May 30th, 2013
AvantCredit Review: A Better Alternative to Payday Loans?
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Welcome a new member to the online-only personal loan space! Chicago-based AvantCredit aims its unsecured loans at consumers with credit scores between 620 and 720—a nearly-prime community rarely served by other lenders. Like NetCredit, AvantCredit hopes to bridge the gap between payday loans and traditional personal loans.
Its loans range from $1,000 and $10,000 and are payable over one to three years, depending on the terms you receive.
How it works
AvantCredit services its loans with a completely online process. You fill out an online application, and can receive a “provisional approval” instantly. This means you’re probably approved for the loan, but AvantCredit may require you to fax in additional information, like proof of income.
Once you receive final approval, your loan amount will be deposited into your checking account the next business day. You can make repayments on your AvantCredit loan by setting up automatic Electronic Fund Transfers from your bank account so you don’t have to worry about due dates. And the only fee you’ll pay is the daily simple interest accrued on the remaining unpaid principal of your loan.
It’s important to note that AvantCredit’s loans are only available to residents in a short list of states right now: South Dakota, South Carolina, California, Alabama, Utah, New Mexico, Georgia, Missouri, Wisconsin, Illinois and Virginia. You can see the rates and terms for each state on Avant’s site.
How it could change the industry
AvantCredit loans could be a better alternative to payday loans for consumers who can’t qualify for traditional personal loans. Known for their cyclical and predatory nature, payday loans can have interest rates in the triple digits, since they’re calculated over a year’s time. An AvantCredit loan interest rate varies from 35 percent to 95 percent a year, depending on a borrower’s credit score.
But even so, you can reduce the amount of interest you’ll pay by doubling up your monthly payments and paying off your loan sooner. AvantCredit doesn’t penalize you for paying off your loan early.
What borrowers should look out for
If you’re considering applying for a personal loan with AvantCredit or any other lender, here are a few things to consider:
- The potential interest cost: Do the math, or have Credit Karma do it for you using our personal loan search. For some personal loan offers, you can find out if you’re pre-approved before you apply and initiate a hard inquiry on your credit.
- The project you want to fund: Getting approved for a personal loan means quick access to a chunk of cash. While you might want to fund that home improvement project now, in some cases it might be best to wait until you have the cash. On the other hand, if you’re fixing up your home to put it on the market to sell, a loan with a relatively low interest rate can be a good option.
- The credit impact: A new loan adds new debt to your credit report. If you plan on applying for other types of credit in the near future and can hold off on the personal loan until you do so, that might be the way to go. Use Credit Karma’s Credit Score Simulator to see how a new personal loan could affect your credit.
Bottom Line: AvantCredit is not the first online lender working to serve consumers between payday loans and traditional loans. And it’s easy to see that there will be more hoping to fill the opportunity this space affords.
Bethy Hardeman is the Communications Manager at Credit Karma, where she’s been since February 2011. When she’s not writing about credit and finance all over the web, you can find her playing her guitar, catching the latest movie, training for her next race or just exploring the city of San Francisco. Say “Hi” on Twitter: @bhardeman.
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