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Personal Loans

Earnest Personal Loan Review

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Earnest personal loans: Pros and cons

Pros:

Cons:

  • Low fixed APR: Starts at 5.99% for 36-month loans
  • Fee-free:No origination fee, late payment or prepayment penalty means your loan is more affordable
  • Forbearance options: Qualifying borrowers can temporarily pause payments
  • Comprehensive underwriting process: Earnest takes your future earning potential and savings habits into account
  • Benefits to servicemembers: Potential military service deferment and servicemembers’ interest rate cap
  • Higher rates for longer terms: 60-month loans have a 7.24%% minimum APR
  • Minimum credit score of 680: As the lowest acceptable score, these are likely to be given the highest interest rates
  • Slow loan funding: Loan underwriting takes five to 10 days, and funding can take another two business days
  • Higher minimum borrowing limit in California: You’ll have to borrow a minimum $10,000 if you’re a California resident
  • Not available in all states: Alabama, Delaware, Kentucky, Nevada and Rhode Island residents won’t qualify for an Earnest personal loan

How your Earnest loan can be used

Earnest personal loans can be used for many expenses, including:

  • Credit card consolidation
  • Home improvements
  • Tuition and education expenses for unaccredited institutions
  • Rental security deposit
  • Moving costs
  • Engagement ring purchase
  • Weddings or honeymoons
  • Vacations
  • Medical expenses

Earnest personal loans cannot be used for:

  • Tuition at an accredited institution
  • As business capital to start a business or pay current business expenses
  • To buy or invest in real estate

Who qualifies

Standard requirements

  • Be 18 years of age or older
  • Have proof of regular income
  • Be a U.S. citizen, have a 10-year green card or a two-year green card with Form I-751 approval or acceptance
  • Be a resident of Washington D.C., or any of the 45 states they service (Alabama, Delaware, Kentucky, Nevada or Rhode Island residents don’t qualify)

Financial requirements

  • A minimum credit score of 680
  • History of on-time payments
  • Bank account balances with a history of rising
  • Adequate savings to cover two months of expenses
  • No large amounts of non-mortgage, non-student debt
  • No open collection accounts
  • No bankruptcies in the past three years

How Earnest compares to competitors

LightStream

APR

3.49%
To
19.99%*

with AutoPay

Credit Req.

Not specified

Terms

24 to 144*

months

Origination Fee

No origination fee

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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.

With a starting APR of 3.49% (with autopay) and a high of 19.99%, LightStream offers more affordable terms than Earnest. Lightstream, which is also an online lender, also beats out its competitor with larger loan amounts and a greater variety of terms.

However, Earnest has a more comprehensive underwriting process. LightStream defines excellent credit as having at least five years of credit history, in addition to a robust credit score. Earnest, meanwhile, looks deeper into borrowers’ potential, so a limited credit history won’t necessarily keep you from qualifying for a loan. This can be especially helpful to recent college graduates.

SoFi

SoFi
APR

5.99%
To
16.19%*

Credit Req.

680

Minimum Credit Score

Terms

24 to 84

months

Origination Fee

No origination fee

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on LendingTree’s secure website

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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 versus Earnest is a tight race. Both online lenders offer no origination, prepayment or late payment fees. SoFi’s APRs cap out at 16.19% — which is higher than Earnest’s maximum by a few percentage points — through the lender offers a higher maximum borrowing limit and more flexible repayment terms.

SoFi also offers a unique borrow protection program: unemployment protection. Borrowers in good standing who lose their jobs through no fault of their own may have their personal loan payments suspended, as well as receive job placement assistance.

How to apply for an Earnest personal loan

With Earnest, online personal loan applications require a few steps:

  1. Complete and submit an online application. Be prepared to send requested tax documents, bank information and employment and income verifications. Upon receipt of your application, Earnest will send you a confirmation email.
  2. Submit additional requested documentation. If Earnest needs any additional tax, income or other documents, you will be notified by email. You can sign in to your Earnest account to upload the requested documents.
  3. Wait for a loan decision. The underwriting process can take five to 10 business days. Applicants will receive loan decisions via email.
  4. Approve or deny your loan offer. After receiving the loan decision, applicants have seven calendar days to review the terms and approve (or turn down) the loan offer. Loans are funded within one to two business days after acceptance.

FAQ on Earnest

Earnest is an online lender that strives to deliver a fast and personalized low-cost lending solution. The company uses an algorithm to identify qualified borrowers and relies on data, software and online applications to reduce costs and rates.

In addition to personal loans, borrowers can get Earnest student loans and student loan refinancing, including for Parent Plus loans.

As part of the underwriting process, Earnest needs to review bank account transactions and balances. Earnest uses bank account information to verify identity and reduce fraud.

Most applications for both large and small personal loans are underwritten within five to 10 business days. After a loan is approved, borrowers have seven calendar days to review and accept the offer.

Loans are funded within two business days of signing the acceptance.

Earnest offers both autopay and manual pay options. This means borrowers may be able to send checks, wire funds, or set up electronic transfers for payments.

Earnest customer service is available from Monday through Friday from 8 a.m. to 5 p.m. Pacific time. A customer service representative can be reached via the Earnest contact phone number or through a form on the website.

Once a personal loan has been approved and is being serviced, borrowers need to contact System & Services Technology by phone. The company is available from 7 a.m. to 10 p.m. Central time Monday through Friday and from 8 a.m to 12 p.m. Central on Saturdays.

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

Debt Settlement: How It Works, FAQs And More

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

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Household debt statistics ebb and flow over the years, but debt never completely goes away. As of January 2020, 41.2% of U.S. households have credit card debt. The average among American households carrying a balance is $9,333.

But whether you’re buried under credit card, medical or another type of debt, one option you might be considering is debt settlement. This form of debt relief can help you erase your unpaid balances – but it isn’t guaranteed and can mean costly consequences for both your credit and wallet.

What is debt settlement?

Debt settlement is the process of hiring a company to negotiate with your creditors to reduce or erase your balances. You may also do it yourself. (More on that below.)

When you hire a debt settlement company, you’ll be asked to deposit a certain amount of money in a savings or escrow account each month. (The account will belong to you.) As you build your savings, the debt settlement company will generally advise you to stay delinquent with your creditors. That means you’ll continue to accrue fees, such as for late payment on your debts – hurting your credit in the meantime.

Once your savings account accumulates a high enough balance, the debt settlement company will begin negotiating with your creditors to settle the debt. If your creditors agree to settle, the payoff amount will be taken out of the savings account.

Fees

Fees for debt settlement programs can be difficult to find on company websites. However, most consumers can expect fees to range from 15% to 25% of the total debt they enroll in the program. Fees are charged against successfully settled debts, but may also include fees for any third-party managed savings account that is part of the program.

Pros and cons of debt settlement

Is debt settlement a good idea

Pros

Cons

  • Can reduce your total balances due
  • Simplifies monthly bill payment
  • May help you avoid bankruptcy
  • Could take less time to finalize than Chapter 13
  • Fees can be costly
  • You generally need to be behind on payments and remain delinquent, accumulating late fees
  • Remaining behind on payments will negatively impact your credit
  • No guarantee that your creditors will accept the settlement offer
  • Canceled debt may be treated as taxable income

Working with a debt settlement company

  • Evaluate debt settlement companies. This starts by comparing the fees and claims of each company. Debt settlement can be risky as it isn’t guaranteed, so it’s critical to compare fees. Additionally, since there is no guarantee that a creditor will accept the settlement, it’s a good idea to review each company’s claims to ensure you’re dealing with one that sets reasonable expectations.Next, evaluate the company’s process as well as their terms to make sure you qualify. For any company you work with, you should retain control over the funds. Some companies begin making settlement agreements as soon as the funds build up, others wait.
  • Research debt settlement companies. After you’ve narrowed down your choices, check on the company’s compliance and other user experiences. You can visit the Better Business Bureau and ensure the companies are members of the American Fair Credit Council and the International Association of Professional Debt Arbitrators.
  • Establish agreement/account. Upon selecting a company to work with, visit their website to open an account. Be prepared to give your name, phone number, email address and the total amount of credit card debt.
  • Start saving money according to your plan. Once the company reviews your debt, they will propose a savings plan that you should follow. This will require you to make a single deposit into an account usually managed by a third party.
  • Saved funds are disbursed. When the company begins making settlement agreements, the funds will be distributed from the account, paying off both debts and settlement company fees.

How to settle debt on your own

1. Figure out which accounts are past due

If you’ve secured money through a loan, savings or inheritance and you want to leverage that to settle your debt, you don’t have to hire a debt settlement company. Instead, you can take care of it yourself or hire a lawyer to handle the negotiations.

For a debt settlement offer to be appealing to creditors, you likely need to be behind on payments. Rather than stopping payments on your current debt, make a list of the debts you are already behind on.

Next check the statute of limitations on that past-due debt. If you have debt that’s past the statute of limitations, then you can no longer be sued by the creditor to collect. If you decide to make a partial payment on debts that are past the statute of limitations, it might restart the clock on the statute.

2. Save money, and determine how much you can pay

Before contacting your creditors to make a settlement offer, determine what kind of lump sum or payment plan agreement you can stick to. The goal is not only to pay off the settled debts but to stay current with all your other bills and ensure you have enough of a cushion to deal with potential emergencies.

If you don’t have a lump sum of money to offer for debt settlement

3. Contact your creditors

Creditors need to agree to reduce your debt balance as part of your settlement offer. To find out which creditors are amenable to debt reduction, contact all those whose payments you’ve fallen behind on. Because you want everything documented, this contact should be made in writing, although you can call the company as well.

In some cases, this debt may have already been transferred to a collection agency. If that’s the case, verify which collection agency has taken the debt and contact them.

4. Write a debt settlement letter

Once you know which creditors are willing to settle, write a debt settlement letter spelling out the details of the agreement. This letter should include:

  • The account number
  • The reason you want to settle the debt
  • The current balance
  • The proposed settlement amount or restructured payment plan
  • The deadline for the settlement payment or starting date for the payment plan

Sample debt settlement letters

Alternatives to debt settlement

Debt management plans

Nonprofit credit counseling organizations often offer what’s called a debt management plan. This is a strategy in which the credit counseling agency works with creditors to reduce your interest rates and create payment plans that work with your budget. You then make a single monthly payment to the agency and have a payoff date within three to five years.

A debt management plan may come with a monthly fee as well as a setup fee. However, these fees may be worthwhile, as the credit counseling agency will work to have late fees and other kinds of fees waived on your debt.

Debt consolidation

If you don’t like the idea of keeping your debts unpaid for debt settlement, you can instead consider debt consolidation. You can accomplish this by either:

  • Working with a nonprofit credit counselor to create a debt management plan; or
  • Getting a personal loan, balance transfer card or equity loan to pay off all creditors, thus reducing your repayments to a single lender and due date.

Bankruptcy

Debt settlement is often chosen as a way to avoid bankruptcy, but in some situations, bankruptcy could be a better option.

  • With Chapter 13 bankruptcy, a three- to five-year payment plan can mean that your debts are settled and your secured assets protected with a court-approved payment plan and possibly lower debt balances.
  • With Chapter 7 bankruptcy, many unsecured debts can be discharged without payment, so you might save even more money. Since credit cards are unsecured debt, Chapter 7 can be a better choice than credit card debt settlement.

With either type of bankruptcy, collection actions are stopped, along with garnishments. This can provide a welcome relief to those being hounded by debt collectors.

FAQ: Debt settlement

A debt that’s been settled will show as such for up to seven years on your credit report. In addition, late payments of 30 days or more can remain on your credit report for up to seven years.

Because debt settlement generally requires you to remain past due on payments, it can have a detrimental effect on credit. Missing more than one payment, which is typical for debt settlement, can have an even greater impact.

Taking a settlement in and of itself is not necessarily a bad thing, although it will show up on your credit report. There can be tax consequences on the forgiven debt, so make sure you’re ready to pay those. Settlements also generally require you to be past due on payments, which also has a negative effect on your credit score.

Debt settlement companies often claim reductions of 30% to 70%. This does not include fees paid to the settlement company.

To qualify for debt settlement, a creditor generally must be enduring a financial hardship that has put them behind on payments. They must also meet the company’s debt balance requirements.

Debt settlement companies often claim to have an advantage with creditors by handling a large volume of customer debt through bulk negotiations. This could mean you have better odds of having your agreement accepted when you use one. However, you may save money by handling it on your own.

Avoid companies that charge in advance or that guarantee results. Check the Better Business Bureau for complaints and make sure the company is compliant with the Federal Trade Commission.

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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Strategies to Save

Understanding the Various Types of Deposit Accounts

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

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A deposit account is an account at a bank or credit union that allows you to safely and easily manage your money. Deposit accounts fall into two major categories: demand deposits and time deposits.

Demand deposit accounts, which include checking and savings accounts, may let you withdraw up to the full amount of your savings at any time without gaining permission from the bank or credit union. Time deposits, like CDs, restrict your access to funds for a set time period.

What are the types of deposit accounts?

The two key features of deposit accounts

All deposit accounts offer two primary features: security and interest.

Security

When deposited into an insured financial institution, your money is protected in the event of bank failure up to the legal amount per account by the Federal Deposit Insurance Corporation (FDIC), or up to the legal amount per credit union account by the National Credit Union Administration (NCUA). Joint accounts with two account owners get double the protection from the FDIC or NCUA. You can find out if the bank you’re considering is insured by the FDIC here.

Interest

You’re not just putting money into a deposit account to keep the funds safe — you also want to be rewarded for letting the bank hold your money. After all, banks and credit unions use funds held in deposit accounts to make loans to other customers, and earn profits. Interest payments is how banks and credit unions reward their deposit account customers, and incentivize them to keep funds in their accounts.

The longer you leave your money and earn interest in the bank, the greater the interest the account will earn. This is called “compound interest.” Depending on the bank and the account, interest may compound on a quarterly, monthly, weekly or daily basis. The more often interest compounds, the faster your balance grows.

When comparing prospective deposit accounts, you’ll want to review the annual percentage yields (APY). The APY advertised by your bank or credit union is the amount of interest you’ll earn in one year — the APY factors in the interest rate on the account as well as how often it compounds, so comparing APYs is the best way to compare the earning potential of different accounts.

Features of the main types of deposit accounts

These are the five main kinds of deposit accounts — let’s take a look at how they work and when you need them.

Checking accounts

Checking accounts are demand deposit accounts that let you deposit or withdraw money whenever you want. A checking account provides easy access to your money via paper check, ACH transfer, debit card, or cash withdrawal at a branch or ATM.

Some checking accounts pay interest, with our list of best accounts available paying upwards of 4.00% APY or more, as long as minimum balance requirements are maintained. But note that many checking accounts pay minimal or even zero interest, and regulations do not require institutions to offer interest payments on checking accounts.

Checking accounts may charge fees, including monthly maintenance charges; however, fees may be waived if you maintain a minimum balance or set up recurring direct deposits. You can be charged for money orders or cashier’s checks, and there may be limits on the amount you can withdraw in a given day or per ATM visit. Writing checks or swiping your debit card for amounts you don’t have can result in costly penalties like overdraft fees, insufficient-funds fees, or returned-check fees.

When to open a checking account

  • Checking accounts are one of your most important personal finance tools. This is where you manage the money you earn and spend on a day-to-day, week-to-week basis.
  • If you’re earning a low APY or earning no APY on your checking account, now might be the right time to examine your options. There are plenty of high-yield checking accounts available on the market today.
  • Look for checking account with zero fees. There are simply too many zero-fee options for you to be paying monthly account fees for your checking account.

Savings accounts

Savings accounts are demand deposit accounts that offer interest on your balance. Interest may be compounded daily, weekly, monthly, or annually. The benefits of savings accounts can vary widely based on requirements for a minimum opening deposit, monthly service fees, interest rates, and how the interest is calculated.

Savings accounts aren’t meant to offer the ease and frequency of access you get with checking accounts, but some do offer debit cards and even checkbooks. The Federal Reserve’s Regulation D mandates certain types of telephone and electronic withdrawals, including transfers from savings accounts up to 6 per statement cycle. If you exceed your transaction limit, the bank may charge you a fee, close your account or convert it to a checking account, so check with your bank about requirements and penalties.

When to open a savings account

  • You may want to look into moving your savings into a high-yield savings account if you can get a better rate than what you’re earning with your current savings account.
  • When considering a new savings account, look for the highest possible APY you can find — most often, that means looking at our list of online savings accounts, which we have found consistently offer the best rates in the business.
  • Skip accounts with any monthly maintenance fees, as they eat into your returns. Also keep an eye on minimum balances to earn the highest possible APY.

Money market accounts

A money market account (MMA) is a high-yield deposit account that offers interest rates very similar to those offered by savings accounts. Money market accounts often provide access to your funds via debit cards or checks. However, like savings accounts, they too are subject to Regulation D which mandates certain types of telephone and electronic withdrawals, including transfers from savings accounts up to 6 per statement cycle. You should check with your credit union or about any transaction limits and potential penalties. Minimum deposit requirements for MMAs are frequently higher than those for savings accounts.

When to open a money market account

  • Money market accounts have many of the same benefits and restrictions as savings accounts. MMAs generally require higher minimum deposits to open than savings accounts, and in exchange for that, you may be able to secure a higher APY. If you have a large sum you wish to keep as a liquid asset, a money market account may be your best option.
  • If you need easy access to your funds, a debit card or even a checkbook can be reasons to choose an MMA — although many savings accounts offer these conveniences as well.
  • Like with savings accounts, you need to understand the minimum balance required to earn the account’s highest advertised APY.

Certificates of deposit

Certificates of deposit (CDs) offer a way to earn higher rates of interest than those offered on savings accounts. CDs are time deposits, with common terms between one month and ten years. With a CD, you cannot withdraw money before the CD matures without incurring a penalty.

Penalty rates vary across the industry and by CD term length, but penalties generally amount to losing some or most of the interest you’ve earned on your investment at the time you withdraw. The interest rates are fixed over the term of the CD. The CD may automatically renew upon the maturity of the original deposit, so check with your bank or credit union for details.

CDs are insured by participating institutions up to the legal amount per account, per institution by the FDIC for banks and the NCUA for credit unions. Larger principal deposits and longer terms may fetch more competitive rates, although investors need to be sure they are comfortable losing access to their money for long durations.

You can stagger multiple CD maturity dates to create a CD ladder as a way of maintaining liquidity, capitalizing on increasing rates, and hedging against falling rates.

When to open a certificate of deposit

  • CDs are only a good option if you don’t need access to your money for whatever term you choose — either a short-term certificate with a term numbered in months, or a long-term CD lasting years.
  • Some CDs offer higher interest rates than savings accounts. Again, though, you must be prepared to leave your funds untouched for the term of the CD. Beware of high penalties for early withdrawals, before the end of the CD’s term.
  • Locking your money up in CDs could be a good strategy when market interest rates are falling: You can maintain a higher APY while other deposit accounts see declining rates. Conversely, they might not be the best choice when market rates are rising: By locking in a CD, you might miss out on higher APYs on other deposit accounts from higher rates.

Individual retirement account CDs

Individual retirement accounts (IRAs) are tax-advantaged vehicles designed to help people save for retirement. With an IRA CD, you may use funds saved in your IRA to invest in designated CD products. Credit unions, banks and brokerage firms offer IRA CDs, available as either traditional IRAs or Roth IRAs.

IRA CDs share most characteristics with regular CDs. IRA CDs may renew automatically like traditional CDs, so it’s important to keep track of your CD maturity dates so you can make educated investment decisions when the CD term ends. Keep in mind that deposits into an IRA account are subject to annual IRA contribution limits.

Like regular CDs, IRA CD investors need to beware of early-withdrawal penalties. Not only are there penalties for withdrawing from the CD before it matures, but if you remove the funds from your IRA, there is an IRS tax penalty of 10% on any distribution you take before you reach 59½ years of age. Still, the IRS may waive early distribution penalties for certain situations, such as a withdrawal of funds applied to a first-time home purchase.

When to open an IRA CD

  • IRA CDs are a great option for conservative retirement investors who want a decent rate of interest, without exposure to volatile stock or bond markets. 
  • Unlike stock and bond investments in IRAs, IRA CDs are insured by the FDIC and NCUA up to the legal amount per account, per institution.
  • Like standard CDs, IRA CDS prevent you from accessing principle for whatever term you choose.

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.