Even though credit cards are still the go-to 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.
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How do personal loans work?
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 tranquillity 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 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 2021. 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. Pros Cons
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. Additional Information APR: Loan Amount: $5,000 to $100,000 Length: 2 – 7 Years Minimum Credit Score: 680 FICO Minimum Annual Income: None Fees: 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. Additional Information APR: 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 Fees: 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: 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. Additional Information APR: Loan Amount: $2,000 to $35,000 Length: 2 – 5 Years Minimum Credit Score: 580 FICO Minimum Annual Income: $20,000 Fees:
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. Additional Information APR: Loan Amount: $1,000 to $40,000 Length: 3 – 5 Years Minimum Credit Score: 600 FICO Minimum Annual Income: None Fees:
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. Additional Information APR: Loan Amount: $2,500 to $35,000 Length: 3 – 7 Years Minimum Credit Score: 660 FICO Minimum Annual Income: $25,000 Fees: There are a number of different loan types. If you are looking for a specific type of loan, browse our list below which contains detailed guides about each type of loan 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.
Best 5 Online Personal Loans Providers in 2021: Summary
Reviewers Choice 
Best 5 Online Personal Loans Providers in 2021:
1. Sofi | Best for Flexibility
2. Marcus by Goldman Sachs| Best for Debt Consolidation
3. Avant | Best For Dented Credit Scores
4. Lending Club| Best P2P Lending
5. Discover | Overall Best for Debt Consolidation
What different types of loans are there?
Conclusion
Glossary of Loan Terms
FAQs
What's the Minimum Credit Score for a Personal Loan?
What is the Origination Fee?
What are prepayment penalty Fees?
How long does it take to get the money in my account?
Secured vs Unsecured Personal Loans
Types of Loan – A-Z Directory
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