Even though credit cards are still the goto borrowing vehicle of many Americans, more and more individuals are starting to turn their heads toward other vehicles and especially Personal Loans. One of the main reasons for this is that application processes have become considerably easier and faster, and also the fact that in most cases the interest rates are much lower.
Imagine having credit card debt with an interest rate of 32% and being able to take a personal loan to bring down the length of the loan and the interest rate to only 9.2%. This is one of the many scenarios where Americans are trying to flee the credit card market and land in the safe haven provided by personal loans.
It is important to understand that just like with any other type of borrowing instrument, your credit score will have an important impact on the amount you will be charged in interests. Chances are that if you have a very dented credit score you won’t get such a preferential treatment like in the example of above, but in most cases, you would still be able to refinance and consolidated at a much lower rate to what you are currently paying.
Another important aspect of Personal Loans is the fact that applications on most of the firms can be done online, this allows individuals to fill the documents without living the tranquility of their house or office. Even if it doesn’t sound like a big deal, this has become one of the key elements that make Americans choose personal loans over any other vehicle that would request visiting a branch. It is worth mentioning that this also allows for an overall cheaper experience since these institutions are not incurring in overhead or fixed expenses from keeping employees and a branch available. It also allows for individuals from all states to apply, effectively making these products available countrywide.
In this article, we will go through the very best personal loan providers available in 2019. Even though we’ve done a very extensive comparison and a review of the market, it is important for all individuals to perform their deep review and to analyze all available options before making a financial decision. This is a relatively large market and it has many different players, it is very likely that you will find the right type of institution if you take your time.
What are the Pros and Cons of Getting a Personal Loan?
Based on your situation getting a personal loan might be one of the best possible decisions you can make with your finances. Not only will be secure the health of your credit score, but it can also do so while saving you a considerably large sum of money.
Before many any desition, the best advice I can give is to take your time reviewing and analyzing different pros and cons of any personal loan. This will help you understand better if you truly need a personal loan or if you should aim for an alternative borrowing vehicle.
- Quick Application: Most financial institutions will even be able to provide an approval or a rejection the same day of your application. Since most companies are currently employing algorithms to review the profiles of the borrowers, the real process takes only a few seconds. Due to federal law, all approvals for emissions of loans must be revised by an authorized individual within the firm, this is actually the main reason why approvals and applications might take longer than they should.
- Consolidate Debt: One of the main reasons why so many individuals apply for personal loans is to consolidate debt from other borrowings vehicles. The most common type is for individuals to consolidate the debt from multiple credit cards under one single personal loan. This would allow for a better interest rate and an easier model than having to pay different cards every month, plus it also permits individuals to pay a smaller and more accessible payment every month.
- Open Use: Another benefit of personal loans is that in many cases you won’t have a restriction in terms of what you are planning on doing with the money. While many banks or financial institutions ask about the intention of the funds, they do not enforce any type of objective (unless it is a consolidation of debt). This openness allows individuals to use the money for whatever they need, from renovating a kitchen, paying for medical treatment or simply taking those vacations that you always dreamed about.
- Reasonable Rates: Even with the level of risk that most financial institutions are taking when lending money without collateral, the interest rates often charged are actually relatively decent. This allows any individual to change their existing debt for a personal loan and save money in the process. Keep in mind that the overall market is still one of the best options for anyone interested in an unsecured loan.
- Average Credit: Many individuals commit the mistake to think that only individuals with great credit would be able to obtain a personal loan when in reality it is much more accessible. While each minimum will vary from institution to institution, it is important to remember that you need need to get an average credit score to be eligible. Note that just like with other borrowing vehicles, the better your score the cheaper it will be for you in terms of interest rates.
- Long Lenght Available: If you are aiming to refinance your debt or simply to consolidate it is very likely that you will also be interested in spreading your payments over a longer period of time. This length extension will allow you to get smaller monthly payments. Depending on your situation this might be a great way to get everything aligned from a credit perspective while being able to have more cash in your wallet. Depending on the situation this might be a great option for individuals who are too tight at the moment but that don’t want to affect their credit score at all.
- Fees: Origination Fee, Disbursement Fee, Management Fees you name it! When an individual gets a personal loan they usually start the relationship with the left foot since they are not expecting to receive less money than what they borrowed. The problem is that there are many different types of fees that will be charged to you, and this reduces the final number that you would receive in hand. Not two financial institutions are the same, so it is incredibly important for you to take your time to review what is being offered, especially the amount that will be charged in fees!
- Prepayment Penalties: If you have credit debt then you know that if you win the lottery tomorrow you would be able to pay your debt in full without having to deal with additional fees. In the world of personal loans, it is a little bit different, mostly because if you find yourself in a position of prepaying the loan in full you would still have to pay an additional fee. The reason for this fee or penalty is to cover for the interest that otherwise would have been earned over the term of the loan.
- Transfer of Debt: Many people failed to comprehend that when they consolidate their debt they are not paying it, instead they are simply transferring into a new vehicle. This usually put many individuals in a lot of problems, mostly because they are not ready for the financial cost of paying for a loan. Even if it sounds like a good idea to get out of a sketchy situation, it is important to understand the risk associated with failing with a credit card for example and falling into a restructuring with a personal loan.
Best 5 Online Personal Loans Providers in 2019:
1. Sofi | Best for Flexibility
Sofi is one of the most powerful names in the world of student loans, but over the years the firm has ventured into other different products and lending vehicles. Today Sofi is one of the most important and also elite online banks in the US.
We say that Sofi is elite because of their high standards in terms of credit and also because on average their users have an annual income of six figures.
When it comes to personal loans the firm allows for a fully online application of their products. Note that unlike much other firms, Sofi requires that money to be spent in three different things that are house remodeling, health procedures and debt consolidation. If you are interested in a loan to pay for anything else you might need to go with a different option, otherwise look no more and take a quick review of Sofi and their platform.
- Fixed: 5.99% – 16.24% (with autopay)
- Variable: 5.74% – 14.70% (with autopay)
Loan Amount: $5,000 to $100,000
Length: 2 – 7 Years
Minimum Credit Score: 680 FICO
Minimum Annual Income: None
- No Origination Fee
- No Late Fees
- No Overdraft Fees
2. Marcus by Goldman Sachs| Best for Debt Consolidation
As an American, it is very likely that you’ve heard the name of Goldman Sachs when it comes to wall street and the whole investment banking industry. What many people forget or simply don’t know is that Goldman Sachs has their own retail and consumer bank brand call Marcus by Goldman Sachs.
It is important to mention that when doing business with Marcus you are receiving the expertise and the treatment from one of the titan brands in the world. While the company started operating under a traditional banking structure, the firm has been improving its model and have invested in an online platform that permits most processes and requests to be performed online. This might not be the best online bank in the market, but it is certainly an option that is worth paying attention to.
Marcus is a name that has become known for its refinancing products and also their consolidation vehicles. If you are interested in refinancing your credit card debt or simply to consolidate your debt, you should pay extra attention to this company and their fully online banking platform. Your request will certainly be handled by some of the very best institutions in the country and the world.
- 5.99% – 28.99% Variable
Loan Amount: $3,500 to $40,000
Length: 36 to 72 Months (3 – 5 Years)
Minimum Credit Score: 600 FICO
Minimum Annual Income: $40,000
4. Avant | Best For Dented Credit Scores
This Chicago based firm was one of the first fully online lending institutions to completely focused on individuals with a damaged credit score. According to the firm, their target is to help the typical middle-class American consumers improve their finances and their life.
While you might be able to apply for a fully open personal loan, this firm is typically used by individuals who are actually trying to consolidate their debt into one single payment. For most instances the company will provide two options:
- You lower your interest rate in exchange for a higher payment, this will help you amortize more to your loan can pay it in full faster
- You lower your interest rate in exchange for a smaller payment spread across a longer tenure. This is a great tactic if all you are looking for is to clear some cash out of your wallet.
It is important to mention that even though it is a mid-size firm, you are still going to be dealing with a company that has fewer resources in terms of problem-solving. If you have any situation with your application or your loan, you can easily find yourself spending hours if not days trying to get somebody to help you with it.
- 9.95% – 35.99% Variable
Loan Amount: $2,000 to $35,000
Length: 2 – 5 Years
Minimum Credit Score: 580 FICO
Minimum Annual Income: $20,000
- Administrative Fee 4.9%
- Late Fee $25
- Unsuccessful Payment $15
- No Prepayment Fee
6. Lending Club| Best P2P Lending
Lending club is a disruptive company that operates in its own category, while it offers access to traditional methods of borrowing, the entire structure is backed by a peer to peer lending. Instead of acting as a final lender who is giving you their money in exchange of interest, the firm connects multiple individuals who are interested in being the lender.
P2P Lending is not a new thing but it has become mainstream as more and more firms digitalize their platforms. Keep in mind that due to the fact that there is an intermediary involved in the whole process, you might actually have to pay a higher rate for your loan.
While the firm openly says that their minimum credit score is 600, it has become known to the public that individuals with an even lower number have been approved. Remember that there is someone backing your loan, chances are that if they are in the market with a higher risk appetite they will be interested in lending you for a higher rate.
- 6.95% – 35.89% Fixed Rates Only
Loan Amount: $1,000 to $40,000
Length: 3 – 5 Years
Minimum Credit Score: 600 FICO
Minimum Annual Income: None
- Origination Fee 1% – 6%
- Late Fee $15 or 5% of payment after 15 days grace period
5. Discover| Overall Best for Debt Consolidation
Discover might be known for their payment network and their vast range of credit and debit cards. But in silence, the firm has become one of the most important and fully operational online banks in the US. If you are in need of a personal loan and you have a good credit score, this might be an option that should not miss.
Keep in mind that in a market full of companies offering sketchy products and taking advantage of individuals with a low credit score, names like Discover act as safe havens and heroes for individuals in need. While the problem might always occur with any type of institution, it is comforting to know that you are doing business with a mature and reputable company.
There are only a handful of names in the financial markets where I can truly say that the firms best interest is the client best interest, and Discover is one of them. If you don’t want to lose your sleep over a personal loan you might want to review Discover as your best possible option.
- 6.99% – 24.99% Variable
Loan Amount: $2,500 to $35,000
Length: 3 – 7 Years
Minimum Credit Score: 660 FICO
Minimum Annual Income: $25,000
- No Fees
Before even thinking about choosing one provider over the other it is important to have a clear picture of why you need the loan in the first place. The main reason for this is to be able to have an objective perspective, maybe you want to get the cheapest loan in terms of interest and make bigger payments or actually the opposite and what you want is to free some cash from your wallet every month.
This is a very big market and it gets even bigger once you understand that most of these institutions will give you several different options to choose from.
A personal loan will not solve all your problems, but it will certainly help you regain control of your finances if you’ve lost it or one reason or another. After knowing and understanding how easy it truly is to request a loan online, there isn’t really a reason or an excuse to justify procrastinating it.
Our best advice is to weight the necessity of the loan and to deeply understand the structure of the borrowing in order to be on the same page with the lender. The idea of getting a personal loan should be to improve your life and not to impact your credit score because you did not have the capacity to repay the money.
On average most financial institutions would expect a FICO credit score of at least 580 or Fair. Keep in mind that while this is the average in the country, it does not mean that other scores would be received as well. Any institution from this list will review your credit score and based on that they will assign your interest rates, the lower your score the higher the rates.
If you have a really damaged credit score you might want to look for a secured loan. This structure would require collateral to cover for the loan, but since it reduces the level of risk taken by the firm, it is almost certain that you might get approved for your loan.
Origination fees usually represent the cost of processing a loan and setting up an agreement. This fee covers the cost that the lender incurs of underwriting a loan and also the cost associated with the verification of documents (including the credit score).
Even though it may sound unfair, many institutions will calculate the origination fee based on the creditworthiness of the individual. In reality, the fee might not be too high but is another point that proves that having a proper credit score will save you a lot of money down the road.
In 2019 the average origination fee is between 1% and 5%.
Even before a personal loan is granted the financial institution has the knowledge of what’s the minimum profit they would make considering the length and also the different fees and interest rates. Chances are that things are going better for you and you decide to repay your loan, this would mean that the firm that issued the loan would get their money back sooner but would lose the profit from the interest.
These penalty fees and fines are used to cover for the loss in terms of fees, the bank is certainly not going to lose money but you will get fined anyway. Take your time to review if your institution offers a free prepayment or if there is any fee or fine associated with it.
In most cases, the entire process is very straightforward and easy. Once approved you should receive the funds in 1 business day. Many financial institutions explicitly ask their customers to proceed with this type of requirement online if their are looking to get their funds as soon as possible, mainly because the review would be done by artificial intelligence and not by an agent inside a branch. This is another great reason why to proceed online and not in a physical branch.
- Secured Personal Loans: A secured personal loan means that you have offered the bank some sort of collateral that would take the fall in case you don’t pay for your loan. In synthesis, you would be providing some insurance or coverage for default. There are many different types of assets that can be used as collateral but the most common are properties, cash, CDs, and even cars. It is important to understand that if you fail to meet your payments you will lose your collateral.
- Unsecured Personal Loans: Unsecured loans are completely the opposite. Under this category the institution would be taking the risk for your default, meaning that it would be their loss if you don’t pay back. This is a perfect example where your creditworthiness will determine if a bank is willing to take the risk with lending you money and if so, at what price.