Unconventional Personal Loans: A Fresh Take on Borrowing
When traditional banks slam the door due to sparse credit history, patchy income records, or sketchy employment, a new breed of personal lenders might come riding to your rescue. These lenders, who specialize in unorthodox personal loans, often open doors to borrowing opportunities with competitive interest rates and some perks you won’t find in the usual places.
What Exactly Defines an Unconventional Personal Loan?
Unlike the old-school personal loan that drones on about steady income and neat credit scores, unconventional loans tend to flip the script. They weigh less obvious factors — like your profession or education background — to decide if you’re worthy of their cash. In doing so, they might approve you even when a high-profile bank would wave you off.
How Do Traditional Personal Loan Approvals Typically Play Out?
To kick things off, a lender usually measures your debt-to-income ratio (DTI) to gauge whether your financial landscape can handle a fresh loan. If you pass this prequalification stage, expect to get a glimpse of your potential annual percentage rate (APR) alongside the terms they can offer.
Deciding to proceed means the lender will run a “hard inquiry” on your credit file and may request extra paperwork before sealing the deal.
Distinctly, unconventional lenders also check your credit and DTI but tend to interpret these numbers through a different lens. They might approve your loan thanks to factors like your degree or job sector, which traditional lenders often overlook.
Unconventional Lenders to Keep on Your Radar
- Avant
- LendingPoint
- Upstart
- Best Egg
These players are usually friendly to those with shaky or slim credit histories. Each brand has its unique rules and underwriting quirks, so it pays to shop around.
| Avant | 600 | 7.99%–35.99% | 2–6 years | $36,500 |
| LendingPoint | 600 | 6.99%–35.99% | 3–5 years | $50,000 |
For borrowers boasting credit scores as low as 550, Avant stands out — many competitors hold firm to the mid-600s and above. Loan amounts range from $2,000 up to $35,000, and you can snag terms as short as 24 months, helping slash interest costs. Approved loans might hit your account by the next business day, a nice perk if you need quick cash.
On the flip side, Avant tacks on an administrative fee that can climb to 9.99%, sliced off before you get your hands on the money. This means borrowing a tad more than you planned might be necessary to cover this upfront cost. It’s wise to crunch the numbers before you sign on that dotted line.
LendingPoint: The Choice for the ‘Near-Prime’ Crowd
Serving folks with credit scores nestled in the 600s, LendingPoint goes beyond raw numbers. Its software digs deep — dissecting your financial story to tailor loan terms that fit like a glove.
Loan sizes stretch from $1,000 to $36,500, with repayment timelines extending up to six years, which beats the five-year cap most lenders impose. Keep in mind, depending on local regulations, you might encounter origination fees flirting with 10%.
Upstart: Artificial Intelligence Meets Lending
Upstart’s underwriting wizardry relies heavily on AI that sifts through your education, field of study, and employment background to decide if you’re a good match. This approach claims to unlock lower interest rates and greenlight more applicants, even those without a credit score.
Beware, though—interest and fees can be steep for newcomers or those with poor credit, with APRs soaring up to 35.99% alongside origination fees reaching 12% of your loan amount.
Best Egg: Larger Loans with a Twist
Offering loans from $2,000 up to a hefty $50,000, Best Egg typically issues unsecured loans based on your credit and promise to repay. But for homeowners, it offers the option to secure loans against household fixtures, adding a layer of security that might get you better rates.
Weighing the Pros and Cons of Offbeat Personal Loans
Like every financial tool, these unconventional personal loans come with their upsides and setbacks. Let’s break down what’s on the table if you’re eyeing this borrowing path.
The Bright Side: Why Go Unconventional?
- No Collateral Needed (Usually): Unlike payday loans, these lenders rarely demand assets as backup, offering a safer borrowing avenue.
- Clear-Cut Fees and Rates: Trustworthy lenders lay their cards on the table, revealing rates and origination fees upfront. Some even allow prequalification without dinging your credit.
- Approval Chances with Low or No Credit: These loan specialists often target fair- to bad-credit applicants, making approval more accessible.
The Flip Side: What To Watch Out For
- Steeper Interest and Extra Fees: APRs can be significantly higher than those on loans secured by better credit, sometimes reaching that 35.99% mark. Add origination fees that might hit 12%, and the cost adds up fast.
- No Face-to-Face Interaction: Most unconventional lenders exist solely online, so expect to communicate by phone or email only.
In terms of credit benchmarks, a FICO score between 580 and 669 typically counts as “fair,” though some lenders extend a hand to those below that threshold. When searching for competitive financing, keep this in mind.
If traditional banks and credit unions turn away your application, an unconventional personal loan might just be the fallback you need—especially when time is of the essence and quick funds are the priority.
