LightStream says it will give you a personal loan for “practically anything.”
Of course, that’s true of most personal loans: Once you qualify for a loan at a particular interest rate, you typically can spend the money on anything you want.
LightStream’s twist is that what you buy determines the interest rate you pay. If you have a credit score above 680 and a substantial credit history, LightStream has interest rates tailored for everything from buying a horse to paying for fertility treatments. (LightStream doesn’t offer loans for college tuition or businesses.)
For example, a well-qualified borrower getting LightStream’s best rates on an unsecured, $25, 000 three-year loan would pay:
- 1.99% APR on a new car loan
- 4.99% for a home improvement / solar installation / pool loan
- 5.49% for a credit card or debt consolidation loan
Borrowers must agree to use the loan as intended. In return, they get an unsecured personal loan at a lower rate, in some cases for the price of a traditional secured loan.
Secured loans vs. unsecured loans
With a secured loan, the lender has a claim on your property if you don’t pay. For example, your bank holds title to your car until it’s paid off and requires that you buy comprehensive and collision insurance to protect its interest in the vehicle. Home improvement loans typically require you to pledge your house or savings as collateral.
Unsecured loans, on the other hand, are made on your creditworthiness alone. With no collateral, the risk for lenders is bigger, and they charge much higher rates to make up for it.
LightStream turns that business model on its head by requiring good to excellent credit for all its borrowers, then pricing loans by their purpose.
The reason you’re borrowing money is the most important factor used to determine the range of interest rates you would qualify for, says Todd Nelson, LightStream’s director of business development. LightStream recognizes that a loan to pay off existing debt is inherently riskier than, say, one for buying a new car, Nelson says.
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