Where And Why To Apply Online For Unsecured Personal Loans
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Where do you get a loan for a motorcycle? A wedding? A vacation? A horse? New options in unsecured personal loans offer financing for almost anything, with far better rates than traditional credit cards.
Let’s face it: It’s not everyday you can get an online loan to buy a horse.
But if you go to the website for LightStream’s “AnythingLoan”, and scroll down to the bottom of the page, you’ll see it right there: a link for horse loans (with an APR as low as 5.99 percent). It’s right alongside other links for aircraft financing and season ticket loans. (Speaking as a long-suffering Cubs fan, I have to question the wisdom of that last category, at least in the Windy City.)
LightStream: Fast, easy personal loans
Bank loans are one thing, but the loans offered by LightStream, the private, online lending division of SunTrust Bank, represent a new phenomenon altogether. That’s because they belong to, what’s at this point, a small market niche: the unsecured low(ish) interest loan.
Julie Olian, a spokeswoman for LightStream, says the loans can range in size from $5,000 to $100,000. That’s a large range, especially considering that these unsecured loans don’t require you to put up collateral, such as a home or property, to get them.
So what do you need? A good credit score doesn’t hurt, but it’s not the primary thing LightStream looks at, it turns out. “Credit scores are one element in the mix, as FICO is a good aggregate risk predictor; but it’s not determinative,” Olian says. LightStream does cite a minimum FICO score of 680 (650 for auto loans), but notes that someone with a perfect score of 850 might still be declined for other reasons.
Here are some example rates, provided that you use the “AutoPay” option, as of April 2014:
credit card consolidation: 7.19 – 9.99 percent
medical/adoption expenses: 5.99 – 9.74 percent
new auto: 1.99 – 5.34 percent
used auto: 2.19 – 5.34 percent
LightStream looks at other factors for its AnythingLoan, including a stable and sufficient income, the ability to easily make loan payments, and an ability to save evidenced by some or all of the following; liquid assets (stocks, bonds, bank deposits, etc.), cash down payments on real estate, retirement savings, and manageable revolving credit card debt.
There is some wiggle room if you don’t qualify in the car category. LightStream can offer you a secured loan with a higher rate based on your credit profile. (In that case, LightStream would need to be listed as lienholder on the title, Olian says.)
AnythingLoans stand out, at least from a categorical standpoint, because there just aren’t many other options to compete with them in the unsecured category.
Learn more: LightStream requirements and online application
On the one hand, you’ve got peer-to-peer lending sites, but the interest rates can be astronomical if you don’t fall into the very top credit categories.
At Lending Club, the rates range from 6.78 to 32.99 percent APR. Another peer-to-peer site, Prosper, goes even higher, with fixed rates ranging from 6.73 to 35.36 percent APR. The application process can be lightning fast (especially if you’ve been pre-approved), but your individual credit situation will play a huge role in the APR you’re offered.
The interest rates with the AnythingLoan will typically be much lower—in the single digits and fluctuating depending on the category where you choose to borrow. For example, a home improvement loan might average between 4.99 and 9.24 percent APR.
For low interest rates, secured credit union loans can be a good alternative, but are certainly more restrictive in terms of the loan usage. According to the National Credit Union Administration, interest rates on a 48- and 60-month new car loan in September 2013 (the latest figures available) averaged 2.68 percent and 2.78 percent respectively. That compared to 3.74 percent and 3.87 percent at all banks as a national average.
Speaking of cars, Greg McBride, a senior financial analyst with Bankrate.com, makes an analogy between unsecured loans and car insurance. “The guy with a litany of accidents is going to pay a whole lot more than the guy with the spotless driving record,” he says.
While unsecured loans like the AnythingLoan stick out because of their uniqueness, they’re also much tougher loans to get in terms of the requirements.
And there are other ways to approach the need for cash, McBride says. “If you have strong credit, you can get a single-digit interest rate on a credit card and get purchase protection. In that case, the credit card starts to stand out.”
And while McBride acknowledges that credit unions tend to present hurdles with formidable amounts of paperwork, he still encourages consumers to consider all of their options when looking for a loan. “You’ve got a cast a wide net and include credit unions in your search,” he says. “If you can save money, paperwork is not a hurdle.”
In sum, more personal loan options than ever
That said, the AnythingLoan and peer-to-peer lending sites have their place in the financial landscape, in large part because of how much the banking industry has changed.
“It’s just a matter of demand.” McBride says. “There’s always consumer demand for borrowing and in the small-dollar realm– anything under $10,000 generally. A lot of banks are not into that business, and a lot of finance companies have been shuttered. But the demand for small-dollar loans has not diminished at all.”
“One of the things that held back the home improvement market is that financing was more difficult,” says Gary Miller, the SunTrust senior vice president who runs LightStream. “A pent-up demand was created and people put projects on the back burner because they couldn’t get financing, or they were nervous about the economy. But that’s been relieved over the past few years.”
LightStream continues to do a robust business with the AnythingLoan, which it introduced in March 2013. Along with those home improvement loans, Olian says auto loans and pool construction loans have been popular. “We anticipate that weddings and PreK-12 Tuition loans are going to be strong, seasonally, she adds.
Ah, but the tuition category proves that even the AnythingLoan has its limits. “We’re currently unable to provide loans used to fund college or post-secondary education expenses, or refinance previous college or post-secondary education loans,” Olian says.
Those are niches this writer would hope get a chance someday. At least when compared to a Cubs season ticket, it’s got much higher potential for return on investment.