LightStream Personal Loan Review: How You Spend It Matters

LightStream says it will give you a personal loan for “practically anything.”

Of course, that’s true of most personal loans: Once you qualify for a loan at a particular interest rate, you typically can spend the money on anything you want.

LightStream’s twist is that what you buy determines the interest rate you pay. If you have a credit score above 680 and a substantial credit history, LightStream has interest rates tailored for everything from buying a horse to paying for fertility treatments. (LightStream doesn’t offer loans for college tuition or businesses.)

For example, a well-qualified borrower getting LightStream’s best rates on an unsecured, $25,000 three-year loan would pay:

• 1.99% APR on a new car loan
• 4.99% for a home improvement / solar installation / pool loan
• 5.49% for a credit card or debt consolidation loan

Borrowers must agree to use the loan as intended. In return, they get an unsecured personal loan at a lower rate, in some cases for the price of a traditional secured loan.

Secured loans vs. unsecured loans

With a secured loan, the lender has a claim on your property if you don’t pay. For example, your bank holds title to your car until it’s paid off and requires that you buy comprehensive and collision insurance to protect its interest in the vehicle. Home improvement loans typically require you to pledge your house or savings as collateral.

Unsecured loans, on the other hand, are made on your creditworthiness alone. With no collateral, the risk for lenders is bigger, and they charge much higher rates to make up for it.

LightStream turns that business model on its head by requiring good to excellent credit for all its borrowers, then pricing loans by their purpose.

The reason you’re borrowing money is the most important factor used to determine the range of interest rates you would qualify for, says Todd Nelson, LightStream’s director of business development. LightStream recognizes that a loan to pay off existing debt is inherently riskier than, say, one for buying a new car, Nelson says.

For great credit risks, LightStream’s rates on its unsecured loans are competitive with secured loans from major banks. But you’ll need more than just a credit score above 680 to qualify.

LightStream’s top-tier borrowers typically have:

• Several years of credit history
• Varied forms of credit, such as multiple credit cards, mortgages or auto loans
• A retirement savings account
• Few or no payment delinquencies
• Enough income to cover expenses

[Compare LightStream with other personal loan companies.]

What makes LightStream different

Borrowers with great credit often have many low-cost options for a loan. But a LightStream loan might offer advantages in certain instances.

• First, LightStream offers unsecured loans for items that are traditionally financed with a secured loan, usually at a similar interest rate.
• Second, LightStream’s tailored rates may be cheaper than traditional one-rate-fits-all personal loans for some purchases. Another online lender may charge all its best credit risks 7% for a loan, no matter what they are buying.
• Third, the company’s maximum loan amount is $100,000, higher than most online lenders and credit card limits, and it doesn’t charge any origination, prepayment or late fees.

The majority of LightStream borrowers use loans to buy vehicles, remodel their homes or finance medical treatments, Nelson says.

LightStream doesn’t offer flexible loan payments or payment dates, like some other online lenders. But it provides flexible funding times — borrowers can choose to get funded on the same day or wait to accept the loan within 30 days of approval.

LightStream is an arm of SunTrust Bank, but it’s also one of the country’s oldest online lenders. Founded as FirstAgain in 2005, the company was acquired by SunTrust in 2012. Borrowers do not need to be SunTrust customers to receive loans.

Here’s what else you need to know to apply for a LightStream personal loan:

LightStream’s credit standards

• Minimum credit score required: 680
• Minimum gross income required: None
• Minimum credit history: No requirement, but borrowers typically have several years of credit history
• Maximum debt-to-income ratio: None, but generally low

LightStream’s lending terms

• APR range for unsecured loans: 5.49% to 14.49% with autopay (minimum/maximum rate varies based on loan purpose)
• Minimum loan amount: $5,000
• Maximum loan amount: $100,000
• Minimum loan duration:  2 years
• Maximum loan duration: 7 years
• Time to receive funds: Same day, with option of up to 30 days from approval

LightStream’s fees and penalties

• Origination fee: None
• Prepayment fee: None
• Late fees: None
• Personal-check processing fees: 0.5% higher APR for non-autopay payments