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Personal Loans

Discover Personal Loan Review

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

APR

6.99%
To
24.99%

Credit Req.

660

Minimum Credit Score

Terms

36 to 84

months

Origination Fee

No origination fee

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Discover is a financial services firm that offers credit cards, deposit accounts and personal loans. ... Read More

Discover Personal Loan Details
 

Fees and penalties

  • Terms: Discover Personal Loan terms range from 36 to 84 months.
  • APR Range: The APR ranges from 6.99% to 24.99% depending on creditworthiness.
  • Loan amounts: Loan amounts can be anywhere from $2,500 to $35,000.
  • Time to funding: You can get a loan decision as quickly as the same day of your application. Funds may be received as early as the next business day. It may take up to seven days if your application has errors, is funded on a weekend or holiday, or you request funds with some disbursement methods.
  • Hard pull/soft pull: Checking your rate will result in a Soft Pull that won’t impact your credit score.
  • Origination fee: None
  • Prepayment fee: None
  • Late payment fee: $39 if payment is not received in full by the due date.
  • Other fees: None

Discover Personal Loans have no fees as long as you make your monthly payments in full and on time. To help avoid late payments, you can set up automatic payment for free at any time. You can also set up the automatic payment to withdraw more than the monthly payment amount if you want to pay off your loan early.

The repayment terms with Discover Personal Loans are more flexible than most personal loan lenders, with 36 to 84 months to repay your loan.

A cool perk that is offered by Discover for anyone to take advantage of (you don’t even have to be a customer of Discover) is the free Credit Scorecard with your FICO® Score. This is a free way to find out your credit score without a hard pull, which means checking your score with Discover won’t lower it.

Discover Personal Loans also offers a 30-day money-back guarantee. This means you have 30 days after the date your loan is funded to return the entire amount without fees or interest and the loan will be canceled. However, this does not apply to loans where funds are disbursed directly to other creditors to consolidate existing debt.

Funds can be used for many different purposes, including vacations, financing a wedding, home improvements, moving costs, medical bills, debt consolidation and more.

Eligibility requirements

  • Minimum credit score: Discover seeks applicants with “good credit”
  • Minimum credit history: Discover seeks applicants with a “strong financial history”
  • Maximum debt-to-income ratio: Not specified

Discover Personal Loans doesn’t specify a minimum credit score, minimum credit history or maximum debt-to-income ratio required to qualify for a loan. However, their website does say their personal loans “may be an ideal solution for people with good credit and a strong financial history.” The exact definition of a good credit history is subjective.

Discover does specify that in order to be eligible for a personal loan, you must:

  • be a U.S. citizen or permanent resident
  • be at least 18 years old
  • have a minimum household income of $25,000

Applying for a personal loan from Discover

You can apply for a personal loan from Discover on their website, or you can call 1-866-248-1255 and apply over the phone. If you received an invitation in the mail to apply, you can also fill out and mail the application.

On their website, you do have the option to view your interest rate and monthly payment without a hard pull on your credit. You have to fill out your requested loan amount, state the funds will be used for, the length of term you’d like, as well as your personal information like your address, etc.

After reviewing this information, you can then decide to finish your application or not.

Make sure you have the following information handy to complete your application:

  • An invitation number if you received an invitation by mail or email to apply
  • Income information
  • Employment history
  • Bank account number and routing number for depositing funds via direct deposit
  • Creditor information (balances and account numbers) if funds will be sent directly to creditors to consolidate debt

According to their website, after your loan application is received, a loan specialist may call to confirm and verify your information.

If your information is all correct and free of errors, you can receive a decision the same business day. Funds may be disbursed as quickly as the next business day depending on the disbursement method you’ve chosen.

Pros and cons of a Discover personal loan

Pros:

Cons:

  • Flexible terms. A repayment term of 36 to 84 months is among the longest for most personal loan lenders.
  • Few fees. No origination fee and no prepayment fees. Fees only apply if payments are late or not paid in full.
  • Check your rate with a soft pull before applying. This means shopping around to see your rate won’t impact your credit score.
  • Interest rates higher than some lenders. It may be a good idea to shop around for a better rate. Definitely take advantage of their pre-qualification form so you can compare your rate with other offers.
  • Application process may be more stringent than other lenders. You may receive a phone call after applying to review and verify your information. This seems more stringent than some other lenders.

Who’s the best fit for a Discover Personal Loan?

If you have high-interest debt to consolidate, a personal loan from Discover may help you get a lower interest rate with a flat monthly payment, which also makes budgeting easier than with fluctuating monthly payments. The longer terms offered by Discover may also result in lower monthly payments than shorter-term personal loan options with other lenders.

Alternative personal loan options

Here are some loan alternatives:

Upgrade

Upgrade
APR

7.99%
To
35.89%

Credit Req.

620

Minimum Credit Score

Terms

36 or 60

months

Origination Fee

1.50% - 6.00%

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on LendingTree’s secure website

Upgrade is an online lender that offers fairly priced personal loans for a term of either 36 or 60 months.... Read More .

While Upgrade charges an origination fee and offers few options for loan terms, you may be able to get a slightly lower APR than with Discover. You may also be able to get a loan more easily with Upgrade since the credit score requirement is low.

Marcus by Goldman Sachs®

Marcus by Goldman Sachs®
APR

5.99%
To
28.99%

Credit Req.

Varies

Minimum Credit Score

Terms

36 to 72

months

Origination Fee

No origination fee

SEE OFFERS Secured

on LendingTree’s secure website

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

Marcus by Goldman Sachs® offers slightly higher amounts for borrowers. With Discover, you can borrow up to $35,000, while you can borrow up to $40,000with Marcus. However, the shorter repayment terms means that you monthly payments will likely be higher with Marcus.

LightStream

APR

3.99%
To
16.99%

Credit Req.

660

Minimum Credit Score

Terms

24 to 144

months

Origination Fee

No origination fee

SEE OFFERS Secured

on LendingTree’s secure website

Advertiser Disclosure

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


Your APR may differ based on loan purpose, amount, term, and your credit profile. Rate is quoted with AutoPay discount, which is only available when you select AutoPay prior to loan funding. Rates under the invoicing option are 0.50% higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 3.99% APR with a term of 3 years would result in 36 monthly payments of $295.20.

*Rates with .50% autopay discount.

With low APRs available for qualified borrowers and longer terms on personal loans, LightStream is a highly competitive lender. However, there’s no preapproval process to check rates with a soft pull like there is with Discover, so you have to apply and take a hit on your credit report if you want to see your rate. Plus, in order to get the best rates, you have to sign up for autopay to receive an interest rate discount.

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

Kayla Sloan
Kayla Sloan |

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

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Personal Loans

Top 5 Personal Loan Myths of 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

personal loans
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When it comes to personal loans, many Americans are more likely to turn to credit cards as a way to pay emergency bills, enjoy a dream vacation, or pay for items they can’t afford with cash.

According to Experian, existing personal loan debt was at $273 billion in the second quarter of 2018, while existing credit card debt was at $782 billion in the same period.

But it also shows personal loans with a greater year-to-year change in debt growth than credit cards. Whether personal loans are a viable option for expenses depends, apparently, on who you ask.

Awareness seems to be a key factor. When people are in the dark about financial solutions, they will draw their own conclusions, often leading to false perceptions.

What are some of the myths about personal loans?

5 things people say about personal loans

Myths about personal loans have developed over two centuries, making them hard to debunk.

Fortunately, the internet makes it easier than ever to not just raise awareness about personal loans and to clarify misconceptions, but to find the lowest interest rates and apply for loans.

Personal loans have a difficult and lengthy application process

Before the internet, borrowers had to apply for a personal loan by visiting their bank. During the days of the Morris Plan banks, they often evaluated borrowers based on character and income. This may have meant dressing in your Sunday best and arriving for a meeting with a loan officer with stacks of paperwork, pay stubs and tax returns.

Today, applying for a personal loan is easier than applying for a home equity loan or a mortgage.

You can apply easily online in just a few clicks. Many lenders will ask you to provide your Social Security number, your monthly expenses — including any outstanding debt such as mortgages, car loans, student loans and credit card debt — and your income.

Keep in mind that applying for a personal loan may require a hard credit inquiry and could lower your credit score. If you can, try to pre-qualify for a loan before you apply.

You won’t qualify for a personal loan if you don’t have excellent credit

This common misconception couldn’t be further from the truth. Personal loans are available for borrowers with a FICO Score as low as 500, but you won’t get the best rates with a rock-bottom credit score.

Most lenders look for borrowers with a credit score of 670 or higher. But a score of 800 or more will net you the best terms and interest rates.

Personal loans have lower interest rates than credit cards

Unlike the other myths explored, this one has some truth to it. It all depends on your creditworthiness.

Borrowers with a credit score of 720 or higher get personal loans at an average APR of 7.09%, according to LendingTree data, which is lower than the current 14.73% average APR for credit cards. (Disclosure: MagnifyMoney is owned by LendingTree.)

But if your credit is between 660 and 679, the average APR for a personal loan jumps to 16.72%.

It might be smarter to open a credit card with a 0% introductory APR for balance transfers and pay down as much debt as you can during that introductory period. With on-time payments, your credit score will rise and you can continuing using the same process until your high-interest debt is paid off.

Personal loans have high interest rates

“Personal loans have high interest rates” and “personal loans have lower interest rates than credit cards” might seem to be contradictory misconceptions.

In fact, they show just how much confusion there is about personal loans. Some people perceive the rates to be too high, while others assume a personal loan will offer a lower interest rate than their existing credit card debt.

There is just not enough awareness about personal loans being a good option for many people.

So what’s the truth?

If you have an excellent credit score, you could qualify for a personal loan with single-digit interest rates, which is lower than most credit cards.

Personal loans are also a better option than predatory payday loans, which can have an APR of almost 400%.

But if you own a home, a secured loan such as a home equity loan or home equity line of credit will almost certainly deliver a lower interest rate than an unsecured personal loan.

Personal loans just aren’t right for many borrowers

Many people don’t think of themselves as a good candidate for a personal loan. Maybe they feel their credit isn’t good enough or they don’t make enough money to quality.

Homeowners often consider home equity loans or HELOCs before personal loans. And, of course, the 70 million Americans carrying credit card debt month to month may not have thought about a personal loan.

But you could be a good candidate for a personal loan if you have excellent credit and need cash to consolidate credit card debt, pay medical bills or make a large purchase.

With an easy online application process, personal loans are increasingly becoming a smart choice for many borrowers.

What are your personal loan options?

In spite of the myths surrounding them, personal loans continue to grow in popularity.

In the second quarter of 2018, personal loans showed the greatest year-over-year growth than any other type of loan, according to Experian. Personal loan debt increased by 11.4%.

Borrowers looking for cash to pay off revolving credit cards or remodel their home may want to consider a personal loan. If you’re considering a personal loan, check your credit reports from all three credit bureaus and repair any errors to be sure your credit is in tip-top shape so you can qualify for a lower interest rate.

If your score isn’t where you’d like it to be, take time to pay down existing debt to improve your credit utilization ratio and raise your credit score. Avoid opening or closing accounts before applying for a personal loan since these actions could reduce your score.

As your credit score is increasing, use the MagnifyMoney personal loan marketplace to find a loan with the lowest rates and best terms for your situation. Always remember to do your research, consider all your options and make sure your finances are in order before applying for a personal loan.

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

Dawn Allcot
Dawn Allcot |

Dawn Allcot is a writer at MagnifyMoney. You can email Dawn here

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Loan Origination Fees: Should I Be Paying Them?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

girl with a cup of coffee with a money bag symbol
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If you’ve applied for a personal loan or mortgage, chances are you probably came across something called an origination fee. If you’re wondering what it’s for and whether you have to pay it, here’s what you need to know.

Understanding origination fees

An origination fee is a common charge that is added to a personal loan, student loan or mortgage. It is charged by the lender and can also be referred to as an application, processing or underwriting fee. Its purpose is to cover the hard costs of preparing documents, processing and underwriting your loan, and any third party fees that might be incurred along the way, said Ashley Luethje, a York, Neb.-based sales manager at Waterstone Mortgage.

“These fees are typically a percentage of the total amount you’re borrowing,” Luethje said. “Generally, a mortgage origination fee is around one percent, but for consumer and commercial loans, the fee can be greater and is at the discretion of the lender.”

How an origination fee can come into play

If you’re deciding between lenders, one criteria you might want to take into account is the difference in their origination fees. There are some key points to consider, depending on the type of loan you’re applying for.

Personal loan

As personal loans are typically unsecured and not backed by any collateral, you may find the highest origination fees in this category. Because these types of loans carry more risk for lenders, they may charge you anywhere between 1% to 6% of the total amount you are borrowing. Those higher fees also offset the lower amount of interest lenders like banks and credit unions will receive during the life of a personal loan. These loans tend to be extended for a shorter term and in smaller amounts than other kind of loans.

If you’re not getting charged an origination fee with your personal loan, be aware that the lender may make up for it some other way, such as charging higher interest rates, said Jacob Dayan, the Chicago, Ill.-based CEO and co-founder of Community Tax and Finance Pal.

“It’s important to note that having a good credit history will yield you a much lower origination fee,” Dayan said. “Those fees are negotiable for larger loans, but will commonly require you to put up something, such as accepting a higher Annual Percentage Rate (APR) on your loan.”

Mortgage

Mortgage origination fees — also called mortgage points — can vary drastically as they are determined by the lender, said Jason Larkins, a Scarborough, Maine-based branch manager at United Fidelity Funding. These fees are charged to cover the labor involved in the processing, underwriting and funding of a mortgage, as well as third party fees incurred in tasks such as verifying your employment.

Many lenders, such as banks, credit unions and brokerages, charge a flat origination fee. This means the fee is not based on the amount you borrow. Others could charge a 0.5% to 1% origination fee; the VA home loan program sets a cap at 1%. “However, if a borrower is paying a 1% origination fee, they are likely paying too much and can shop for a better deal,” Larkins said.

At the beginning of the mortgage application process, lenders must disclose the exact origination fee being charged in an official Loan Estimate form. Lenders may not increase the stated fee except under special circumstances, such as if you decrease your down payment or change your type of loan. However, you could negotiate it downwards depending on your credit score, and the size and duration of your requested loan.

As long as you meet certain criteria outlined in IRS Publication 530, your mortgage origination fees may also be tax deductible.

Student loans

Origination fees for federal student loans are set by the government and may vary depending on whether you have a direct subsidized, direct unsubsidized or direct plus-type loan. Those fees could range from 1.062% to 4.264%  and are deducted from the loan amount — meaning you get a smaller loan in the end but will still pay back the full amount. For example, if you were to take out a $10,000 loan with a 4% origination fee, you would only receive $9,600 but would have to pay back the entire $10,000.

The only federal student loans that didn’t charge an origination fee were the Perkins Loans for undergraduate and graduate students in financial need, but this program recently ended. While most student loans provided by private lenders such as credit unions and banks might not come with origination fees, they could cost you more in the long run by charging higher interest rates. Private student loans also don’t come with the federal protections that are standard with federal loans.

Keep in mind that loans with lower interest rates but higher fees can cost more than loans with a higher interest rate and no fees. An easy way to calculate whether your lender is giving you a good deal is to remember that 3% to 4% in fees is equivalent to a 1% higher interest rate.

Is my origination fee too high?

Origination fees are not required, so it’s at the lender’s discretion to waive or negotiate the fee, said Kris Alban, the San Diego-based executive vice president of iGrad.

“It’s always smart to ask for a discount, especially if you have a high credit score and it’s a large loan,” Alban said. “When negotiating, the lender may agree to lower or waive the origination fees if you’ll pay a higher interest rate — meaning they will still make a profit, and you can pay the fees over the length of the loan rather than up front.”

To get the best big picture outlook of whether you’re getting a good deal on your loan, make sure you’re not just comparing the origination fees but also factoring in the interest rate. For example:

  • A $10,000 loan at a 4.99% APR for five years with a 3% origination fee will cost you $11,620 over the life of the loan.
  • The same loan at 5.65% APR with a 1.5% origination fee will cost you $11,652 over the life of the loan.

“Pay attention to both the interest rate and APR,” Alban said. “If they are different, the lender is most likely factoring additional fees into the APR; any origination fee over 4% of the total loan amount is excessive.”

The bottom line

Origination fees are charged by lenders to cover the costs of processing your loan, whether you’re looking for a mortgage, personal loan or student loan. Even though lenders are subject to regulations, be cautious of anything that sounds too good to be true and remember that the absence of origination fees can translate into higher interest rates. “Take the time to read the fine print and completely understand the terms of the loan,” Luethje said.

While you should exercise your ability to price origination fees with different lenders to get you the best deal possible, remember there is no one-size-fits-all scenario. “Make the choice that best fits your needs. If an upfront origination fee hinders your ability to receive a loan but a higher interest rate is a better option, then that might be the best scenario for you as a consumer,” Luethje said.

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

Barbara Balfour
Barbara Balfour |

Barbara Balfour is a writer at MagnifyMoney. You can email Barbara here

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