. How they proceed will depend on your state. Judgments can remain active for 10 years with the opportunity for a 10-year extension. Any unpaid amounts will remain and accrue interest.

For example, even if there’s not enough equity in your home to pay off your debt, the debt collector can place a lien on your home. They may decide to eventually either force you to sell once your equity covers the debt, or demand a debt repayment when you sell or refinance.

When you can’t afford to repay the debt

If you lose your case and can’t afford to pay the judgment against you, you have several options to pursue:

Agree to a payment plan

A debt collector may request a repayment plan to be part of the agreement of judgment. A repayment plan means you and the collector agree that you will pay a set amount every month. This might be a part of your court order.

But, only agree to a repayment plan if you can actually make payments. Since the loan is part of the court order, any missed payments could violate the court.

Consolidate the debt

With debt consolidation, you can combine multiple debts by taking out a new loan. This solution can make your debt more manageable since you will only have one payment, interest rate and repayment term to worry about. You may also choose a longer repayment term in order to lower your monthly payments, though a longer term could translate to higher overall interest charges.

Debt consolidation is typically done with a debt consolidation loan, which is a personal loan. These loans are often unsecured, meaning they don’t require collateral. Lenders will rely more heavily on your credit and financial situation to determine loan eligibility and interest rates.

If you have damaged credit, you may find a secured loan is easier to qualify for and offers better interest rates. A secured loan uses your property, like a savings account, car or home, as collateral. Fail to repay the loan and you could lose the collateral. Common types of secured loans include secured personal loans and home equity loans.

File for bankruptcy

If your finances in dire straits, you might want to determine if filing bankruptcy is a viable option and if you’re eligible.

If you file Chapter 7 bankruptcy, you can discharge certain debts to give you a “fresh start” and eliminate the liability of discharged debts. Chapter 13 bankruptcy enables debtors the opportunity to develop a plan to repay all or part of their debts over three to five years. But, once you pay the agreed-upon amount, a debt collector cannot continue to pursue you.

Keep in mind, it’s wise to explore all other options before pursuing bankruptcy. Bankruptcy will severely damage your credit, impact your access to future credit and can be costly.

Why trust us...

Fact Checked By: Pearly Huang

Reviewed By: Michael Galvis

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Personal Loans

Where to Get the Best Personal Loan Rates Online

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Where to Get the Best Personal Loan Rates Online

Updated January 01, 2020

If you want a to pay off a credit card or consolidate debt, a personal loan is going to be one of your best options. A personal loan with a set payoff period a few years from now has some of 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 lending platforms and you can see sample APRs (annual percentage rates) below for excellent credit and good credit.

Company
APR
Terms
Credit Req.
LendingTree

As low as 3.49%

24 to 60

months

Minimum 500 FICO®

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

Advertiser Disclosure.

Disclaimer


As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 3.49% (3.49% APR) on a $10,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected). Terms Apply. NMLS #1136

3.49% - 19.99%*

with AutoPay

24 to 144*

months

Not specified

SEE OFFERS Secured

on LendingTree’s secure website

Advertiser Disclosure.

*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 3.49% APR with a term of 3 years would result in 36 monthly payments of $292.98.
SoFi

5.99% - 16.19%*

24 to 84

months

680

Minimum Credit Score

SEE OFFERS Secured

on LendingTree’s secure website

Advertiser Disclosure.

Fixed rates from 5.99% APR to 16.19% APR (with AutoPay). SoFi rate ranges are current as of July 10, 2020 and are subject to change without notice. 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, income, and other factors. See APR examples and terms. 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.
Marcus by Goldman Sachs®

6.99% - 19.99%

36 to 72

months

Not specified

SEE OFFERS Secured

on LendingTree’s secure website

Advertiser Disclosure.

Your loan terms are not guaranteed and are subject to our verification of your identity and credit information. To obtain a loan, you must submit additional documentation including an application that may affect your credit score. The availability of a loan offer and the terms of your actual offer will vary due to a number of factors, including your loan purpose and our evaluation of your creditworthiness. Rates will vary based on many factors, such as your creditworthiness (for example, credit score and credit history) and the length of your loan (for example, rates for 36 month loans are generally lower than rates for 72 month loans Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your verifiable income must support your ability to repay your loan. Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA and all loans are issued by Goldman Sachs Bank USA, Salt Lake City Branch. Applications are subject to additional terms and conditions.

5.99% - 29.99%

36 or 60

months

640

Minimum Credit Score

SEE OFFERS Secured

on LendingTree’s secure website

Advertiser Disclosure.

The Annual Percentage Rate (APR) is the cost of credit as a yearly rate and ranges from 5.99% to 29.99%, which may include an origination fee from 0.99% - 6.99% that is deducted from loan proceeds. Any origination fee on a loan term 4-years or longer will be at least 4.99%. The loan term and the APR offered will depend on your credit score, income, debt payment obligations, loan amount, credit usage history and other factors. Additionally, the APR offered is impacted by your loan term and may be higher than our lowest advertised rate. Requests for the highest loan amount may result in an APR higher than our lowest advertised rate. You need a minimum 700 FICO® score and a minimum individual annual income of $100,000 to qualify for our lowest rate.

Best Egg loans are unsecured personal loans made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC. Equal Housing Lender. "Best Egg" is a trademark of Marlette Funding, LLC. All uses of "Best Egg" on this site mean and shall refer to "the Best Egg personal loan" and/or "Best Egg on behalf of Cross River Bank, as originator of the Best Egg personal loan," as applicable. Loan amounts generally range from $2,000-$35,000. Offers up to $50,000 may be available. Residents of Massachusetts have a minimum loan amount of $6,500; New Mexico and Ohio, $5,000; and Georgia, $3,000. For a second Best Egg loan, your total existing Best Egg loan balances cannot exceed $50,000. Borrowers should refer to their loan agreement for specific terms and conditions. Your verifiable income must support your ability to repay your loan. Upon loan funding, the timing of available funds may vary depending upon your bank's policies.

To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you.

10.68% - 35.89%

36 or 60

months

Not specified

SEE OFFERS Secured

on LendingTree’s secure website

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 10.68% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 9.56% and a 5.00% origination fee of $300 for an APR of 13.11%. In this example, you will receive $5,700 and will make 36 monthly payments of $192.37. The total amount repayable will be $6,925.32. Your APR will be determined based on your credit at time of application. The origination fee ranges from 2% to 6% (average is 4.86% as of 7/1/2019 – 9/30/2019). In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,001 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.

9.95% - 35.99%*

24 to 60**

months

600

Minimum Credit Score

SEE OFFERS Secured

on LendingTree’s secure website

Advertiser Disclosure.

*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
**Example: A $5,900 loan with an administration fee of 4.75% and an amount financed of $5,619.75, repayable in 36 monthly installments, with an APR of 29.95% would have monthly payments of $250.30.

Based on the responses from 11,574 customers in a survey of 210,584 newly funded customers, conducted from 1 Feb 2018 - 1 Aug 2019 95.05% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.

18.00% - 35.99%

24 to 60

months

Not specified

SEE OFFERS Secured

on LendingTree’s secure website

Advertiser Disclosure.

Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on your ability to meet our credit standards (including a responsible credit history, sufficient income after monthly expenses, and availability of collateral). Larger loan amounts require a first lien on a motor vehicle no more than ten years old, that meets our value requirements, titled in your name with valid insurance. Maximum annual percentage rate (APR) is 35.99%, subject to state restrictions. APRs are generally higher on loans not secured by a vehicle. Depending on the state where you open your loan, the origination fee may be either a flat amount or a percentage of your loan amount. Flat fee amounts vary by state, ranging from $25 to $400. Percentage-based fees vary by state ranging from 1% to 10% of your loan amount subject to certain state limits on the fee amount. Active duty military, their spouse or dependents covered under the Military Lending Act may not pledge any vehicle as collateral for a loan. OneMain loan proceeds cannot be used for postsecondary educational expenses as defined by the CFPB’s Regulation Z, such as college, university or vocational expenses; for any business or commercial purpose; to purchase securities; or for gambling or illegal purposes.

Borrowers in these states are subject to these minimum loan sizes: Alabama: $2,100. California: $3,000. Georgia: Unless you are a present customer, $3,100 minimum loan amount. Ohio: $2,000. Virginia: $2,600.

Borrowers (other than present customers) in these states are subject to these maximum unsecured loan sizes: Florida: $8,000. Iowa: $8,500. Maine: $7,000. Mississippi: $7,500. North Carolina: $7,500. New York: $20,000. Texas: $8,000. West Virginia: $14,000. An unsecured loan is a loan which does not require you to provide collateral (such as a motor vehicle) to the lender.
PenFed Credit Union

Starting at 6.49%

6 to 60

months

Not specified

SEE DETAILS Secured

on PenFed Credit Union’s secure website

8.13% - 35.99%

36 or 60

months

600

Minimum Credit Score

SEE OFFERS Secured

on LendingTree’s secure website

Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Loans are not available in West Virginia or Iowa. The minimum loan amount in MA is $7,000. The minimum loan amount in Ohio is $6,000. The minimum loan amount in NM is $5,100. The minimum loan amount in GA is $5,000.

The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart Platform will have an APR of 22% and 36 monthly payments of $36 per $1,000 borrowed. There is no down payment and no prepayment penalty. Average APR is calculated based on 3-year rates offered in the last 1 month. Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.

Best personal loans for excellent credit: SoFi, Marcus by Goldman Sachs®, Best Egg, LightStream

Best personal loans for good credit: LendingClub, Best Egg, Upstart, PenFed Credit Union

Best personal loans for bad or minimal credit: Avant, OneMain Financial

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

Start Here – Multiple Lenders at Once

LendingTree

LendingTree
APR

As low as 3.49%

Credit Req.

Minimum 500 FICO®

Terms

24 to 60

months

Origination Fee

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

Advertiser Disclosure

LendingTree is our parent company. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. LendingTree is not a lender. Terms Apply. NMLS #1136.



As of 17-May-19, LendingTree Personal Loan consumers were seeing match rates as low as 3.49% (3.49% APR) on a $10,000 loan amount for a term of three (3) years. Rates and APRs were based on a self-identified credit score of 700 or higher, zero down payment, origination fees of $0 to $100 (depending on loan amount and term selected). Terms Apply. NMLS #1136

Dozens of lenders and online lending platforms participate in LendingTree‘s personal loan shopping tool – including all of the lenders and lending platforms listed on this page. With one online form, LendingTree will perform a soft pull (with no impact to your score) and match you with multiple loan offers from up to five different lenders or lending platforms based on your creditworthiness. This is our favorite (because it is easy) way to get multiple offers from lenders and online lending platforms in minutes and consolidate debt. For people with excellent credit, you could get an APR below 6%. For people with less than perfect credit, there are many lenders and online lending platforms 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.

Best 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 that you want to consolidate.

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

SoFi

SoFi
APR

5.99%
To
16.19%*

Credit Req.

680

Minimum Credit Score

Terms

24 to 84

months

Origination Fee

No origination fee

APPLY NOW Secured

on LendingTree’s secure website

Advertiser Disclosure

SoFi offers some of the best rates and terms on the market. ... Read More


Fixed rates from 5.99% APR to 16.19% APR (with AutoPay). SoFi rate ranges are current as of July 10, 2020 and are subject to change without notice. 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, income, and other factors. See APR examples and terms. 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.

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% in an introductory balance transfer offer 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 APRS, we think anyone with good credit should start with Sofi first, and then compare their offer to the rest of the providers.

Amount: $5,000 – $100,000

Marcus by Goldman Sachs®

Marcus by Goldman Sachs®
APR

6.99%
To
19.99%

Credit Req.

Not specified

Terms

36 to 72

months

Origination Fee

No origination fee

APPLY NOW Secured

on LendingTree’s secure website

Advertiser Disclosure

Marcus by Goldman Sachs® offers personal loans for up to $40,000 for debt consolidation and credit consolidation. ... Read More


Your loan terms are not guaranteed and are subject to our verification of your identity and credit information. To obtain a loan, you must submit additional documentation including an application that may affect your credit score. The availability of a loan offer and the terms of your actual offer will vary due to a number of factors, including your loan purpose and our evaluation of your creditworthiness. Rates will vary based on many factors, such as your creditworthiness (for example, credit score and credit history) and the length of your loan (for example, rates for 36 month loans are generally lower than rates for 72 month loans Your maximum loan amount may vary depending on your loan purpose, income and creditworthiness. Your verifiable income must support your ability to repay your loan. Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA and all loans are issued by Goldman Sachs Bank USA, Salt Lake City Branch. Applications are subject to additional terms and conditions.

If you want to work with a traditional bank, Marcus by Goldman Sachs® can be a great option. With APRs 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.

BestEgg

APR

5.99%
To
29.99%

Credit Req.

640

Minimum Credit Score

Terms

36 or 60

months

Origination Fee

0.99% - 6.99%

APPLY NOW Secured

on LendingTree’s secure website

Advertiser Disclosure

People looking for a process that is fast and straightforward can’t go wrong when applying through Best Egg for a personal loan. ... Read More


The Annual Percentage Rate (APR) is the cost of credit as a yearly rate and ranges from 5.99% to 29.99%, which may include an origination fee from 0.99% - 6.99% that is deducted from loan proceeds. Any origination fee on a loan term 4-years or longer will be at least 4.99%. The loan term and the APR offered will depend on your credit score, income, debt payment obligations, loan amount, credit usage history and other factors. Additionally, the APR offered is impacted by your loan term and may be higher than our lowest advertised rate. Requests for the highest loan amount may result in an APR higher than our lowest advertised rate. You need a minimum 700 FICO® score and a minimum individual annual income of $100,000 to qualify for our lowest rate.

Best Egg loans are unsecured personal loans made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC. Equal Housing Lender. "Best Egg" is a trademark of Marlette Funding, LLC. All uses of "Best Egg" on this site mean and shall refer to "the Best Egg personal loan" and/or "Best Egg on behalf of Cross River Bank, as originator of the Best Egg personal loan," as applicable. Loan amounts generally range from $2,000-$35,000. Offers up to $50,000 may be available. Residents of Massachusetts have a minimum loan amount of $6,500; New Mexico and Ohio, $5,000; and Georgia, $3,000. For a second Best Egg loan, your total existing Best Egg loan balances cannot exceed $50,000. Borrowers should refer to their loan agreement for specific terms and conditions. Your verifiable income must support your ability to repay your loan. Upon loan funding, the timing of available funds may vary depending upon your bank's policies.

To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you.

BestEgg is an online lending platform that offers low APRs and quick funding. Best Egg 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 APR and loan amount in the market.

You can check to see your APR without hurting your score, and they do approve people with scores as low as 640. If you have an excellent credit score, BestEgg will be very competitive on terms.

Amount: up to $35,000

Lightstream

APR

3.49%
To
19.99%*

with AutoPay

Credit Req.

Not specified

Terms

24 to 144*

months

Origination Fee

No origination fee

APPLY NOW Secured

on LendingTree’s secure website

Advertiser Disclosure

LightStream is the online lending division of SunTrust Bank.... Read More


*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 3.49% APR with a term of 3 years would result in 36 monthly payments of $292.98.

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 APRs available, and they are delivering. The interest rate you are charged depends upon the purpose of the loan. APRs can be as low as 3.49% for a new car purchase (and LightStream does not put their name on your title. They just put the cash in your bank account, and you can shop around and pay cash for the car). Home improvement loans start at 4.99% APR with AutoPay , making them cheaper and easier than a home equity loan.

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

Amount: $5,000 – $100,000

Available states: All

Best Personal Loans for Good Credit

These providers may be able to help you out if you’re not approved for your best terms or an introductory 0% balance transfer offer.

LendingClub

APR

10.68%
To
35.89%

Credit Req.

Not specified

Terms

36 or 60

months

Origination Fee

2.00% - 6.00%

APPLY NOW Secured

on LendingTree’s secure website

LendingClub is a great tool for borrowers that can offer competitive interest rates.... Read More

You might not have heard of LendingClub yet, but they are a big player in online loans. And they offer a wide range of APRs and terms based on your credit profile and needs. LendingClub’s minimum credit requirements are not specified.

Amount: up to $40,000

Available states: All except Iowa and West Virginia

BestEgg

APR

5.99%
To
29.99%

Credit Req.

640

Minimum Credit Score

Terms

36 or 60

months

Origination Fee

0.99% - 6.99%

APPLY NOW Secured

on LendingTree’s secure website

Advertiser Disclosure

People looking for a process that is fast and straightforward can’t go wrong when applying through Best Egg for a personal loan. ... Read More


The Annual Percentage Rate (APR) is the cost of credit as a yearly rate and ranges from 5.99% to 29.99%, which may include an origination fee from 0.99% - 6.99% that is deducted from loan proceeds. Any origination fee on a loan term 4-years or longer will be at least 4.99%. The loan term and the APR offered will depend on your credit score, income, debt payment obligations, loan amount, credit usage history and other factors. Additionally, the APR offered is impacted by your loan term and may be higher than our lowest advertised rate. Requests for the highest loan amount may result in an APR higher than our lowest advertised rate. You need a minimum 700 FICO® score and a minimum individual annual income of $100,000 to qualify for our lowest rate.

Best Egg loans are unsecured personal loans made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC. Equal Housing Lender. "Best Egg" is a trademark of Marlette Funding, LLC. All uses of "Best Egg" on this site mean and shall refer to "the Best Egg personal loan" and/or "Best Egg on behalf of Cross River Bank, as originator of the Best Egg personal loan," as applicable. Loan amounts generally range from $2,000-$35,000. Offers up to $50,000 may be available. Residents of Massachusetts have a minimum loan amount of $6,500; New Mexico and Ohio, $5,000; and Georgia, $3,000. For a second Best Egg loan, your total existing Best Egg loan balances cannot exceed $50,000. Borrowers should refer to their loan agreement for specific terms and conditions. Your verifiable income must support your ability to repay your loan. Upon loan funding, the timing of available funds may vary depending upon your bank's policies.

To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you.

BestEgg (reviewed earlier in this post) will approve people with credit scores as low as 640. If you have good credit and are looking for a loan, you should consider BestEgg.

Upstart

APR

8.13%
To
35.99%

Credit Req.

600

Minimum Credit Score

Terms

36 or 60

months

Origination Fee

Up to 8.00%

APPLY NOW Secured

on LendingTree’s secure website

Upstart is an online lender created by ex-Googlers.... Read More

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 36 or 60 months. 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 APRs 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 600 or better FICO and your monthly payments can’t be more than 55% of your monthly income.

Amount: $1,000 – $50,000

Available states: All

PenFed

PenFed Credit Union
APR

Starting at 6.49%

Credit Req.

Not specified

Terms

6 to 60

months

Origination Fee

None

APPLY NOW Secured

on PenFed Credit Union’s secure website

Pentagon Federal Credit Union (PenFed) offers personal loans with terms up to five years and maximum loan amounts of $20,000.... Read More

Previously, PenFed offers a fixed rate starting at 6.49% interest rate for 6 to 60 months. 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.

Available states: All

Best Personal Loans for Bad or No Credit

Avant

APR

9.95%
To
35.99%*

Credit Req.

600

Minimum Credit Score

Terms

24 to 60**

months

Origination Fee

Up to 4.75%**

APPLY NOW Secured

on LendingTree’s secure website

Advertiser Disclosure

Avant is an online lender that offers personal loans ranging from $2,000 to $35,000. ... Read More


*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
**Example: A $5,900 loan with an administration fee of 4.75% and an amount financed of $5,619.75, repayable in 36 monthly installments, with an APR of 29.95% would have monthly payments of $250.30.

Based on the responses from 11,574 customers in a survey of 210,584 newly funded customers, conducted from 1 Feb 2018 - 1 Aug 2019 95.05% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.

Avant‘s platform offers access to loans from $2,000 to $35,000, with terms from 24 to 60 months. 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.

Amount: up to $35,000

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.

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

OneMain Financial

APR

18.00%
To
35.99%

Credit Req.

Not specified

Terms

24 to 60

months

Origination Fee

1.00% - 10.00%

APPLY NOW Secured

on LendingTree’s secure website

Advertiser Disclosure

OneMain Financial offers quick turnaround times and you may get your money the same day... Read More


Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on your ability to meet our credit standards (including a responsible credit history, sufficient income after monthly expenses, and availability of collateral). Larger loan amounts require a first lien on a motor vehicle no more than ten years old, that meets our value requirements, titled in your name with valid insurance. Maximum annual percentage rate (APR) is 35.99%, subject to state restrictions. APRs are generally higher on loans not secured by a vehicle. Depending on the state where you open your loan, the origination fee may be either a flat amount or a percentage of your loan amount. Flat fee amounts vary by state, ranging from $25 to $400. Percentage-based fees vary by state ranging from 1% to 10% of your loan amount subject to certain state limits on the fee amount. Active duty military, their spouse or dependents covered under the Military Lending Act may not pledge any vehicle as collateral for a loan. OneMain loan proceeds cannot be used for postsecondary educational expenses as defined by the CFPB’s Regulation Z, such as college, university or vocational expenses; for any business or commercial purpose; to purchase securities; or for gambling or illegal purposes.

Borrowers in these states are subject to these minimum loan sizes: Alabama: $2,100. California: $3,000. Georgia: Unless you are a present customer, $3,100 minimum loan amount. Ohio: $2,000. Virginia: $2,600.

Borrowers (other than present customers) in these states are subject to these maximum unsecured loan sizes: Florida: $8,000. Iowa: $8,500. Maine: $7,000. Mississippi: $7,500. North Carolina: $7,500. New York: $20,000. Texas: $8,000. West Virginia: $14,000. An unsecured loan is a loan which does not require you to provide collateral (such as a motor vehicle) to the lender.

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 $20,000. The APRs are not low, and can go up to 35.99%. 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.

Amount: Up to $20,000

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Advertiser Disclosure: The products that appear on this site may be 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 financial institutions or all products offered available in the marketplace.

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Pay Down My Debt

What a Debt-Free Lifestyle Really Looks Like

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

Written By

Reviewed By

When it comes to debt, most of us have outstanding balances of one kind or another, whether for our car, our home or our education. And while debt can be a necessary tool to achieving certain goals, most Americans (nearly 60%) report feeling weighed down by what they owe, a February 2020 survey by LendingTree found.

But you don’t have to be tied to that borrow-and-repay cycle forever, especially if you have a stable income with cash flow to get ahead of your debt. The benefits of living a debt-free lifestyle can be life-changing — reduced financial stress, more money for saving and no interest payments, among them. Here is our guide on what you need to know about living a debt-free lifestyle.

What it takes to live a debt-free lifestyle

A strict monthly budget

Funneling extra cash into your debt is the quickest way to become free of it. The amount of interest you’ll owe overall will shrink, and so can your repayment timeline. But finding spare dollars to increase your payments can be tricky when you don’t know what money is coming in and going out. Making and following a budget could solve this issue.

Budgeting requires that you list out your income and subtract all expenses (such as rent, utilities and groceries) for the month. What’s left represents how much you have to allocate toward your debt. If you come up with a negative number, it means you’re running in the red and need to make some lifestyle tweaks to avoid going even further into debt.

Maybe you notice, for instance, that you’re buying lunch three times a week, paying for four different streaming services or splurging on new tech every other month. These are budget items you could easily reduce or eliminate to free up even more cash for paying off your debt.

It may seem a tedious process to track every dollar, but there are a variety of strategies and digital tools you can use to make it easier. For example, apps like Mint and YNAB (You Need a Budget) link up to your bank and credit card accounts to help you track spending.

  • Zero-based budgeting: If you struggle with making unnecessary purchases, this could be your best option. Every dollar in this budgeting scheme is given a job, even the money leftover after paying for necessary expenses. By predetermining what money goes toward debt repayment or retirement savings and what goes toward other needs or wants, you minimize the risk of having nothing leftover at the end of the month to meet financial goals.
  • 50/30/20 budgeting: Under this budgeting plan, you allocate 50% of your monthly income to major living expenses (housing, utilities, food and transportation) and 30% to discretionary spending (travel, entertainment, shopping), while the remaining 20% goes toward your financial goals, like paying down debt or saving. Of course, if you want to pay your debt down faster, you could inverse the 30% and 20% targets.
  • The 60% solution: All expenses under this budget should only eat up 60% of your income. The remaining 40% should be split among your retirement savings, long-term savings, emergency fund — and your own enjoyment. You could easily replace one of those 10% savings goals with your debt repayment or reduce the fun spending.
  • Classic line-item budget: There are no prescribed spending or savings targets under this traditional budget — instead, it’s up to you to categorize your expenses as you see fit, and then subtract them from your income to determine how much of the remainder can go to additional debt payments.

Saying ‘no’ to your wants

When you’re in a stable financial situation and looking to become debt-free, overspending on wants can be a common hurdle when maximizing debt repayment. This can be as small as charging more purchases to your credit card than you can afford to repay, or as big as taking out a large auto loan to pay for a car beyond what you can afford.

It takes discipline to break your spending habits and refuse yourself the things you want so that you can achieve your bigger goal of becoming debt-free. Buying only what is absolutely essential prevents you from adding to your debt and frees up more of your income to channel into paying off debt.

But this will be challenging to stick to, especially if it takes you a couple years to rid yourself of debt, so it is important to occasionally reward yourself for good behavior so you remain motivated. You might decide that after every few weeks you’ve gone without unnecessary purchases, you can splurge on a treat under a certain monetary threshold, say $100, that you know you can afford.

If you’re tempted to buy nonessential items, leave your credit card at home and carry cash: This way you can’t spend more than the dollars in your pocket. If online shopping gets you, remove all saved credit card and payment information from the websites you visit, unsubscribe from promotional emails, and mandate a 24- to 48-hour waiting period before you buy, giving you time to weigh how important that purchase really is.

Making sacrifices to live within your means

As we mentioned above, limiting unnecessary purchases, like meals out, can help you put more money toward debt repayment or avoid new debt. But if such tweaks aren’t freeing up enough cash to meet your debt repayment goals, your necessary expenses may have to change if you expect to have a debt-free lifestyle in the long term.

For instance, housing will always be a cost you have to pay, but the amount you spend can change big time depending on square footage, location or number of roommates. It may be worth sacrificing some space, privacy or convenience to find cheaper lodgings that will leave you with a decent amount in your bank account after bills so you can pay off debt.

Review your gym membership, subscription services, cable package, utility providers, cell phone service and any other fixed expenses you deem essential. Try renegotiating or changing providers to get a lower rate, find a less-premium option or cancel the service altogether. Limiting spending is the only surefire way to achieve a debt free lifestyle.

Having an emergency fund

When living debt-free, having an emergency fund is imperative to avoid falling into debt over unexpected costs, like a home repair bill. Set your sights on socking away three to six months’ of take-home pay in an emergency fund. Self-employed or freelance workers with variable income may want to tuck away a bit more — about nine months’ worth of expenses — to cover any earning lulls, as well as any surprise bills.

Keep your fund in a high-yield savings account. You could earn better interest than with a typical checking account, while still being able to easily tap the money whenever you want without incurring fees or time delays.

Debt vs. savings: Which comes first?

Both do. Just because you have competing money goals doesn’t mean you have an either/or situation. You can achieve both at the same time.

An emergency fund is key to avoiding acquiring more debt when an unexpected event occurs. Press pause on your hefty debt-payoff efforts for a brief spell to focus on building a $1,000 foundation for your emergency fund. Once you hit that milestone, you can resume tackling your debt until it’s knocked out, at which point you can switch back to building your savings up to the three- to six-month mark.

Retirement savings shouldn’t be put on hold, either. You don’t want to be so laser-focused on paying off debt that you rob your future self of a comfortable retirement. If your company offers matching contributions to retirement saving accounts, like a 401(k), you should prioritize stocking enough away in those accounts to get the full match. Otherwise, you’re turning down money from your employer.

The main benefit and risk of living debt-free

You’ll save more money on interest in the long term

Whenever you borrow money to finance a purchase, you must pay back the lender that original sum plus interest and other fees. The interest rate will change depending on the lender and the kind of debt, but it is always a percentage of the loan amount. (Many lenders charge compounding interest, meaning you pay interest on the interest you owe each month.)

Avoid debt and you skip having to pay interest altogether, meaning the cost of any item you’ve bought is the actual total cost you’ll pay for it. Those carrying debt balances with high interest rates will really feel the impact of becoming debt-free on their purse strings.

For example, let’s say you have a $3,000 balance on a credit card with an 18% interest rate and a $125 minimum monthly payment. Here’s how long it’ll take you to get out of debt and how much interest you’ll pay if you put up that minimum each month, versus a higher sum.

Your monthly paymentNo. of months needed to repay the debtTotal interest paidTotal repaid% of payments that went to interest
$125 payment30$747$3,74719.9%
$225 payment15$372$3,37211%
$325 payment11$253$3,2537.8%

To put into perspective how valuable these kinds of savings are, consider this: If you took $400 that you were spending each month on debt and redirected it toward a Roth IRA, it would grow to more than $487,000 over the next 30 years, assuming 7% annual returns, if compounded monthly.

You might struggle to build or maintain your credit

While avoiding debt and living a debt-free lifestyle may be a healthy way to manage our finances, it doesn’t mean you should swear off credit altogether. You will likely need to borrow again at some point to afford a large purchase like a new car or home, and having a good credit score is the key to landing those loans with an affordable interest rate.

A number of factors go into determining your credit score. For example, 15% of your FICO Score is determined by the length of your credit history. New credit makes up 10% and having a mix of credit counts for another 10%. In other words, actively using credit responsibly accounts for 35% of your credit score. Going completely credit-free translates to a thin credit file that can impact important financing options down the road.

The good news is you have two major options if you don’t have to sacrifice a debt free lifestyle to maintain a good credit score:

  • Use credit cards responsibly: This means paying off your balances on time and in full every month and never carrying a balance. Your credit utilization ratio (i.e. how much of your available credit you’re actually using) makes up one-third of your FICO score — creditors like to see that you’re using less than 30% of it. Those with reward credit cards may even make a little back on everyday spending.
  • Consider a secured credit card: If you don’t trust yourself with a credit card, a secured credit card could be a solution. These cards require you to put down a cash deposit, which determines the credit line (typically between 50% and 100% of the deposited amount). After that, you can use it like a regular credit card without the fear of overspending. Not carrying a balance and making on-time payments is key to boosting your credit as your activity is reported to the credit bureaus. But if you miss payments, the bank will hold your deposit as collateral and apply it to your outstanding balance and charge high fees.

Advertiser Disclosure: The products that appear on this site may be 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 financial institutions or all products offered available in the marketplace.

Get Personal Loan Offers
Up to $50,000

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