Short on Cash? Ditch the Credit Card and Get a Personal Loan

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Paying for everything in cash (even a house) is a great goal, but thanks to Murphy's law you will eventually find yourself cash-poor and in need of an immediate infusion of liquid assets. Loan seekers used to go scrambling to banks and credit unions -- and many would get turned away due to minimal credit history and strict underwriting criteria. But new companies are changing the way you're evaluated for a personal loan -- and allowing you to search for options from the comfort of your couch and without hurting your credit score.


Social Finance, more commonly known as SoFi, offers personal loans with set annual percentage rates of 5.50 to 8.99 percent. Borrowers can get a loan from $5,000 to $100,000 with a three-, five- or seven-year term. There are no origination fees and no prepayment penalty fees, making SoFi one of the cheapest personal loan options on the market.

Borrowing $10,000 at 16 percent and paying $300 a month on a credit card would take 45 months and cost $3,312 in interest to repay. Borrowing $10,000 with SoFi's lowest APR of 5.50 percent with a monthly payment of $301.96 for three years would cost $870.56 in interest –-- less if you can pay it off early.

The underwriting process takes into account much more than a FICO score, but SoFi does have a 700 FICO minimum. The underwriting also considers where you went to college, your major, employment history and debt-to-income ratio. SoFi personal loans are available in 46 states and the District of Columbia. The loans are not available in Louisiana, Mississippi, Nevada and Tennessee.

You can see your rates without harming your credit score. SoFi conducts a soft pull to provide interest rates to prospective borrowers.


Earnest brands itself as "low-cost loans for the financially responsible." A relatively new entrant into the personal loan marketplace, Earnest also examines more than just a credit score. It asks borrowers to link their LinkedIn profiles and financial accounts during the application process, which allows Earnest to analyze education, employment history, credit card debt, income, savings and investment planning. Borrowers can have minimal credit history, but it's best to have a 700 credit score or higher to get the most competitive rates on a personal loan.

The personal loans have a minimum of $2,000 and a maximum of $30,000 for one-, two- or three-year terms. Fixed APR ranges from 4.25 percent to 9.25 percent based on creditworthiness and length of the loan. However, Earnest personal loans are only available in California, Colorado, Connecticut, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Tennessee, Texas, Utah, Washington, Washington D.C., and Wisconsin.

There is no origination fee or prepayment penalty. Earnest also does a soft pull at the beginning to provide terms to interested borrowers and doesn't complete a hard pull until the end of the application process.


Prosper was America's first peer-to-peer marketplace and launched in February of 2006.

Unlike SoFi and Earnest, Prosper dives a little deeper in the approval process with a minimum 640 FICO score. However, its APR ranges are much higher, starting with 6.68 percent and going up to 35.97 percent. The maximum loan is $35,000 and terms are either three years or five years.

Prosper created its own rating scale, which goes from AA to HR. AA borrowers are eligible for the 6.68 percent APR while H borrowers are more likely to have an APR in the 30s. The rating also determines origination fees, which operate on a sliding scale of 1 to 5 percent. There is no prepayment penalty.

Like SoFi and Earnest, Prosper allows borrowers to check rates without harming a credit score. In most cases, Prosper would be a back up in case you don't have a credit score high enough for a competitive rate with SoFi or Earnest.


Vouch provides one of the most unusual personal loans available today. It appeals to borrowers with minimal credit history, a low credit score but a strong network of friends and family.

The Vouch model allows for friends and family to "vouch" for you -– essentially work as a cosigner/guarantor -- and in return your interest rate will decrease while the amount you can borrow will increase. The more vouches, the better the deal you'll get on a loan. Friends and family will be asked to stake a minimum of $25. They won't be required to pay unless you default on your loan, much like a cosigner. Signing up for Vouch and beginning the process will not hurt your credit score.

Vouch goes deeper than SoFi, Earnest and Prosper and will approve down to a 600 FICO credit score. However, it only offers loans for $500 to $7,500 for up to 36 months. The APR ranges from 7.35 percent to 29.96 percent.

There are no application fees, annual fees or prepayment penalty fees –- but there is an origination fee of 1 to 5 percent. Vouch may be an ideal option for young professionals that recently graduated college and have minimal credit history.

Don't Be Afraid to Shop Around

You should never take on debt lightly. Always search for the lowest possible interest rate and preferably go with lenders that don't charge an origination fee, prepayment penalty fee or an application fee. You can search a variety of other offers from personal loan providers on's personal loan marketplace. Many personal loan providers offer the opportunity to see the terms without a hard inquiry in your credit report, so shop around before committing.

Erin Lowry writes for DailyFinance on issues relating to millennials, money and personal finance. She is the blogger behind Broke Millennial, where her sarcastic sense of humor entertains and educates her peers. She is also the brand and content manager for MagnifyMoney.
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