If you’ve tried to borrow money at reasonable interest rates from traditional lenders but have been turned down because of limited credit, income, or employment history, the newest generation of personal loan lenders may be able to help. These so-called “non-traditional personal loans” may be your best chance at getting good interest rates and unique perks.
What is a non-traditional personal loan?
Like a traditional personal loan, a non-traditional personal loan allows you to borrow a set amount of money from a lender. You must repay the loan, plus any accrued interest, within an agreed upon time period. The borrowed funds can be used towards an upcoming purchase, like a car repair or medical bill.
Non-traditional personal loans come from non-traditional lenders, such as online or marketplace lenders, who may focus on non-standard factors in evaluating loan applicants. As a result, they may be approved for a loan even if a traditional bank would not approve the loan.
How does a personal loan approval usually work?
Lenders will typically do a “soft pull” of your credit and analyze the information on your application, including your debt-to-income ratio (DTI), to determine whether you qualify for a loan. If you qualify for financing, the lender will also provide you with the annual percentage rate (APR) and loan terms they can offer you.
If you choose to move forward with your application, the lender may conduct a “hard pull” of your credit history and request additional documentation to make a final decision.
Non-traditional personal loan lenders will also evaluate your credit score and DTI, but they may weight those factors differently and may also approve you based on things like your background or college degree.
Unique Personal Loan Lenders
Avant, LendingPoint, and Upstart are online lenders that offer personal loans to borrowers with poor credit. Keep in mind that each company has its own eligibility requirements and underwriting standards. Here are some important details about the unconventional personal loan options these companies offer.
| Lender | Minimum Credit Score | April | semester | Maximum Loan Amount |
| Avant | 580 | 9.95%-35.99% | 2 to 5 years | $35,000 |
| Lending Points | 600 | 7.99%-35.99% | 2 to 6 years | $36,500 |
| Upstart | No requirements | 7.80%-35.99% | 3 to 5 years | $50,000 |
| Best Egg | 600 | 7.99%-35.99% | 3 to 5 years | $50,000 |
To find the best personal loan interest rates, be sure to shop around.
Avant
Avant offers unsecured loans ranging from $2,000 to $35,000, and you can choose terms as short as 24 months to save big on interest. Loan proceeds are deposited the next business day after approval. Our user-friendly mobile app makes it easy to manage your loan. Even better, there are no prepayment penalties if you choose to pay off your loan early.
There are drawbacks to consider: Lenders charge an administration fee of up to 9.99 percent, which is deducted from the loan amount. Make sure you factor that fee into your budget before accepting a loan offer.
Lending Points
LendingPoint caters to borrowers who are considered “sub-prime,” with scores in the 600 range. The lender uses software that looks beyond credit scores to evaluate personal loan applicants and customize the most ideal loan solution.
Loan amounts range from $1,000 to $36,500, and there are no prepayment penalties if you choose to pay off the loan early. Depending on where you live, there may be a financing fee of up to 10 percent.
Upstart
Upstart considers more than just your credit score to determine whether you’re a good fit for a loan. It takes into account your education, major, and work history when evaluating your application. If you’re not working yet but have a job offer, this lender may consider you.
Upstart specializes in fast funding, claiming that 99 percent of personal loans are funded within just one business day of approval.
Best Egg
Borrowers can take out loans ranging from $2,000 to $50,000 through Best Egg.
One feature that sets this lender apart is that it offers both secured and unsecured personal loan options. Most personal loans are unsecured. With Best Egg, you can provide collateral, such as your car or home furnishings, to increase the loan amount or lower the interest rate.
The Pros and Cons of Non-Traditional Personal Loans
Non-traditional personal loans have both advantages and disadvantages. Here are some things to consider if you’re thinking about taking out a non-traditional loan:
The Benefits of Non-Traditional Personal Loans
Obtaining a non-traditional loan has several advantages.
- Collateral is not necessarily required: Many online lenders allow borrowers to get personal loans without collateral at reasonable interest rates if they are not approved by a bank.
- Transparent Pricing and Loan Fees: A reputable lender should disclose their interest rates and financing fees up front, and they may even offer pre-qualification, which allows you to see what your actual interest rate will be immediately, without a credit check.
- It makes it easier to get approved if you have poor or no credit. Lenders who offer nontraditional personal loans typically target borrowers with fair to good credit. Some lenders also offer services to borrowers with poor or no credit, removing a common obstacle to getting approved.
Disadvantages of Non-Traditional Personal Loans
However, there are also drawbacks to getting a non-traditional loan. Common drawbacks include:
- Rising interest rates: You may end up with a higher APR than if you had worked to improve your credit before applying for the loan. Depending on your credit score, income, and DTI, you could end up paying an APR of up to 35.99 percent.
- No in-person services: Many non-traditional personal loan lenders operate entirely online, meaning all transactions must be conducted via email or phone.
What are the credit score requirements for non-conventional loans?
Some online lenders target borrowers who might not qualify for a loan from a traditional lender, but even non-traditional lenders have credit requirements that borrowers must meet.
For nontraditional personal loans, you’ll usually need at least a “fair” credit score to be approved for the competitive rates and terms in this category. A FICO score between 580 and 669 is considered “fair,” but different lenders may have different definitions. If you fall into this category, be sure to check out Bankrate’s Best Fair Credit Loan picks.
Some lenders may consider first-time borrowers (those who don’t have a credit score) on a case-by-case basis. Non-traditional factors like your college major or work history may help with approval, but traditional factors like your credit score still matter.
Conclusion
If you can’t secure the financing you need from a traditional bank or credit union, a non-traditional loan may be a viable option. You may be able to get approved for a loan on competitive terms, and you may not even need collateral.
Still, these loan products have drawbacks to consider, and depending on your financial situation, it may be wise to look for other options if you need cash quickly.
