What are unconventional personal loans?

If you tried to borrow money at a reasonable interest rate from a traditional lender, but were turned down due to credit, income, or employment history limited, the latest generation of personal lenders may be able to help. These so-called “unconventional personal loans” could be your best chance for a good interest rate and unique benefits.

What is an unconventional personal loan?

Like a traditional personal loan, an unconventional personal loan allows you to borrow a fixed amount of money from a lender. You will be required to repay the loan, plus accrued interest charges, within an agreed time frame. Borrowed funds can be used for future purchases, such as car repairs or medical bills.

Unconventional personal loans, however, differ in two main ways: Money is borrowed from non-traditional lenders, such as market lenders, who focus on unconventional factors to assess the loan applicant. Therefore, you could get approved for financing even if you wouldn’t qualify at a traditional bank.

How do personal loan approvals generally 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 will also share the APR and loan terms they can offer if you qualify for financing.

If you choose to go ahead with the application, lenders do a “firm extraction” of your credit history and may ask you for additional documents to make a final decision.

Unconventional personal lenders also assess your creditworthiness and DTI, but they may weigh these factors differently. They may also approve you based on factors such as your career or college degree.

Unique personal lenders

Before, LendingPoint and Upstart are examples of online lenders that offer personal loans to borrowers without strong credit. Remember that everyone has their own eligibility requirements and underwriting criteria. Here are some key details about their unconventional personal loan options.

Lender Minimum credit score
APR Term Maximum loan amount
Before 580 FICO and 550 Vantage 9.95% to 35.99% 2 to 5 years $35,000
LendingPoint 590 9.99% to 35.99% 2 to 5 years $25,000
Reached No minimum credit score requirement 5.35% to 35.99% 3 or 5 years $50,000

If you seem like a “preferred future borrower,” you have a good chance of getting an unsecured personal loan from one of these lenders. To find the best rates on personal loans, be sure to shop around.


Avant offers unsecured loans ranging from $2,000 to $35,000, and you can choose terms as short as 24 months to save a lot of interest. Loan proceeds are typically distributed the next business day after approval, and you can easily manage your loan through the user-friendly mobile app. Best of all, there’s no prepayment penalty if you choose to prepay the loan.

There is a downside to consider – the lender charges an administration fee of up to 4.75%, which you need to factor into your budget before accepting a loan offer.

You can also get a secured personal loan through Avant. Loan amounts range between $5,000 and $35,000, and you’ll need some form of collateral, like your car, to be approved. Since this loan option is secured by collateral, the administration fee is only 2.5%. You may qualify for a lower APR with secured than with an unsecured loan.


LendingPoint specifically caters to borrowers considered “near-preferred”. The lender leverages technology that goes beyond credit scores to assess personal loan applicants and tailor the most ideal loan solutions.

Loan amounts range from $2,000 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 incur set-up fees of up to 6%.


Upstart lends from $1,000 to $50,000 and offers “fair and fast personal loans.” In fact, it offers 10% lower rates than traditional lenders.

It’s also a great lender to build credit with because it takes into account more than just your score for approval. Upstart also considers your education, field of study, and work history when evaluating your application. If you are not yet working but have a job offer, this lender may still consider you.

Upstart specializes in rapid financing; he claims that 99% of his personal loans are disbursed just one day after approval.

Advantages of an unconventional personal loan

Some online lenders allow borrowers to obtain personal loans at reasonable rates without collateral when they cannot be approved by a bank. These companies keep rates low through their online-only presence and thorough underwriting processes that eliminate fraud and risky borrowers.

Another benefit is transparent pricing, with fixed interest rates and no hidden fees. For example, LendingPoint clearly states that it charges an origination fee of 0% to 6% of the amount borrowed, depending on your state.

Lenders who fund unconventional personal loans target borrowers with a thin credit history, which removes a typical obstacle to approval. Getting approved for an unconventional personal loan can also help you build your credit rating and background, as these lenders report your loan activity to the credit bureaus they work with. These regular updates from the credit bureaus allow you to establish your credit history and payment history. Some lenders report to all three main offices, while others report to one or two.

Disadvantages of an unconventional personal loan

Although you are more likely to be approved for an unconventional personal loan with one of these lenders, your APR could be higher than if you had worked on improving your credit before applying for a loan.

Additionally, the type of borrowers that traditional banks typically reject may not qualify for the best rates advertised by online lenders. For example, although the minimum APR offered by LendingPoint is 7.99%, the APR for your loan is based on your specific credit, income and DTI situation, which means that you are not insured. get the lowest APR. You could pay up to 35.99% APR.

Perhaps the biggest downside is that many unconventional personal lenders operate entirely online, which means you’ll have to conduct all of your business via email or phone. Some people prefer to get help in person, and having a relationship with a local bank can also improve your chances of getting a good interest rate.

Credit score requirements

Even though some online lenders target borrowers who might not qualify with traditional lenders, unconventional lenders still have credit requirements that you will need to meet.

For unconventional personal loans, you’ll likely 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.”

Some lenders may consider first-time borrowers (i.e., those without a credit score) on a case-by-case basis. Unconventional factors, like your areas of study in college or your work history, can help you get approved, but traditional factors, like a credit score, still matter.

Alternatives to the personal loan

A personal loan is not the only way to access cash. If you have fair credit, you could also:

  • Apply with a co-signer. Leverage the creditworthiness of a co-signer who has a solid score and regular income. When a cosigner agrees to be responsible for payments in the event of a default, it presents a lower risk for lenders to lend you money.
  • Get a secure credit card. A secured card requires you to provide a cash deposit which you will use as available credit on your credit card. It’s a useful way to build credit while having the convenience of a cashless payment method. This alternative, however, is less useful if you are looking for a new loan greater than the amount you can deposit on a secured credit card.
  • Become an authorized user. If you just need access to credit and aren’t ready to sign up for a card on your own, you can request to be an authorized user on someone else’s card account. Some creditors report authorized users’ credit data to the credit bureaus.
  • Use the equity in your home. Homeowners can borrow against the equity in their home through a home equity loan. Home equity is the market value of your home minus what you owe on it. It offers a fixed loan amount at a fixed interest rate. However, make sure you can repay the loan; otherwise, the bank may seize your property.
  • Increase your credit score. If your need for a personal loan is not urgent, one way to obtain competitive loan terms is to improve your credit score. Build your FICO score to at least 670 – what FICO considers “good” – to expand your personal loan options.

At the end of the line

An unconventional loan could be a viable option if you can’t get 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 collateral.

However, these loan products have drawbacks to consider. Depending on your financial situation, you may find it makes more sense to look for other alternatives if you need cash fast.

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