What we like:
|Rates (APR)||2.90% – 15.99%|
|Loan Terms||12 – 36 months|
|Loan Amounts||$3,000 – $25,000|
|Fees||Origination fee: 0.8% – 2.0%|
Prepayment penalty: None
Late fee: $20
Backed Inc. has been in business since 2014. Backed offers personal loans to all sorts of people, but the online lender focuses on borrowers who haven’t established much credit history yet — namely, millennials.
By taking out a Backed personal loan and responsibly handling their payments, borrowers can get a fair APR and build their credit score at the same time.
In this review:
- How to get a Backed Personal Loan
- How Does the Backed Loan Application Process Work?
- Rates, Fees, & Other Basic Information
- Benefits of Backed Loans
- Downsides of Backed Loans
Getting a Backed Loan
If you need a loan, Backed has your back. The lender offers personal loans that can be used for a variety of reasons, including:
- Moving expenses
- Making a large purchase
- Paying off credit card debt
- Career investments
- Debt consolidation
- Professional training
- Home Improvements
Generally, Backed doesn’t care what you do with the money, but they will ask you about the purpose of the loan when you apply.
Backed is flexible when it comes to qualifying for their loans. You don’t have to meet a minimum FICO score requirement to qualify. You also won’t be required to meet a certain annual income requirement, which is helpful to young people who are just starting out their careers.
The only requirements to get a Backed loan are:
- You must be 18 or older.
- You must be a resident in one of the states in which Backed Inc. is established: New York, Florida, New Jersey, Arizona, Arkansas, or West Virginia.
- You must not have any recent blemishes on your credit report.
How Does the Backed Loan Application Process Work?
The first thing you need to do to apply for a Backed personal loan is fill out a quick online form. You’ll have to select the loan amount you’re seeking, the loan term, and the reason you’re seeking a loan. After that, you’ll fill out basic information about yourself, such as your name, birthdate, Social Security number, address, and phone number.
You’ll also set up a password so you can check the progress of your application. You can also choose to give extra information on your loan application form, which will decrease your loan’s origination fee.
You may also receive lower interest rates by adding a backer, who is essentially a cosigner for your loan. Adding a cosigner reduces the risks for Backed, which is why they’ll give you better interest rates for taking that step. But it also means your cosigner is on the hook if you default on your loan payments.
After the form is filled out, Backed will do a soft credit check, which won’t hurt your FICO score.
If you’re given the green light, you’ll need to provide more personal information, such as your last three pay stubs. The final credit decision could be made within three days, but Backed may take up to 30 days to make the decision. Once you’re approved and you submit any additional documents Backed requests, you can have your money in as little as two business days.
Rates, Fees, & Other Basic Information
Backed’s loan terms and fees are fairly straightforward — you shouldn’t find any hidden surprises. You can choose a loan term of one, two, or three years. The loan amount you can borrow ranges from a minimum of $3,000 to a maximum of $25,000.
The annual percentage rate (APR) you’ll receive is dependent upon a number of factors, including your credit score and if you have a backer, but it will range from a low rate of 2.9% to a much higher rate of 15.99%. The more personal information you give Backed about your circumstances, the more likely you are to receive better rates.
With the loan structure Backed uses, you’ll get a lower APR for a longer-term loan. But keep in mind that generally, the longer your term, the more you’ll pay in interest over the life of the loan.
You’ll also have to pay an origination fee for your loan. That amount can range from .8% to 2% of the amount borrowed.
If a payment doesn’t go through because of insufficient funds in your bank account, you’ll be charged $15, and late payments incur a $20 late payment fee.
But if you decide to pay off your loan early, you can do so with no prepayment penalty.
Benefits of Backed Loans
One of the perks of Backed personal loans is the potentially low interest rate. If you have a creditworthy cosigner and you qualify for Backed’s lowest available APR, you’re getting a great loan rate.
Another benefit is that if you don’t make your monthly payment on time, you still have a 15-day grace period before you’ll be charged a late fee or your credit score will be affected.
The final major benefit is for your backer. Although a backer is essentially a cosigner, Backed cosigners enjoy some additional protection.
Traditionally, cosigners won’t find out a borrower is in trouble until they have already defaulted on their loan. By then extra fees and penalties have already stacked up and both the borrower’s and the cosigner’s credit scores have been affected.
But with Backed, the backer will be notified as soon as the payment is late — before the account is in default. That will give them a window of opportunity to make a payment or talk to the borrower before any negative consequences take place.
Downsides of Backed Loans
While this isn’t a deal breaker for most customers, you should be aware that Backed charges a $10 manual processing fee for every payment that is made by check. But if you make your payment through an electronic transfer from your bank account, there is no manual processing fee.
Also, Backed Inc. is a fairly new company. If you don’t live in one of the limited states where Backed is incorporated, you’re out of luck. But that may change as the company grows.
Finally, Backed’s lowest loan rates are only accessible if you or your backer have excellent credit. If you don’t have good credit, Backed may offer you a loan at their highest rate of 15.99% APR. That’s not a great rate, so you should, and there’s a chance you could do better with other loan providers, so always compare quotes from a few of the best personal loan companies.
If you feel you can’t get a better offer anywhere else, try your best to find a creditworthy backer. If you explain to family members that they have more built-in protection as a backer than they would as a traditional cosigner, they might be more apt to support you.
Bottom Line: Is a Backed Personal Loan Right for You?
Backed offers transparency in their lending terms, which is a refreshing change from some online and even brick-and-mortar lenders. You don’t have to be a rocket scientist or play detective to understand their loan terms.
If you can lock into a lower APR, it’s a good deal, especially for borrowers who haven’t established much of a credit history yet. Just be sure you don’t pay by check or the manual processing fee will negate some of the benefits of doing business with Backed.
But if you can’t get approved for a personal loan from Backed Inc., you should also consider other personal loans for bad credit.
Author: Shannon Serpette
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