Are you in the market for a personal loan? Whether it is for home improvement, debt consolidation, or some other purpose, lending options have expanded greatly in the last few years. A variety of online lenders have moved beyond traditional offerings to take advantage of improved technology and lower overhead in order to provide new twists on funding personal loans.
If you happen to have good but not excellent credit (generally in the FICO score range of 690 to 720), most lending options are available to you, including those from brick-and-mortar banks and credit unions. However, online lenders can often offer a superior rate, especially those who cater to higher credit scores. Their lower cumulative risk can lead to better rates and terms.
It pays to shop around within this online lender base for the best deal. In many cases, you can get a rate estimate from online vendors with only a soft credit pull that does not affect your credit report. Most have developed some distinguishing aspect or niche to cater to a specific target group of borrowers.
Consider these two examples of lenders targeting borrowers with good credit (minimum FICO scores of 680). They may be able to offer you a superior deal based on your circumstances.
- LightStream – LightStream is the online consumer-lending arm of SunTrust Bank. They cater to the upper end of the good credit range, featuring great rates and a streamlined process for those who qualify.
LightStream is unique in that the APR and terms are different based on your purpose for the loan (thus you are obligated to use the loan for that stated purpose). Their best rates are incredibly low — as low as 1.99% on a short-term (two- to three-year) auto loan with the AutoPay option. Many other loan purpose categories are in the 2.99% to 4.99% range for the lowest rate. Typical premium rates for online vendors are closer to the 6.99% to 8.99% mark. Funding is rapid if you are approved; same-day funding is possible.
A drop-down menu on the rates and terms page allows you to see the range of possible rates based on the loan purpose, size of the loan, and the loan term (between 24 to 84 months depending on loan amounts). Most common loan purposes are listed, with one exception: LightStream does not provide funding for student loans at the college level or beyond.
Loan amounts up to $100,000 and/or terms up to seven years are available, as compared to typical caps in the $35,000 and five-year range with online lenders. There are no fees of any sort — prepayment, origination, or even late payment fees (accrued interest only).
With good as opposed to excellent credit, you may not get the best rate listed, but the rates you do receive are likely to be very competitive if you meet LightStream's relatively strict standards.
A 680 credit score is the bare minimum, but a score in the 700s is necessary to receive better rates. You also need "several years" of credit history with diverse types (a major credit card, vehicle or similar installment loan, and/or mortgage debt). Stable income and other assets that show an ability to save (retirement accounts, equity accounts, bank deposits, etc.) are also required to establish low risk of default.
LightStream is so confident in their abilities that they offer a "Rate Beat" program, roughly analogous to price matching at your local supermarket. They will beat the interest rate of a competing fixed-rate personal loan by 0.10 percentage points as long as the loan offer meets certain conditions. Not only that, they will give you $100 if your loan experience is unsatisfactory.
LightStream does use a hard credit pull in processing your loan application, so if you think you qualify for one of their better rates, try to avoid other hard credit pulls to minimize the effect on your credit score.
- Freedom Plus – Freedom Plus combines the ease of online lending with a personal touch while catering to the lower end of the good credit range. While the process starts online, they offer a unique human interaction.
Freedom Plus does not stop at an online assessment of your credit score and other relevant data such as debt-to-income ratio. Instead, they follow up with a phone interview to assess your risk further. If you have good credit but extenuating circumstances (such as the thin credit history described above, or an explainable blip in your payment history), the phone interview gives you an opportunity to explain your situation and help you qualify for a better rate.
Loans are available as low as 7.93% APR, but as with LightStream, your credit score may need to be in the 700s to receive the best rates. Loan amounts range from $5,000 to $35,000 with terms from two to five years. There are no prepayment fees and no "hidden fees" according to the website, but there is an origination fee ranging from 1.38% to 5%. Approval can take place within a day and your funds can be available in as few as two days.
The rates that LightStream offers are hard to beat if you can qualify, so it makes sense to try there first if you are reasonably sure that you can qualify. Otherwise, Freedom Plus and multiple other vendors are available to fill the gap for good credit personal loans.
Are you just outside the range of good credit? While some lenders can accommodate you at a higher interest rate, consider whether you can afford to wait on your loan and take steps to build up your credit rating first. Check your credit report for any errors, assess any issues that are dragging your credit score down (too much debt, high credit card utilization, etc.) and set up a long-term plan for improvement.
If you simply cannot reach a sufficient FICO score to qualify for good credit lenders, you can consider dropping down to the next tier of credit score acceptance. For example, Lending Club is a suitable peer-to-peer lending option that allows others essentially to "invest" in your loan, potentially widening your funding opportunities. It is possible to get loans there with credit scores as low as 620.
A good credit score is a great accomplishment, but if you don't use it to shop around for the best deal, you are not making the most of this valuable asset. Be sure to leverage your good credit by searching for the best combination of personal loan terms, payment flexibility, loan limits, and interest rate to fit your needs.
Finally, be sure to check the contract terms in detail. Online vendors are generally quite transparent, but any loan has fine print to review. Aim for the lenders with the highest qualification standards that you can meet and leverage your credit score accordingly, and then enjoy your funds at a well-researched and well-deserved low interest rate.
If you are interested in a personal loan, visit our curated list of top lenders.