Earnest Personal Loans review

Earnest loans are ideal for people who are financially responsible but don’t necessarily have a ton of credit history. The company uses a unique system of “merit-based lending” to qualify borrowers. It uses data to drive an underwriting process that looks at factors beyond your credit score.

This information includes your education, employment history, and your financial behavior. These loans aren’t for people with bad credit; rather, they’re intended to help financially responsible people with limited credit get the access they need to personal loans.

Earnest Personal Loans

EarnestBorrowers from Earnest can expect to see APRs range between 5.25% and 12% on personal loans. You can qualify to earn anywhere between $2,000 and $50,000 over a period of either one or three years. It can take up to a week to complete the application process and receive your loan funds, so be sure to take that into account when deciding on a lender.

One major perk with Earnest loans is that there are no fees associated with borrowing money. Earnest is also rather flexible in what your personal loan may be used for, although it may not be used for business expenses.

Borrower Profile

Earnest borrowers are employed with an above average income. However, an exception is that Earnest also accepts borrowers who have a job agreement in place, even if they haven’t necessarily started yet. You’ll also need a low amount of personal debt to qualify for a loan, although mortgages and student loans aren’t weighted as heavily.

Most borrowers through Earnest have a credit score above 720. The lender also recommends that you have enough savings to cover at least one month of expenses, if not more. You should earn more than you spend while demonstrating bank account balances that increase in funds. Finally, you’ll definitely need a history of on-time payments

Application Process

Earnest does not currently provide a rate check for personal loans, so you do have to go through the entire application process before receiving a loan offer. That also means that a hard check will be performed on your credit report, so expect a small dip in your credit score and a new entry in the Inquiry section of your report.

When you complete the application, you’ll be required to state your loan purpose, education, and employment information. A unique feature of the Earnest process is that you must also grant the lender read-only access of your financial accounts. They use this access to scan your bank accounts and determine your financial patterns, one of the ways they determine how responsible you are with your money.

You’ll also need to enter some personal information that helps verify identity. Another neat feature is that you can actually connect your Linkedin profile to import much of the information required on the application.

Once everything is entered, Earnest then performs a hard credit check through Experian to look at your credit history. From there, it takes up to two business days to receive a response with whether or not you’ve been approved and what your loan terms will be.

Once You’re Approved

If you are approved, you have the opportunity to review the offer and loan terms. If you decide to take the loan, you must accept the terms within seven calendar days by signing an electronic loan agreement. You can then enter your bank account details and the funds will be deposited the next business day. They’ll be available for withdrawal within two days after signing the agreement.

In addition to no fees on originating the loan, Earnest barely charges any other fees during the life of the loan. There are no late payment fees or check processing fees, but you will be charged $8 for an unsuccessful payment. That’s a pretty lenient policy compared to most other lenders.

Special Features

As a borrower with Earnest, you can actually change your autopay amount and payment date any time throughout the life of the loan. Your online dashboard shows you how any changes will affect your future payments so you can decide what is the best option for you. You also have the ability to switch between a fixed rate and a floating rate without having to refinance the loan.

Earnest also provides an iPhone app to help you manage your loan and make payments directly from your smartphone. You have full access to your dashboard and can even adjust your payments or make additional payments on the go.

Earnest’s History

Launched in 2014, Earnest has originated over $500 million in loans. Though they started out focused on refinancing student loans, the lender has since branched into originating student loans as well as personal loans. In a recent batch of student loans, the average borrower had an income of $140,000. Most were from California and attended schools like Harvard University, the University of Southern California, and Columbia University.

Is an Earnest personal loan right for you?

Personal loans from Earnest come with plenty of perks, but how do you know it’s the best choice for you? Here are a few tips to help you find out the answer.

Check your current credit inquiries

Remember that currently, Earnest does not offer any kind of pre-approval process. Most lenders allow you to check your eligibility and rates by just performing a soft pull on your credit report. This doesn’t affect your score, nor is it listed anywhere on your credit report. It’s like it never happened. Unfortunately, Earnest requires that you go through the entire application process — along with a hard pull on your credit report — before even finding out what your available loan rates and terms would be.

Now, this isn’t necessarily a huge deal. One inquiry on your credit report only lowers your score by about 10 points and only stays on there for two years (and the effect on your credit score actually wears off before then). So if this personal loan is the only type of loan you foresee taking out in the next year or two and you know your credit score is solid, then one little inquiry might not make a huge difference.

However, if you pull your credit reports and notice that you already have several accurate inquiries listed on your report from the last two years, you might not want to add another one — especially if your credit score is already borderline.

Know your spending habits

Earnest also requires read-only access into all of your bank accounts so it can see exactly how you spend your money. Even if you meet all of the other borrower requirements, you need to make sure you’re not spending outside of your means in the time leading up to your loan application.

If the company takes the time to put your everyday finances through a complex algorithm, it’s safe to assume that they don’t want to see a negative balance, or more charged on your credit cards than you actually earned. Ideally, your bank account should show a growing balance over time, or perhaps show extra money transferred into savings. As with any loan application, it’s helpful to know your audience before you apply. Even with the highest income, your spending should be in line with how much you earn.

Pay attention to your funding needs

Some online personal lenders boast two-minute approvals and same-day funding. Earnest doesn’t claim to do either of these things and perhaps that’s due to the diligence they perform with their unique underwriting standards.

The lender is upfront about telling borrowers exactly what to expect with the projected funding timeline. It can take up to a week or more, depending on how quick you are on your end. But even if you sign and return all the requested documentation and signatures as fast as possible, it’s still going to take at least a few business days from start to finish before you receive your money.

Make sure your funding needs aren’t a time sensitive emergency because there doesn’t seem to be a way to expedite the process. If you need near-instant approval, then an Earnest loan might not be right for you. On the other hand, with a little time and patience, you might end up getting fantastic rates repaid over a short amount of time.

As with any loan product, it’s important to shop around with several lenders to find the best deal you possibly can. Always be mindful of their approval process and what kind of inquiry they perform on your credit report. If you can’t find the information online, you can always call or email to ask. Most online lenders are eager for your business and quick to respond with any questions you may have. A responsible application process can lead to getting the lowest interest rates so that your personal loan is as inexpensive as possible.