If you make a steady income, pay your bills on time, and save for retirement, you might expect to borrow money at a low interest rate.
But a limited credit history can outweigh these factors when you go shopping for an unsecured personal loan — even if you have excellent credit scores.
Personal lender Earnest thinks it has a way to identify trustworthy — if unestablished — borrowers like you and give them the same rates as other low-risk customers, according to CEO Louis Beryl.
“If you’re financially responsible, you should want someone to look at that and give you credit for it, ” Beryl says.
Typically, an Earnest borrower:
- has a job
- saves money on a regular basis
- has enough income to cover expenses
- has a retirement savings account
The company says 90% of Earnest’s customers are under the age of 35, with credit scores of 700 or above.
But Earnest says it doesn’t weigh credit scores any more than other factors it considers. That’s why buyers with thin credit histories or lower credit scores can also qualify for low rates.
What makes Earnest different
Earnest offers annual percentage rates as low as 5.25%. The lender says it’s able to do this because it collects and analyzes more than 80, 000 data points about each prospective borrower.
In a six-step online application, borrowers provide Earnest basic data about their education and employment histories. They can ask the site to pull information from their LinkedIn profiles to speed up the process.
They also give Earnest permission to scan their bank accounts. The lender’s algorithm analyzes every transaction, payment, deposit and withdrawal and uses that to paint a picture of each applicant’s financial habits.
But every loan decision is ultimately made by a human, the company says.
Earnest’s personal loan product also offers flexibility. Once a borrower is approved, he or she can easily alter the monthly payment amount or payment schedule. There are no prepayment or origination fees, and Earnest doesn’t charge late fees. Instead, the company’s “Client Happiness” team works with individual borrowers to avoid default by setting up payment plans or adjusting loan terms.
Here’s what you need to know before applying for an Earnest loan:
Earnest’s credit standards
- Minimum credit score required: None (Other financial standards apply)
- Minimum gross income required: None
- Limitations: Comprehensive application process
- Minimum credit history: None
- Maximum debt-to-income ratio: None
Earnest’s lending terms
- Minimum loan size: $2, 000
- Maximum loan size: $50, 000
- Minimum loan duration: 1 year
- Maximum loan duration: 3 years
- Time to receive funds: Up to a week
Earnest’s fees and penalties
- Origination fee: None
- Prepayment fee: None
- Late fees: None
- Personal-check processing fees: None
Earnest review: The bottom line
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