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Featured, Personal Loans, Reviews

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

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Marcus by Goldman Sachs

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

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

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

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

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

All rates are current as of March 5, 2018.

Marcus by Goldman Sachs savings account

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


Minimum Balance Amount



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

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

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

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

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

How to open a Goldman Sachs online savings account

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

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

on Goldman Sachs Bank USA’s secure website

Member FDIC

How their online savings account compares

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

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

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

Marcus by Goldman Sachs CD rates

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



Minimum Deposit Amount

6 months



9 months



12 months



18 months



24 months



3 years



4 years



5 years



6 years



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

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

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

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

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

How to open a Goldman Sachs CD

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

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

on Goldman Sachs Bank USA’s secure website

Member FDIC

How their CDs compare

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

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

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

Marcus by Goldman Sachs personal loan

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



Credit Required


Max Loan Amount

36-72 months





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

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

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

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

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

How to apply for a Marcus personal loan

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

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


on Marcus By Goldman Sachs®’s secure website

How their personal loans compare

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

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

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

Overall review of Marcus by Goldman Sachs' products

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

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

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

Lindsay VanSomeren
Lindsay VanSomeren |

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


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Personal Loans

A Guide to Secured Loans

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.


In this guide, we’ll talk about several different secured loans, and the pros and cons of each so you know exactly what to expect before you borrow.

Part I: Secured Loans 101

A secured loan is backed by an asset that you own outright, like a paid-off vehicle or the equity in your home. You put up that property as collateral, and a lender uses that collateral as assurance that they’ll get their money back if you don’t pay. In some cases, secured loans can be allotted for any purpose the borrower chooses.

Home equity loans (HELs) and home equity lines of credit (HELOCs), for example, use the equity a borrower already has in his or her home as collateral. These loans might go toward home improvements and repairs, but consumers also use them to pay for education or debt consolidation.

Each lender has different requirements for the type of collateral they will accept, though it’s most often some form of tangible property with substantial value: a home, car or boat, for example. Auto title loans allow you to put up your vehicle title, and payday lenders take future income — hence the term “payday” — and sometimes even small home appliances as collateral. If you are applying for a secured credit card, your own cash is used as collateral. You can even use a savings or investment account to secure a loan.

For some secured loans, like high-fee payday or title loans, the barrier to entry is very low. Lenders may not require a credit check, and you can walk out with cash in just a few minutes. These usually fall under the category of predatory loans, and although they are easy to obtain and have short loan terms, they are difficult to pay back and escape.

For home and auto loans, borrowers usually have to demonstrate a minimum level of creditworthiness. Secured credit cards are a unique type of secured loan in that they don’t usually require a good credit history and instead are used primarily to build or repair credit on a low-limit card.

The different types of secured loans

Secured card

A secured credit card is often used to build credit, either for consumers who don’t have a history, or those who are trying to recover from dings like bankruptcy or accounts sent to collections.

To obtain a secured card, the borrower must put down a minimum deposit as collateral. The line of credit available for use is usually equal to the deposit amount, though in some cases it can be higher.

The borrower can use their secured card just like a normal credit card — and in order to build credit and avoid interest, he or she should manage the balance and payments responsibly. Minimum deposits for secured cards range widely from $49 to $750, and some carry annual fees up to $50 or more.


With a home equity loan or home equity line of credit, the borrower puts up the equity in his home as collateral — essentially, this means borrowing against the amount your home is worth minus your current mortgage balance.

HELs, like a traditional installment loan, are made in a set dollar amount with fixed payments over the life of the loan.

HELOCs, on the other hand, operate like credit cards. The borrower is approved for a dollar amount that he can draw against and pay off with a variable interest rate. These loans are often spent on home repairs but can be used for other major expenses like education, weddings, debt consolidation or in case of emergency.

In some cases, borrowers carry a zero balance for most of the life of their HELOC but feel secure knowing it’s available if the need arises. If the borrower defaults on a HEL or HELOC, the lender has the right to repossess and sell the home.

Payday loan

Payday loans are a form of lending in which a cash-strapped borrower receives cash with the promise of repaying the loan plus a fee on their next payday.

In this case, a postdated check for the total of the loan amount and fees or authorization to access the funds in your bank or prepaid account serves as collateral for the loan.

These small-dollar loans usually run on two- or four-week terms and although they are often for $500 or less, they carry an average 391% APR. This often traps borrowers in a debt cycle. According to recent research from the Pew Charitable Trusts, 12 million Americans take out these loans every year and spend $9 billion on fees alone.

Title loan

Title loans require the borrower to turn over their car title in exchange for fast cash.

Most lenders don’t require a credit check, and though terms and requirements vary widely, these loans come with hefty fees and interest rates. If the borrower fails to pay back the loan, he or she can either take out another loan with additional fees, or risk having the lender repossess the car.

The Consumer Financial Protection Bureau found that between 2010 and 2013, 20% of borrowers had their vehicles seized by lenders, and more than half of borrowers took out four or more consecutive loans to repay their initial amount.


A mortgage is used to purchase a home, which in turn serves as the collateral to secure the loan. Unlike some other types of secured loans, existing — and healthy — credit is important for securing a mortgage.

If you have poor credit, you’ll see higher interest rates and monthly payments, which means you could owe tens of thousands of dollars more over time than if you had a higher score. Lenders also consider your debt-to-income ratio, the size of your down payment, employment history and the size of the loan. If you fail to make mortgage payments, the lender has grounds to repossess your home.

Auto loan

Like a mortgage, with an auto loan the borrower uses the property they are buying — a vehicle — as collateral to secure the loan.

The lender, usually a bank, credit union or dealership, holds a lien on the car until the loan is paid in full. Monthly payments vary widely depending on the price of the car, the length of the loan contract and the APR you receive.

Similar to a mortgage, if you are late on auto loan payments, the lien holder can repossess your car and, in some states, do so without going to court.

Part II: Secured loans vs. unsecured loans

Whereas a secured loan is made using collateral a borrower already owns, an unsecured loan is offered based on a lender’s trust that you’ll pay back what you owe. The lender takes a bigger risk with an unsecured loan because they don’t have any collateral to claim if the borrower defaults. As a result, unsecured loans may come with higher interest rates and fees.

This isn’t always the case, however — rates and terms vary widely depending on the lender and type of loan as well as the borrower’s credit history. For some, an unsecured loan may not even be an option, as lenders may offer only a secured loan to a consumer who is considered high risk. Borrowers may also prefer to put up collateral and get more favorable terms offered with a secured loan over an unsecured loan.

Unsecured loans include credit cards and student loans as well as personal loans. Like cash from some secured loans, personal loans can generally be used for any purpose — according to data from LendingTree, MagnifyMoney’s parent company, nearly 34% of personal loans are intended for debt consolidation and just under 33% are targeted toward credit card refinancing.

With both secured and unsecured loans, it’s important to know that nonpayment has serious consequences for your financial well-being. In addition to seizing collateral put up for a secured loan, lenders can send your unsecured loan debt to a collections agency and take legal action to recoup losses. Default puts your credit rating and access to future loans in jeopardy.





  • Secured card

  • Mortgage

  • Auto loan


  • Payday loan

  • Title loan

  • Personal loan

  • Student loan

  • Credit card

Collateral required?



Credit required

Varies. Title lenders may not require a credit check, while an auto loan or mortgage lender will

Yes — history and score vary by product and lender. Most federal student loans don’t require a credit check, however.

Cost of loan (APR, fees etc.)

Varies with loan type. Interest rates for auto loans go as low as 5.2%, while rates for title and payday loans can hit triple digits. These also come with fees for rolling over to another loan at the end of a term. Secured cards have APRs ranging from 9% to 21.99% and annual fees of $0-50

Personal: Around 4%-35.99% APR with origination fees ranging from zero to 8%
Student: Federal interest rates range from 4.45% to 7% plus fees between just over 1% and just over 4%. Private loans have variable rates, some high as 14.24%.
Credit: APRs start around 6% and hit upward of 25%. May also have annual fees


Opportunity to build credit and to borrow more than you might be approved for with an unsecured loan

Don’t have to put up collateral, helpful in emergencies, can be used for any purpose — especially to consolidate higher interest debt


Risk of default and loss of collateral plus additional money and property, negative impact on credit

Higher APR and fees, risk of overspending and creating loan dependency, damage to credit if you can’t afford payments

Best for (what type of consumer)

Depends on loan. Secured cards help build (or rebuild) credit history, while payday and title (predatory) loans are not recommended

Consumers looking to consolidate high-interest debt or purchase big-ticket items they’ve planned for IF they can afford the monthly payments

Learn more

The pros and cons of secured loans

Secured loans — aside from predatory payday and title loans — are available from a variety of lenders. If you already hold accounts at a bank, this would be the first place to look. Credit unions also offer secured loan services, though you must be a member to access their products. Finally, look at online, nonbank lenders who focus on loans without offering traditional banking products. No matter what type of loan you’re looking for, shop around to ensure you get the best rates and terms.

When it comes to choosing a secured loan over an unsecured loan, there are some benefits and risks to weigh.


Secured loans may allow you to get more money with less credit.
Lenders are often more willing to lend higher sums to consumers if the loan is secured by collateral because they have something tangible to repossess or foreclose on if the borrower defaults, according to Andrew Chan, a financial adviser at Locker Financial Services, LLC in Little Falls, N.J. Because this is a lower risk for lenders, they may also be more willing to forgive lower credit scores.

Secured loans often have lower interest rates and fees than unsecured loans.
Because secured loans pose less risk to the lender, the borrower may be offered lower rates, fees and payments, says Chan. This may give you access to the cash or credit that you need but may not otherwise get — if you use it responsibly.


The collateral you put up is always at risk.
Even with the best-laid plans, taking on a secured loan means that your personal property may be repossessed. If you default, your lender can take your collateral, sell it and repay the loan with the proceeds. As the borrower, you lose amount you already put into the loan plus valuable property that may be difficult to replace.

Lenders may trap you with prepayment penalties and other fees.
Even if you want to get out of your secured loan and have the ability to pay off what you owe, you may get hit with prepayment penalties — fees that lenders charge borrowers who repay loans before they are due. If you do pay off a loan early, the lender makes less in interest, so they may try to keep you in a costly loan by making it too expensive to leave. With predatory lending, loan fees can quickly add up each time the borrower tries to extend the loan.

Under the Truth in Lending Act, lenders must disclose all charges and fees associated with a loan, so you should know ahead of time if prepayment penalties will apply.

Staying safe with a secured loan

An important part of taking on any loan or form of credit, secured or not, is knowing that you can handle the payments over the life of the loan and continue to afford other financial obligations. Here are five factors that may impact your ability to manage your loan:

Job security. Some secured loans, like HEL and mortgages, are long-term commitments (20 to 30 years) . Even if you have the income to cover your loan payments and still live comfortably now, think about whether your current career and employer offer enough stability to do so down the line, as well as whether you have marketable skills to find other opportunities next month, next year, or far in the future if necessary.

Cash flow. Just because you are able to put up property as collateral doesn’t mean you’ll be comfortable making payments on your secured loan. Look carefully at your income and expenses to determine if the monthly payments, interest and fees on your loan are actually within your budget, both now and (as much as possible) in the future.

Lifestyle. Even if you have the cash, the burden of taking on a loan could impact your ability to live the way you want to, says Johnna Camarillo, assistant vice president of equity processing and closing at Navy Federal Credit Union.

“Make sure that you don’t put yourself in a situation that according to the numbers, I can comfortably make my payments, but I can’t take a vacation or I can’t go out with my family as much as I’d like,” she told MagnifyMoney. “People should really look at their total lifestyle and look at how much disposable income they want.”

Future expenses. If you have kids (or plan to) and want to pay for college, aspire to buy a home or are close to retirement, this may impact your ability to continue to make loan payments. Plus, if you default on a secured loan, lose your property and damage your credit, it will likely be difficult to restore your financial situation to the point where you can afford these investments.

Total interest and fees. When you shop around for a secured loan, look at the total cost you’re on the hook for over the life of the loan — especially when you put up collateral you don’t want to lose.

“Sometimes people get attracted to a low monthly payment, and they’ll stretch it out over 15 to 20 years, but they don’t realize the impact that has on the amount of interest that they pay,” Camarillo said. She recommends looking carefully at interest rates, transaction and maintenance fees, as well as any fees associated with entering and exiting your loan.

MagnifyMoney has a personal loan comparison tool that compares rates and requirements for unsecured loans and a calculator to show monthly payments and interest paid over the life of a loan to help you understand the commitment you are taking on.

When it comes to managing a secured loan, having all the information and planning carefully for the long term is key. Don’t jump on what seems like a good deal without shopping around and budgeting, and don’t sign for a loan without understanding the risk to your property and your overall financial health.

What happens if you can’t pay?

If you get in over your head with any kind of loan, the first thing to do is talk to your lender. If you are a member at a credit union or a long-time customer at your bank, your loan officer may be able to help you with a plan to get back on track. Even payday lenders may be willing to work out an Extended Payment Plan (EPP), which allows borrowers extra time to cover their outstanding debt without added fees or risk of being sent to collections. You can also find ways to free up funds in your budget by cutting expenses large and small.

If you aren’t able to make payments and your loan goes into default, however, there are serious consequences.

Your credit takes a hit.
Payment history is the single most important factor in your FICO credit score — it accounts for 35% of the total. It is also considered “extremely influential” in the VantageScore model. Scoring models take into account bankruptcies, foreclosures and missed/halted payments, and having any of these in your credit history can have a long-lasting impact on your ability to apply for credit in the future. Even secured cards, which are primarily used to build and improve credit, can backfire if not managed properly.

“A lot of people fail at secured cards,” said Lauren Saunders, associate director of the National Consumer Law Center in Washington, D.C. “A lot of people end up defaulting, and their credit score is worse than when they started.”

You end up on a debt spiral.
Defaulting on a loan can quickly put you into a cycle of debt that is difficult to break, especially if you are caught in a predatory lending situation. These lenders operate by charging interest rates and fees so high that the borrower is unable to make a dent in the loan principal and continues to take out additional loans just to pay the excess that accrues.

Auto title loans are “incredibly dangerous” because borrowers continue to pay fees to extend and end up paying out far more than they expected or planned for, says Saunders. “They’re not getting out of debt, and eventually many people not only lose all that money they paid but they lose their car.”

In 2017, the CFPB issued a rule requiring payday and auto title lenders to verify a borrower’s income, expenses and ability to repay before issuing a loan, a move that in theory would protect consumers from entering an endless cycle of payday and title loan debt.

You lose your collateral—and possibly more of your assets.
If you default on a secured loan made with physical property as collateral, there’s a good chance you’ll lose that item at the very least. A lender may repossess your car, foreclose on your home or come after the boat, motorcycle or other valuable property you put up. If it’s something that diminishes in value, what the lender sells it for may not cover the full amount of the loan, in which case they may come after you for the difference, says Chan.

“Although the lender may be willing to offer higher loan amounts with a secured loan, consumers still need to make sure that they can afford the monthly payments associated with the higher loan amount,” he added.

Experts agree that the biggest risk with a secured loan is losing property you already own. When you put your home, car, paycheck or savings on the line, you must understand the consequences of default — especially if you are already in a difficult financial situation.

“The overarching theme is, ‘Can you afford to lose the collateral?’” said Saunders. “How catastrophic would it be for you if you lose the collateral? You shouldn’t put it at risk if you can’t afford it. You shouldn’t pawn your wedding ring, but you might be willing to pawn a TV.”

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

Emily Long
Emily Long |

Emily Long is a writer at MagnifyMoney. You can email Emily here


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Won’t impact your credit score

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Personal Loans

Where to Get the Best Personal Loan Rates Online

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Where to Get the Best Personal Loan Rates Online

Updated March 01, 2018

If you want a personal loan to pay off credit card or other debt, the absolute fastest and most effective way to lower the interest you pay is to apply for a balance transfer, with a 0% rate. You can read our guide to balance transfers to learn about their pros and cons.

But a balance transfer isn’t for everyone, especially if your credit score isn't perfect or if you need to borrow cash.

A personal loan with a set payoff period a few years from now is often the next best thing with these advantages:

  • One monthly payment
  • A set rate
  • You don’t need absolutely perfect credit
  • You can check your rate without touching your score

There are more attractive deals than ever thanks to some new online lenders and you can see sample rates below for excellent credit and good credit.

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

Start Here – Multiple Lenders at Once




Credit Req.

Minimum 500 FICO

Minimum Credit Score


24 to 60





on LendingTree’s secure website

LendingTree is our parent company. LendingTree is unique in that they allow you to compare multiple, personal loan offers within minutes. Everything is done online and you can have your loan pre-approved without impacting your credit score. LendingTree is not a lender, but their service connects you with up to five offers from personal loan lenders.

Dozens of lenders participate in LendingTree's personal loan shopping tool - including all of the lenders listed on this page. (Full disclosure, LendingTree is our parent company.) With one online form, LendingTree will perform a soft credit pull (with no impact to your score) and match you with multiple loan offers. This is our favorite (because it is easy) way to get multiple offers from lenders in minutes. For people with excellent credit, you could get an interest rate below 6%. For people with less than perfect credit, there are many lenders participating with more liberal acceptance criteria.

Why is this a good way to save?

Banks don’t care much for personal loans because the lower rates earn them less profit than credit cards.

Fortunately, some new companies believe you should be able to get a competitive rate without dealing with credit card intro offers, even if your credit isn’t perfect.

They’re doing it by lending online only without the overhead of branches.

They pass the savings on to you through better rates, and you can check up on them below.

Personal loans for Excellent Credit

The following providers are for you if you want the absolute lowest possible rates that reward a record of no late payments and good income, even though you have some high rate debt you want to clean up.

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




Credit Req.

No Minimum FICO Score

Minimum Credit Score





No origination fee


on SoFi’s secure website

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

Sofi’s believes if you’ve graduated college or went to grad school you’ll be a more responsible borrower, so they may be more likely to give you a better rate, even if your credit history is limited.

For example, if you have $10,000 in credit card debt, good income, and great credit, their best rate could save you as much as 0% balance transfer deals once you factor in the fees for each.

What we like best about Sofi is that they offer no origination fee and no prepayment penalty. If you think you may be able to pay off your loan earlier (or want the flexibility to do that), Sofi is the only lender we reviewed that charges no fee at all. Given their very low rates, we think anyone with good credit should start with Sofi first, and then compare their offer to the rest of the providers.

Amount: $5,000 – $100,000

Available states: All states except Tennessee and Nevada.

Marcus by Goldman Sachs®

Marcus by Goldman Sachs®


Credit Req.


Minimum Credit Score


36 to 72



No origination fee


on Marcus By Goldman Sachs®’s secure website

Your loan terms are not guaranteed and are subject to our verification of your identity and credit information.... Read More

If you want to work with a traditional bank, Marcus by Goldman Sachs® can be a great option. With rates as low as 6.99% APR and flexible terms ranging between 36 to 72 months, they offer a competitive personal loan option that is backed by the security and peace of mind that comes with using a bank that has been in business for 148 years.

While Marcus does not state a required minimum credit score, they do seek out people with prime credit, which usually falls above 660 or higher on the FICO scale. Those that meet the requirements will be able to borrow up to $40,000 for debt consolidation and credit consolidation loans.




Credit Req.


Minimum Credit Score


36 or 60



0.99% - 5.99%


on BestEgg’s secure website

People looking for a process that is fast and simple can’t go wrong when applying through Best Egg for a personal loan. The best features of Best Egg are their simple terms and competitive interest rates for those with a strong, positive credit history. While keeping things simple, they only offer payback terms of 3 or 5 years, which may not be the best fit for everyone.

BestEgg is an online personal loan company that offers low interest rates and quick funding. BestEgg is one of the fastest growing personal loan companies in the country, largely because it has been able to provide one of the best combinations of interest rate and loan amount in the market.

You can check to see your interest rate without hurting your score, and they do approve people with scores as low as the mid-600s. If you have an excellent credit score, BestEgg  will be very competitive on terms.

Amount: up to $35,000




Credit Req.


Minimum Credit Score


24 to 84



No origination fee


on LightStream’s secure website

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

Lightstream is a great choice for people with excellent credit. It is actually part of a bank you might have heard of, SunTrust Bank. They were recently set up to offer some of the best personal loan rates available, and they are delivering. The interest rate you are charged depends upon the purpose of the loan. Interest rates can be as low as 3.09% for a new car purchase (and Lightstream does not put their name on your title. They just put the cash in your bank account, and you can shop around and pay cash for the car). Home improvement loans start at 4.99% APR with AutoPay , making them cheaper and easier than a home equity loan.

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

Lightstream has created an exclusive offer, just for MagnifyMoney readers. (This offer went live in January 2016). Credit card consolidation loans for MagnifyMoney readers are now as low as 5.49% fixed. The highest fixed rate is 14.69%. Just beware: LightStream does a hard credit pull.

Amount: $5,000 – $100,000

Available states: All

Personal Loans for Good Credit

These providers may be able to help you out if you’re not approved for the very best rates or a 0% balance transfer offer. Check those deals first, there’s no real harm to do that, but if they fall through, give these a try.


Lending Club


Credit Req.


Minimum Credit Score


36 or 60



1.00% - 6.00%


on Lending Club’s secure website

LendingClub is a great tool for borrowers that can offer competitive interest rates and approvals for people with credit scores in the mid-600s. The loan application process is online and only takes a few minutes to complete and you can check your interest rate without hurting your credit. The loan processing time can take a while and you might not get approved if you have missed payments in the past. LendingClub is not available in Iowa and West Virginia

You might not have heard of LendingClub yet, but they are a big player in online loans. And they offer a wide range of rates and terms based on your credit profile and needs. Generally you’ll need a score of about 600 or higher to get approved.

Amount: up to $40,000

Available states: All except Iowa and West Virginia




Credit Req.


Minimum Credit Score


36 or 60



0.99% - 5.99%


on BestEgg’s secure website

People looking for a process that is fast and simple can’t go wrong when applying through Best Egg for a personal loan. The best features of Best Egg are their simple terms and competitive interest rates for those with a strong, positive credit history. While keeping things simple, they only offer payback terms of 3 or 5 years, which may not be the best fit for everyone.

BestEgg (reviewed earlier in this post) will approve people with credit scores as low as the mid-600s. If you have good credit and are looking for a loan, you should consider BestEgg.




Credit Req.


Minimum Credit Score





0.00% - 8.00%


on Upstart’s secure website

Upstart’s initial focus was to help recent graduates that were struggling with debt, but they have expanded to provide options for those with strong credit profiles as well. They have a unique algorithm that takes into account things such as education, career, job history, and standardized test scores, but you will still need a minimum FICO score of 640.

Upstart offers loans that look a lot like the ones from the bigger online lenders like LendingClub or Prosper.

They’ll let you borrow up to $50,000 for 3-5 years. But the key is they will take into account the schools you attended, your area of study, the grades you earned in school, and your work history to see if you can get a better rate.

So while the range of rates Upstart offers is similar to the bigger guys, if you did well in school, you might find the rate you actually get is lower than what the others will offer you, so it’s worth trying.

You’ll need a 640 or better FICO and your monthly payments can’t be more than 55% of your monthly income.

Amount: $5,000 – $50,000

Available states: All


PenFed Credit Union


Credit Req.


Minimum Credit Score





No origination fee


on PenFed Credit Union’s secure website

Pentagon Federal Credit Union (PenFed) offers personal loans with terms up to 5 years and maximum loan amounts of $25,000. The loan requires no collateral and they don’t have any origination fees, application fees, or early prepayment penalties. You will need to join Pentagon Federal Credit Union before you are able to apply for a personal loan.

Previously, PenFed offers a fixed rate of 9.99% interest rate for 5 years. Veterans get extra special attention so it’s worth checking this online only offer. You have to be a member of the PenFed credit union, but that’s easy and anyone can do that online as part of the process.

Available states: All

Personal Loans for Bad or Minimal Credit




Credit Req.


Minimum Credit Score


24 to 60





on Avant’s secure website

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

If you want a speedy process with your personal loan, you can’t go wrong with Avant, who could get you your loan as soon as the next business day. In terms of rates, qualifications, and repayment terms, Avant keeps things the same as most other lending options, though, it is important to shop around to secure the best offer. Avant is available in all states 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."

There is no prepayment fee. Checking your Loan Options will not affect your credit score. Just one warning: if you are willing to borrow money at 35.99%, then you really need to step back and think about building a longer term financial plan. You can download our free Debt Guide, which will help you put together a plan so that you never have to pay interest rates this high again.

Avant's platform offers access to loans from $2,000 to $35,000, with terms from 2 to 5 years. The minimum credit score varies, but we have seen people with scores as low as 580 get approved.

The good thing about Avant is that these loans are amortizing. That means it is a real installment loan, and you will be reducing your principal balance with every payment.

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

OneMain Financial


Credit Req.


Minimum Credit Score





No origination fee


on OneMain Financial’s secure website

If you have a credit score below 600, OneMain Financial is one of the few lenders that you can use to get a personal loan. They offer quick turnaround times and you can get your money the same day if you apply before noon. Interest rates are higher than other online lenders, especially for those with excellent credit, and you will need to visit a branch to get your loan.

OneMain Financial offers personal loans through its branch network to people with less than perfect credit. You can start your application online. If you qualify, you will have to visit a branch to complete the application. Once in the branch, if you have all of the required documents, you can receive you loan proceeds immediately via check.

You can borrow from $1,500 to $25,000. The interest rates are not low, and can go up to 36%. They will also charge an up-front origination fee that is not refundable. You should definitely shop around at other lenders first, given the high cost of the loan and the need to visit a branch.

Amount: Up to $25,000


* We'll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations You can learn more about how our site is financed here.

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

Brian Karimzad
Brian Karimzad |

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


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Best of, Pay Down My Debt, Personal Loans

Best Debt Consolidation Personal Loans

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Best Debt Consolidation Personal Loans

Are you stuck under an overwhelming pile of consumer debt? Do you feel like it might be impossible to get out? Fortunately there are tools that can help you get out of debt faster.

A debt consolidation personal loan could be a good answer. With a personal loan, you would use the loan proceeds to pay off credit card debt, medical debt or any other form of debt. You would then have a loan at a fixed interest rate and a fixed term.

Debt consolidation provides three benefits:

  1. Make payments simple: If you owe a lot of lenders and are having a tough time keeping track of all the payments, then consolidating will make your life easier. You’ll only owe one lender and have to keep track of one due date. There’s less of a chance of anything falling through the tracks.
  2. Lower your interest rate: This is where you have to run the numbers to see if debt consolidation makes sense for you. What’s the average interest rate you’re paying on your debt? If it’s quite high (which is likely if you have a lot of consumer debt), you may benefit from consolidating under better terms. Just remember to only use a personal loan if the interest rate is lower than the one you are already paying.
  3. Improve your credit score: If your credit cards are currently maxed out, your credit score will suffer. When you pay off your credit card debt with a personal loan, you will often receive a boost to your credit score, so long as you don't start using your cards again. LendingClub did a study and determined that there is an average score increase of 21 points within three months for people who use loans to eliminate credit card debt.

If you think debt consolidation makes sense for your situation, we have a list of the best debt consolidation loans you can use to refinance your consumer debt. Read on for our recommendations.

Personal Loans to Consolidate Credit Card Debt

Start Shopping Here - LendingTree

At LendingTree, you can make dozens of personal loan companies compete for your business with a single online form. When you fill out the form, LendingTree will do a soft credit pull - which means your score will not be negatively impacted. Dozens of lenders will compete and you may be matched with lenders who want your business. You may be able to compare and save in just a few minutes. We recommend starting here. You can always apply directly to other lenders - but many of the lenders we recommend already participate in the LendingTree personal loan application tool. (Note: LendingTree owns MagnifyMoney)



Below are some leading lenders you could also consider:

SoFi - Excellent Credit Required

You can borrow between $5,000 and $100,000, which is the most out of the personal loans recommended here. The fixed APR ranges from 5.49% - 14.24% if enrolled in autopay. You can choose a term of up to 7 years. Variable interest rates range from 5.21% - 11.67% APR. Although SoFi does not use FICO, you need to be "prime" or "super-prime" to qualify. That means you must be current on all of your obligations and must never have filed for bankruptcy. There is no origination fee or prepayment penalty associated with a personal loan from SoFi.



on SoFi’s secure website

Some of the leading lenders for people with less than perfect credit include:

LendingClub - Minimum FICO of 600

This is a peer-to-peer platform, which means individual investors are contributing to your loan. You can borrow between $1,000 and $40,000 with LendingClub, and its APR ranges from 5.98% - 35.89%, depending on the type of loan grade you’re eligible for. Be aware there are origination fees (ranging from 1% - 6%) associated with this personal loan, but there are no prepayment penalties. You can borrow on terms up to 5 years. The minimum credit score needed is 600. LendingClub is not available in Iowa or West Virginia.

Lending Club


on Lending Club’s secure website

Prosper - Minimum FICO of 640

Prosper offers loans from $2,000 to $35,000, and APR ranges from 5.99% to 35.99%. It offers loans terms of either 36 or 60 months. Your APR is determined during the application process, and is based on a credit rating score created by Prosper. Your score is then shown with your loan listing to give potential lenders an idea of your creditworthiness. Origination fees range from 1% to 5% and are based on your Prosper score. In order to qualify, you must:

Prosper is a flexible alternative with a low-end APR that usually beats a credit card.

[Check out other Personal Loans on Our Comparison Table Here]

A Loan or a Credit Card to Consolidate Debt?

Personal loans can be an excellent way to consolidate your debt. Personal loans are best when you have a lot of debt or your credit score isn't perfect. However, if you have a smaller amount of debt and a great credit score, you can get rates as low as 0% with a balance transfer. If you do have a good credit score, you should apply for a 0% interest balance transfer credit card.

Wait: I Have Student Loan Debt

If you’re thinking about refinancing or consolidating your student loans, there are a couple of things to know.

First, what’s the difference between refinancing and consolidating?

  • Private Loan Consolidation: This involves combining all your loans into one loan so you only owe one lender and have to make one simple payment.
  • Federal Loan Consolidation (Direct Consolidation Loan): Only have Federal student loans? You can combine them through a Direct Consolidation Loan with the government. According to, “The fixed rate is based on the weighted average of the interest rates on the loans being consolidated.” This doesn’t save you much money, but your payments will be more manageable. For a complete list of Federal loans that can be consolidated, check here.
  • Refinancing: This is when you apply to a completely new lender for new terms – you’ll have a new loan, and your new lender will pay off your old loan.

The difference isn’t all that big – when you consolidate private (or private and Federal) student loans, you’re essentially going through the refinancing process.

If you currently have Federal loans, you need to be aware refinancing or consolidating means giving up certain benefits that come with federal student loans.

That means income based repayment, deferment, forgiveness, and forbearance options disappear. A few of these benefits are forfeited even with the Direct Consolidation Loan. These benefits could get you through an otherwise rough time, so make sure refinancing makes sense beforehand.

If you do have federal student loans, and you’re thinking of refinancing or consolidating, first see if you’re eligible for deferment or forbearance. There’s no reason to go through the process of having your credit checked if you can lessen your student loan burden another way.

If you have private student loans, you can also check with your lender to see if it offers payment assistance. Many lenders are making improvements to their student loan refinance programs and including forbearance and deferment options.

Also, once you consolidate or refinance your student loans, there’s no going back. This applies to the Direct Consolidation Loan as well.

Okay, still think refinancing or consolidating is right for you? You can shop for the best lender to refinance your student loans here.

Shopping Around is a Must When Consolidating or Refinancing

The goal of refinancing or consolidating is to ultimately make your debt less of a burden on you. That means getting the best rates and terms offered. The easiest way to accomplish this is to shop around with different lenders. If you do so within a 45-day window, FICO will not punish you for shopping around. All of your student loan inquiries in the 45-day period will only count as one inquiry. Plus, there are many lenders out there who will give you rates with just a soft credit inquiry (though a hard inquiry is required to move forward with a loan). Always put yourself first, as you’re never obligated to sign for a loan you’re approved for.


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

Erin Millard
Erin Millard |

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

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Pay Down My Debt, Personal Loans

Personal Loans for People with Bad Credit

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.


Can I get a personal loan with bad credit?

If you have bad credit, it can be difficult but not impossible to get a personal loan. For some, it’s a situation full of painful irony: You have bad credit because you’re in debt; refinancing or consolidating that debt would help improve your credit but you have trouble qualifying for a good loan because you have bad credit.

Fortunately, there are lenders out there who will extend financing to those with less-than-stellar credit. You may not get the lowest interest rate, but you won’t be disqualified simply because your credit score is less than stellar. Lenders will consider other information as well as your credit, such as your income level and whether or not you have a cosigner with strong credit.

One of the most versatile ways to get funding is through a personal loan. Personal loans are unsecured installment loans, which means you’ll get a lump sum upfront to pay off your debts, and you’ll be left with just one fixed loan payment that will be due over a set period of time. Because the loan is unsecured, you won’t have to put up any collateral.

How does a bad credit score affect my loan?

A bad credit score indicates to lenders that you aren’t a reliable borrower. For whatever reason, you have struggled to make on-time payments in the past, or you have taken on a large amount of debt relative to your income.

Because you look risky, they may be more reluctant to lend you money at all. When you are offered a loan, it’s likely to be for a smaller amount with higher interest rates.

Where to shop for a personal loan

When you’re shopping for a personal loan, it’s important to comparison shop. You want to be sure you are getting the best rates and terms before signing your name on the dotted line.

MagnifyMoney’s parent company, LendingTree, can potentially connect you with numerous lenders who offer personal loans to those with less-than-perfect credit. Their personal loan tool will ask you some basic questions, weeding out lenders who aren’t a good match, and saving you time and unfruitful hard inquiries on your credit report.


Learn More Secured

on LendingTree’s secure website

Credit Unions and community banks

In your search for a lender, don’t overlook credit unions and community banks. Rachael Bator, CFP at Lake Street Advisors, says these institutions tend to have lower minimum credit score requirements on top of lower interest rates. And they are often willing to work with people with low credit scores.

Find a credit union in your area here. Look for a community bank here.


Most LendingClub borrowers have a credit score of at least 600. All loans are issued at a fixed APR between 5.99% and 35.89%. Your credit score, current debt burden and the amount you want to borrow will all affect where you fall in that range. LendingClub issues personal loans up to $40,000.

LendingClub personal loans do come with some fees:

  • Origination fees. This will be 1%-6% of the amount you’re borrowing. You will not have to pay it upfront; it will be rolled into your loan, and included in your APR.
  • Late payment fees. If your monthly payment is more than 15 days late, LendingClub may charge you a late payment fee. This fee will be the greater of $15 or 5% of the unpaid payment.
  • Check processing fees. If you choose to pay your loan via paper check, you will be charged a $7 check processing fee.

The application process happens online and will require information about your employment history and income, on top of identifying information like your address and Social Security number. If you’re not confident you’ll qualify with your credit history, you can add a co-borrower with a better history to your application to increase your odds of approval.

“If you’re considering your options and want to talk through your unique situation, don’t hesitate to reach out to us,” said Alia Dudum, spokeswoman for LendingClub.


on Lending Club’s secure website


LendingPoint is on a mission to provide access to financing for those without good credit.
“Most of our competitors have started to deny anyone below a 660-680 [credit score], running up the credit rankings,” said Mark Lorimer, LendingPoint’s CMO. “We’ve started trying to provide access to more — the way down to a 590 [credit score].”

LendingPoint recently launched a program called Step Into More, which helps those with a lower credit score and other negative aspects of their credit rating get personal loans and improve their score at the same time.

The program starts with a $2,000-$3,000 loan which is to be repaid over the course of two years at 34.99% APR. If you make on-time payments for the first three months, your interest rate drops by one percentage point. If you continue making on-time payments up to the six-month mark, your interest rate will drop by yet another percentage point. At the twelve-month mark, your interest rate will go down at least two percentage points more if you have consistently made on-time payments.

You may qualify for a personal loan from LendingPoint independent of the Step Into More program — even with a credit score of 590. Your score alone isn’t enough to get you approved; your income, debt and other factors will be a part of the decision process. But Lorimer says that with a 590 credit score, most applicants could expect to be offered an interest rate of 23.99% to 34.99% APR. Loan amounts vary from $2,000-$25,000.

There is an origination fee ranging anywhere from 0%-6% depending on your state of residence. This origination fee will already be accounted for in your APR.

You can apply online and will need to provide basic identifying information such as name, address and Social Security number. You will also need to verify your bank account with the routing and account number. If you need help with the process, the company has telephone support; a live human being can help walk you through the process.


Read our full review of SoFi’s personal loans here.

SoFi doesn’t publish any specifics about its credit score requirements. It is a unique lender in that they focus more heavily on things like education, employment and income potential. Those with higher income or income potential are more likely to be approved. To this end, SoFi’s personal loans come with unemployment protection — which defers payment and helps you find a new job should you find yourself unemployed.

SoFi grants personal loans from $5,000-$100,000 with interest rates between 5.49% and 14.24% APR after a 0.25% discount for setting up autopay. They do not charge origination fees, and the terms on these loans can be anywhere between three and seven years. If you’re 15 days or more late with your payment, you may be assessed a fee 4% or $5 — whichever is less.

You can apply online. Come armed with your basic contact information, education history and employment information. You may have a hard time getting approved with a bad credit history, but SoFi does a soft pull on your credit report — which does not negatively affect your score. If you have a solid education and earn a decent income, it’s worth seeing if they will take you on.


on SoFi’s secure website


Read our full review of Avant’s personal loans here.

In some cases, online lender Avant will issue personal loans to those with credit scores of 580. Their personal loans range from $2,000 to $35,000, and have terms between two and five years. Interest rates are between 9.95% and 35.99% APR.

There is an administration fee of 1.50%-4.75%. Other fees include a $25 late fee after your payment is 10+ days delinquent, and a $15 fee if your payment is returned.

You can apply online with your name, address, Social Security number and income information. If you are approved, you could have funds in your bank account the very next day.


on Avant’s secure website

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

Alternatives to personal loans

Bator says that while a personal loan may be a good option in certain situations, in others you may be served by a different product.

First, she says you can ask family members if they’d be willing to give you a loan. She does note that in order for this money to be considered a loan and not a potentially taxable gift, your family member will have to charge you the applicable federal rate, which is usually much lower than the interest rate you would get with a lender — especially if you have bad credit.

Another area for examination is a home equity line of credit (HELOC). Bator says because your home is put up as collateral, the interest rate on this product tends to be lower than that of a personal loan.

One source of funding she does not recommend is payday loans.

“The repayment periods are incredibly short,” said Bator. “You can expect to pay outrageous interest rates — they’re illegal in many states for good reason. It’s proven that they don’t help people get out of debt, but rather the debt snowballs into an uncontrollable situation which profits the lender — not the borrower.”

How to rebuild your credit score

Just because you have a bad credit score now doesn’t mean you will forever. There are steps you can take to rebuild it.

The two best things you can do to improve your credit score are making on-time payments and lowering your utilization rate (you can do that by paying down your balances). Your utilization rate is calculated by dividing the total amount of all your statement balances by your credit limits. If you do get a personal loan, be sure to make your payments on time every month to fulfill the first course of action. Be sure you’re paying other bills on time, too, like rent and your cellphone bill.

If you are consolidating debt with a personal loan, making on-time monthly payments may slowly help improve your credit score as you will be eliminating debt.

Other financial options

How your score is calculated: Your credit score is calculated after reviewing your credit report, which includes a record of loans and other accounts in your name and your history of payments. Think of it like your grade point average in school. It’s a score calculated on your overall credit performance over time.

The same way a failed exam would hurt your GPA, a missed credit card payment or significant negative event like a bankruptcy or foreclosure could hurt your score. Vice versa, if you failed that one exam in the early part of the year but score A’s on every other exam moving forward, that new positive information will be factored into your score as well and can boost it.

After a lender looks at your credit report, they will take the information and plug it into a scoring model. There are two main models: FICO and Vantage. Ninety percent of lenders use FICO models, so for our purposes, we’ll assume your credit score is calculated using a FICO model.

Credit scores fall into five different categories:

  • 750+ - Excellent Credit
  • 680-749 – Good Credit
  • 620- 679 – Average Credit
  • 550-619 – Sub-Prime Credit
  • Below 550 – Poor Credit

If you fall into the sub-prime or poor credit categories, you have are going to have a harder time borrowing money — especially with low interest rates.

How to get your credit score: Check your credit cards. Many offer customers access a free FICO score once per month. Otherwise, use a free tool, such as through Discover, which you can access even if you don’t have any accounts with the company.

How to prepare your personal loan application

Before you apply for a personal loan, make sure you take advantage of your free credit report. Check it for accuracy, and if you find any errors, take measures to fix them.

After you’ve made sure your credit report contains only accurate information, you’ll want to get your paperwork together. Many lenders will ask you to provide:

  • Your full name
  • Address
  • Social Security number
  • Residency status
  • Proof of income
  • Information regarding your debts — especially if you are consolidating

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

Brynne Conroy
Brynne Conroy |

Brynne Conroy is a writer at MagnifyMoney. You can email Brynne at

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Personal Loans

Are Long-Term Personal Loans Ever a Good Idea?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.


The importance of having a rainy day fund can't be overstated — you're sure to encounter a storm at some point. While our insiders suggest setting your target at a minimum of three to six months' worth of expenses, actually doing so can be a slow climb. This is especially true if you're splitting your efforts between paying off debt. For many, a trip to the emergency room or a stint of unemployment is enough to seriously rock the financial boat.

That's where long-term personal loans come in. Like any type of financing, they come with both benefits and risks. But if used wisely, they could potentially rescue you from a financial nightmare.

What is a long-term loan?

Personal loans are doled out by lenders and, unlike credit cards, are not revolving lines of credit. When we say "long-term" personal loans, we're referring to loans that stretch beyond the one-year mark. Some may last only 12 months, while others can take a decade or more to pay off.

The most important thing to remember about personal loans is that the interest rate, monthly payment and payoff timeline are all fixed, meaning there's virtually no wiggle room when it comes to how much you have to pay every month. In other words, when you sign on, you're committing to this bill for the long haul. This could be taken as either a pro or a con, depending on how you look at it.

On the one hand, the fixed payment keeps the finish line in sight. Credit cards, on the other hand, give you the oh-so-tempting option of just paying the minimum, which stretches out the life of the loan, resulting in you paying more in interest over the long term. On the flip side, if you stumble upon financial hard times, having the ability to make lower monthly payments can be a godsend.

That said, long-term personal loans can be used for just about anything — from consolidating debt to seeing you through a financial emergency. Since the money is typically deposited straight into your bank account, you can use it however you wish. Of course, they don't come without some strings attached.

Let's break down the fees and rates for personal loans

For starters, personal loans are considered unsecured debt.

"Unlike your mortgage or an auto loan where you're leveraging an asset (your home or your car) as collateral, personal loans are attached to no such security," Pamela Capalad, certified financial planner and founder of Brunch & Budget, tells MagnifyMoney.

"As such, lenders understandably see them as being inherently riskier,” she added.
“This is precisely why you can expect strict repayment terms and potentially higher interest rates."

The APR may not stand alone. In some cases, you could be hit with an origination fee to the tune of 1% to 6%. Some companies will also try and sell you insurance or other expensive, unnecessary products with these loans, says Lynn Ballou, certified financial planner and CFP Board ambassador.

"And if they've front-loaded that loan with extra interest or charged you an origination fee, that's actually costing you quite a bit more than if you'd just looked for a less expensive option,” she added.

In other words, borrowers beware. Before signing on the dotted line, be sure to read carefully through the terms and fees. Ballou then suggests running the numbers through an independent loan calculator to make sure it's actually a good deal for you. After factoring in the interest rate and potentially an origination fee, would it be less expensive to go with a different financing option? (We'll explore this shortly.) Also, is the monthly payment within your budget? These are make-or-break questions to ask yourself before pulling the trigger.

When a long-term personal loan makes sense

Now that we've picked apart the nitty-gritty details, let's explore when a long-term personal loan might be a good idea. A personal loan can be a powerful consolidation tool for those struggling to eliminate high-interest debts — assuming you snag a better APR. In addition to saving money, you'll have a clear timeline in place and the convenience having just one monthly payment.

When it’s the cheapest borrowing option

"Personal loans actually have some great interest rates, especially now since the market has gotten really competitive over the last few years," said Capalad. "With a long-term loan, you'll probably end up paying off your debt faster, or at least about the same time as doing some sort of debt snowball method." The debt snowball method involves ordering debts from smallest to largest balances and tackling the smallest debts first.

As far as rates go, the better your credit score and higher your income is, the better chances you’ll secure a good rate. If you have poor credit, however, you should expect to see a higher rate. Personal loan rates can eclipse credit card rates, getting as high as 35.99%.

Capalad does offer another word of warning. If you're using a personal loan to consolidate debt, you have to be really disciplined to put those credit cards away. When people use the loan to get their cards down to what Capalad calls "that nice $0 balance," it can be extremely tempting to run up the balances again. That said, if you're disciplined and committed to using a long-term personal loan to get on stronger financial footing, it can represent a great solution.

Debt consolidation aside, sometimes it simply works out better from a dollar-and-cents perspective. If you find a personal loan with no origination fee and a reasonable APR, it may very well be less expensive than getting a cash advance via a credit card, especially since many financial institutions charge a 1% to 5% cash advance fee.

"Sometimes a personal loan is actually the least expensive option available, but sometimes it's also the only option available," added Ballou. "Not everyone has something to collateralize, like equity in their home to unlock a home equity loan."

When a long-term personal loan doesn't make sense

If you're stuck between a financial rock and a hard place, being hit with costly fees or high interest rates is certainly better than filing for bankruptcy or defaulting on your bills. The good news is that doing some light research might reveal a different option that's a better fit than a personal loan.

Begin by asking yourself what you need this loan for. Is it to see you through a financial emergency that's unlikely to happen again? Or is it to take a last-minute vacation? That may sound obvious, but it's a legit question to ask because it's all about trade-offs here.

Let's say you take out a five-year $5,000 personal loan at 19.5% APR. If you crunch the numbers using our personal loan calculator, it translates to a $131 monthly payment — you'll also spend an additional $2,865 on interest. Is that really worth it for a family vacation? Perhaps not.

You might, on the other hand, feel like it’s your best option if you’re swimming in credit debt with higher interest rates and need a debt consolidation loan.

The scenario plays out better if you have a fully-funded emergency savings.

"If you have a steady job and you're at that three- to six-month level, and the trip is extremely important to you because it's for, let's say, your best friend's wedding, you're better off dipping into your emergency fund and then paying yourself back — but you have to be extremely committed to topping it back off as soon as possible," said Capalad.

When your cash reserves are running low and a long-term personal loan isn't your best option, it's time to explore the financial alternatives. (We'll dive deeper into your options below.)

Getting a long-term personal loan

Ready to move forward with a long-term personal loan? Here's what should be on your radar:

Checking your credit score

Whenever you're seeking new financing, your credit score is perhaps the most important factor. This number basically sums up how creditworthy you are, which is what lenders care about. The higher your score, the better interest rates and financing options you'll get. Here's how FICO, America's leading credit reporting agency, breaks down this all-important three-digit number. (There are a number of ways to access your credit score for free.)

This number is actually a reflection of what's on your credit report, which sums up your credit history. Experian, TransUnion and Equifax (the three major credit bureaus) each generate their own report, which you can pull for free once a year at Doing so is vital to maintain a healthy credit score. What's more, finding and disputing an error on your report may give your score a significant boost.

Where to get a long-term personal loan

Applying for a long-term personal loan isn't all that different from locking down one with a shorter term. The internet has certainly streamlined the process. LendingTree, which is MagnifyMoney’s parent company, offers a way to compare loans from top lenders like BestEgg, Avant, LendingClub and more. Here, you can plug in a few pieces of information and possibly get quotes in a matter of seconds based on your credit score. It’s a soft credit pull, which won’t hurt your credit, but just know that when you officially apply with a lender, it will count as a hard inquiry.

Just be sure to compare rates as no two lenders are the same. Let's say, for instance, your credit score sits at 660 and you're looking to remodel your kitchen for $20,000. Short of a hard credit pull, here are some instant quotes:

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Loan Amount
up to $35,000
36 to 84 Months
APR Range
Origination Fee
No origination fee
Credit Required

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on Payoff’s secure website


Loan Amount
$5,000 – $35,000
up to 60 Months
APR Range
Origination Fee
Credit Required
Soft Pull
You can get your rate without hurting your score.

Advertiser Disclosure :

All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, VT, WI, and WV.

Apply Now Secured

on BestEgg’s secure website


Loan Amount
$2,000 – $35,000
36 or 60 Months
APR Range
Origination Fee
Credit Required
Soft Pull
You can get your rate without hurting your score.

As you can see, there's a pretty wide gap when it comes to interest rates. The good news is that the longer the term, the shorter the monthly payment — but you'll ultimately pay more in interest over the long haul. For example, let's pretend you lock down that $20,000 loan with no origination fee and an APR of 16%. Now let's compare what happens when we tweak the repayment timeline:

Payoff Timeline

Monthly Payment

Total Interest Paid

60 months



40 months



24 months



There are a lot of moving parts here, which is why reading the fine print is vital. Before we jump into that, let's talk about getting pre-qualified.

Getting pre-qualified for a personal loan

It's probably a term you've heard before, but let's unpack what it actually means. Pre-qualification utilizes what's known as soft credit pulls as opposed to hard inquiries. Doing this does not impact your credit, making it much easier to shop around for the best deals. Soft inquiries essentially give lenders a little sneak peek of your credit. Once you pull the trigger on a loan, the bank will then do a deep dive by pulling your full credit report. (FYI, hard credit inquiries typically only shave a few points off your score, depending on your overall credit health, and you'll bounce back relatively quickly if you keep up with on-time payments.)

Applying for a personal loan

Once you're ready to formally apply for a long-term personal loan, you'll need to gather up some documents. According to Ballou, this typically includes:

  • Photo ID
  • Proof of income and employment
  • Bank statements
  • Possibly a copy of a W-2 or tax return as proof of past income

Once the application process is in motion, the next step is approval, but Ballou says you could be denied if the lender sees you as a credit risk. Having bad credit, a short credit history, unreliable income or unsteady employment could all work against you.

Read the fine print

Before making the commitment, thoroughly read through all the terms and fine print. Here are some helpful questions to ask yourself:

  • Do you really need this loan? If it's a true financial emergency, the answer might be yes. Otherwise, think long and hard before going all in.
  • Can your budget comfortably absorb the monthly payment? Remember, personal loans are locked in; you're on the hook for that payment every month.
  • Is there an origination fee? Run the numbers and also factor in the APR. How much will your loan actually cost you when all is said and done? Is there a cheaper alternative? (We'll jump into this in the next section.)
  • Are you okay with the repayment timeline? Think about your long-term financial goals. If, say, you'd love to save for a down payment on a house within the next five years, will this loan impede your ability to do so?
  • Is a prepayment penalty hiding in the contract? This could make it costly to pay off your loan ahead of schedule.

Alternatives to a long-term personal loan

Depending on your situation, a personal loan may very well be your cheapest option. If not, you're not out of luck. Here are some alternatives worth exploring:

Home equity loans & lines of credit

Home equity loans (HELs) and home equity lines of credit (HELOCs) both use your home as collateral. You're basically borrowing against the equity you have in your home by way of a secured loan or credit line. To get the best rates, you'll need a decent credit score (ideally 660 and up) and at least 15% equity in your home. You also don't want your debt-to-income ratio to exceed the 43% mark. One other crucial point: if you default on your payments, the bank could seize your home, so make sure you're really comfortable moving forward.

Cash-out mortgage refinancing

A cash-out refinance lets you borrow additional cash to use as you wish. You could also tweak the terms, like extending to a longer-term loan, to lower your monthly payment and give your budget some breathing room. This, of course, will keep your mortgage debt alive and well for a longer period of time, and there may be fees, but in the short term, it may be your least expensive option.

Balance transfer credit cards

Seeking a personal loan to consolidate debt? Utilizing balance transfer offers may be a more strategic way to go. This is when you jump on low- or no-interest promotional APR offers to pay off your existing balances. Then you knock out the new balance before that teaser introductory period ends.

"If you can aggressively pay down the debt, then you can save a lot of money, especially if you have a lot of debt," said Capalad.

Just be sure to read the fine print. There's usually an initial fee that could be as high as 4%. And once the promotional period ends, your APR may skyrocket. This option really only makes sense if you can eliminate the balance within that time. Also, most banks won't let you transfer debt from one card to another within the same bank.

Traditional credit cards

Your financial emergency may cost you less if you finance it with a traditional credit card, especially if the interest rate is reasonable and you're able to accelerate your payments. While some personal loans will hit you with a prepayment penalty, you're more than welcome to pay more than the minimum balance on a credit card. Here's a simple credit card debt calculator to help bring the numbers into focus.

Borrowing from family or friends

It may bruise your pride, but borrowing cash from loved ones just might save you from financial ruin. (According to LendingTree research, 94.5% of people surveyed said they wouldn't charge interest on a loan to a family member.) If you're face-to-face with a true emergency, tap into your personal network to see what options may be available. You can work together to determine the terms and even draw up a contract if it gives your benefactor some peace of mind.

The Pros and Cons of Long-Term Personal Loans

Let's recap, shall we?


  • Long-term personal loans translate to on-the-spot cash that's typically deposited right into your bank account, which you can then use for whatever you want.
  • If you routinely make on-time payments, you'll end up boosting your credit score in the long term.
  • Using personal loans to consolidate debt could save you big time in interest.
  • They're good for folks who don't have something to collateralize, like home equity or a car.


  • The monthly payment and payoff timeline are fixed, and there's no wiggle room. If you miss it, you're in default, which could do a number on your credit score.
  • Depending on your credit score, you may not be eligible for a reasonable APR. This could cost you.
  • Your loan may come with a prepayment penalty.
  • Making this monthly payment over a long period of time could impact your ability to save for other financial goals.
  • Opting for a long-term loan over a short-term one means you'll ultimately shell out more in interest payments.

The bottom line

Moving forward with a long-term personal loan really comes down to your individual situation. The big idea here is to choose the least expensive financing option.

Using credit to live beyond your means is one thing, but debt that gets you to a better place and adds value to your life is another. If a long-term personal loan can help see you through a financial emergency relatively unscathed, it might be worth taking on some new debt.

As Ballou aptly put it: "The cost may be worth what it's giving you.”

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

Marianne Hayes
Marianne Hayes |

Marianne Hayes is a writer at MagnifyMoney. You can email Marianne here


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

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

What is a personal loan?

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

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

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

What are personal loans used for?


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

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

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

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

How do I qualify for a personal loan?

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

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

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

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

Credit score

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

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

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

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

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

Get your credit report and score for free

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

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

How to improve your credit score to get better loan terms


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

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

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

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

Debt-to-income ratio (DTI)

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

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

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

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

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

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

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

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

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

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

How to apply for a personal loan

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

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

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

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

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

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

Lenders with alternative qualifications

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

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



on SoFi’s secure website

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



on Upstart’s secure website

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



on Earnest’s secure website

What if you are rejected for a personal loan?

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

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

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

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

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


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

Marty Minchin
Marty Minchin |

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


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Paying for Plastic Surgery: How to Borrow Smart

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

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

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

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

What does plastic surgery cost?

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


National average (2016)

Breast augmentation


Breast implant removals


Breast reduction


Buttock lift


Eyelid surgery


Tummy tuck






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

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

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

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

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

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

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

How to pay for plastic surgery

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

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

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

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

Personal loans

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

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

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

Pros and cons of personal loans

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

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

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

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

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

Medical credit card

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

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

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

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

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


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

Credit cards

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

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

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

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

Home equity loans or lines of credit

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

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

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

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

Cash-out refinancing

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

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

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

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

Cash savings

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

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

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

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

Doctor payment plans

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

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

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

401(k) loans

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

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

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

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

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

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

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

Family and friends

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

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

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

Borrowing responsibly

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

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

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

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

Get the best deal on your plastic surgery loan

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

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

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

The bottom line

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

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

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


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Can I get an Unsecured Loan After Bankruptcy?

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

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

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

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

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

What is a personal loan?

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

What are my odds of getting approved?

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

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

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

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

Chapter 7 bankruptcy

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

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

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

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

Chapter 13 bankruptcy

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

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

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

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

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

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

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

Part II: Applying for a personal loan after bankruptcy

How to prepare your loan application

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

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

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

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

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

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

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

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

Part III: Shopping for an unsecured personal loan after bankruptcy

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

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

Here are a few options to consider.

Your bank

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

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

A local credit union

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

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

Online lenders

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

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

Peer-to-peer lenders

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

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

Other options if you’re rejected for a personal loan

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

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

Find a co-signer

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

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

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

Apply for a secured personal loan

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

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

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

Apply for a secured credit card

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

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

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

Part IV: How to rebuild your credit after bankruptcy

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

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

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

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

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

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

The bottom line

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

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

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

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

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

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

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Should You Use Your Assets to Get a Collateral Loan?

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

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

What is a collateral loan?

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

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

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

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

How a collateral loan works

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

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

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

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

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

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

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

Types of collateral you can use to secure loans

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

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

A home

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

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

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

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

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

A vehicle

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

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

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

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

Title loan

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

Investments and savings

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

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

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

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

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

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

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

Life insurance

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

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

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


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

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

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

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

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

Your paycheck

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

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

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

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

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

Alternatives to secured personal loans

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

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

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

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

Borrowing smart

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

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

The bottom line

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

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Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at

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