Intro to Personal Loans with Best Egg
Intro to Personal Loans with Victoria and Bobby from Best Egg
On this episode of Financially Naked: Stories from The Financial Gym, our host is Victoria Sechrist, and she is joined by Bobby Ritterbeck from Best Egg, and they are going to talk about personal loans.
Podcast Notes
Bobby is the General Manager of Personal Loans at Best Egg. He leads the cross functional effort for the direction of the product, and he works with their insights team to figure out the customer need.
P and L means profit and loss. They want to make sure they are focused on their customers’ needs and making a profit.
A personal loan is a lump sum loan that you pay back over time. The most typical loan is paid back in three to five years.
The loan is not secured by collateral and it gives you a fixed term. It gives people a path to pay down debt in a specific amount per month and a specific period of time. If you don’t make your personal loan payment, there is nothing that Best Egg will seize.
If you have $20,000 of credit card debt at 25% interest, you could potentially get a personal loan with lower interest. This is one of the most common personal loan uses for Financial Gym clients and for Best Egg customers. The second most common use for personal loans is for home improvements.
For personal loans, once the customer has agreed on a loan, Best Egg will deposit the funds in their bank account. For credit card refinancing, Best Egg will facilitate the payoff of the credit cards and other debt. This way customers aren’t tempted by a lump sum in their account.
Interest rates can vary from 5.99% to 29.99%. Best Egg looks at your credit history and your ability to pay the loan to assign an interest rate. Typically, people who have very prime to super prime credit (740 - 760) will be the ones most likely to get a lower rate, but it depends on their ability to pay.
There is a lot of variety with personal loans in terms of fees. The best way to evaluate a loan choice is by looking at the APR, Annual Percentage Rate, because that is the “all in” cost of the credit.
The origination fee for Best Egg is .99%-5.99%. If you are looking to get a $10,000 personal loan, there is the interest rate and the origination fee, and the APR is the combination of the two which shows what you will pay on an annual basis.
Deciding to pay an origination fee depends on the type of customer you are. If you are going to pay off the loan in four months, a no-fee loan may be a better fit for you, even though the interest rate is a little higher.
If you apply for $10,000 and the origination fee is 1%, the fee is typically deducted from the loan proceeds. At Best Egg, they have something called top up. Customers have the option to top up the loan to include the origination fee. Approximately 50% of customers choose this option.
Best Egg doesn’t have a pre-payment penalty, which means you can pay the loan off early with no penalty. There are no “gotcha’s” in this process. Pre-payment penalties used to be common in the mortgage and home equity space.
If a customer wants to take out a personal loan for their wedding and they want to refinance credit cards, Bobby recommends one loan, so they only have one payment. It is okay to use this as a hybrid and most people use the loan for more than one thing.
Figure out how much you need before you apply for the loan and not the maximum. You may get a better price for a lower amount.
If a customer loses their job after they take out a loan, Best Egg will work with that customer. They also have programs for customers that are in difficult situations that last longer than a month or two.
Customers should reach out to Best Egg and talk to them about their situation. Best Egg has a lot of options to offer. Most creditors are willing to work with their customers and come up with a plan.
You can find out your loan options without it affecting your credit score, because it is a soft inquiry. There is no risk involved. Once you are qualified and you proceed to take the loan, it then becomes a hard inquiry.
Best Egg tries to automate the process as much as possible. If you apply early in the morning and all of the steps are completed, it is possible the money could be deposited that same day. When they quote the loan, they usually say next day. Sometimes confirming income or employment will take a little time.
Random Three Questions
If this was your last night on earth, what would be your final meal?
When the borders reopen, if you could travel anywhere, where would you go?
If you got a million dollars tomorrow, what are three things you would do with it?
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