Key Takeaways
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Unconventional personal loans are personal loans offered by non-traditional lenders, such as online lenders and credit marketplaces.
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Getting an unconventional loan can be easier than getting a traditional loan for borrowers with little or no credit.
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Lenders of unconventional personal loans typically operate exclusively online.
If you’ve been trying to borrow money at a reasonable interest rate from a traditional lender but have been denied due to limited credit, income or employment history, the latest generation of personal loan lenders may be able to help you. These so-called ‘unconventional personal loans’ can be your best chance to get a good interest rate and unique benefits.
What is an unconventional personal loan?
Just like with a traditional personal loan, an unconventional personal loan allows you to borrow a fixed amount from a lender. You must repay the loan, plus any interest costs that arise, within an agreed time frame. The borrowed money can be used for upcoming purchases, such as a car repair or medical bills.
Unconventional personal loans come from non-traditional lenders, such as online and marketplace lenders, who may focus on non-standard factors to evaluate the loan applicant. Consequently, you can get approved for financing even if you don’t qualify with a traditional bank.
How do personal loan approvals usually work?
The lender typically performs a “soft pull” on your credit and analyzes the information in your application, including the debt-to-income ratio (DTI), to determine if you qualify for a loan. The lender also shares the annual percentage rate (APR) and loan terms it can offer if you qualify for financing.
If you choose to proceed with the application, lenders will perform a “hard check” on your credit history and may ask you for additional documentation to make a final decision.
Unconventional personal loan lenders also assess your creditworthiness and DTI, but they may weigh these factors differently. They may also approve you based on things like your career or college degree.
Unique personal loan providers
Avant, LendingPoint and Upstart are online lenders that offer personal loans to borrowers without strong credit. Please note that each has its own eligibility requirements and acceptance criteria. Here are some key details about their unconventional personal loan options.
| Lender | Minimum credit score |
April | Term | Maximum loan amount |
| Avant | 580 | 9.95%-35.99% | 2 – 5 years | $35,000 |
| Lending point | 600 | 7.99%-35.99% | 2 – 6 years | $36,500 |
| Upstart | No requirement | 7.80%-35.99% | 3 – 5 years | $50,000 |
| Best egg | 600 | 7.99%-35.99% | 3 – 5 years | $50,000 |
To find the best rates on personal loans, shop around.
Avant
Avant offers unsecured loans ranging from €2,000 to €35,000, and you can choose a term as short as 24 months to save a bundle in interest. The loan proceeds will be deposited the next business day after approval. You can easily manage your loan via the user-friendly mobile app. Even better, there is no prepayment penalty if you choose to pay off the loan early.
There is a disadvantage that we must take into account. The lender charges an administration fee of up to 9.99 percent, deducted from the loan amount. Factor that into your budget before accepting a loan offer.
Lending point
LendingPoint focuses on borrowers considered “near-prime” with scores in the 600s. The lender uses software that looks beyond credit scores to assess personal loan applicants and tailor the most ideal loan solutions.
Loan amounts range from $1,000 to $36,500, and there are no prepayment penalties if you choose to pay off your debt early. Depending on where you live, you may face an origination fee of up to 10 percent.
Upstart
Upstart looks beyond your credit score to determine whether you are suitable for a loan. Your education, field of study and employment history will be taken into account when assessing your application. If you are not yet working but have a job offer, this lender may still consider you.
Upstart specializes in fast financing. It claims that 99 percent of its personal loans are disbursed just one business day after approval.
Best egg
Borrowers can get loans through Best Egg for between $2,000 and $50,000.
One feature that sets this lender apart is the fact that it offers both secured and unsecured personal loan options. Most personal loans are unsecured. With Best Egg, you can offer collateral, such as your car or your home’s inventory, to potentially gain access to larger loan amounts or lower rates.
Advantages and disadvantages of an unconventional personal loan
Unconventional personal loans have both advantages and disadvantages. Here you can read what you should pay attention to if you are considering taking out an unconventional loan.
Benefits of an unconventional personal loan
Obtaining an unconventional loan offers several advantages:
- Collateral not always required: Many online lenders offer borrowers personal loans at reasonable rates, without collateral, if they cannot be approved by a bank.
- Transparent prices and borrowing costs: Reputable lenders must share their rates and origination fees up front. You may even be able to pre-qualify immediately to see your actual rate without a hard credit score.
- Easier to get approved with little or no credit: Lenders that finance unconventional personal loans typically target borrowers with fair credit. Some even serve people with poor or no credit. This removes a typical obstacle to approval.
Disadvantages of an unconventional personal loan
However, getting an unconventional loan has its drawbacks. These are some common ones:
- Higher interest rates: Your APR may be higher than if you had worked on improving your credit before applying for a loan. Depending on your credit score, income and DTI, you could pay an APR as high as 35.99 percent.
- No personal service: Many unconventional personal loan lenders operate entirely online, which means you have to handle all business via email or over the phone.
What are the credit score requirements for unconventional loans?
While some online lenders cater to borrowers who may not qualify with traditional lenders, unconventional lenders still have credit requirements that you must meet.
For unconventional personal loans, you typically need at least a “fair” credit score to get approved for a competitive rate and terms in this category. A FICO score of 580 to 669 is considered “fair,” although lenders may have their own definitions. Be sure to check out Bankrate’s best fair credit loans if you fall into this category.
Some lenders may consider applicants who are new to borrowing (i.e. those who do not have a credit score) on a case-by-case basis. Unconventional factors like your college majors or work history can help you get approved, but traditional factors (like credit score) still matter.
The bottom line
An unconventional loan can be a viable option if you can’t obtain the financing you need through a traditional bank or credit union. It is possible to get approved for a loan with competitive terms, and you may not need any collateral.
However, there are disadvantages associated with these loan products that you should take into account. Depending on your financial situation, you may find it wiser to look for other alternatives if you need cash quickly.
