FreedomPlus is an online lender that rewards borrowers for consolidating debt.
The company offers borrowers an option to pay off creditors directly — a feature that few other online lenders offer — and reduces the interest rate by 1% to 3% for those who choose the option, says Joseph Toms, president and chief investment officer of the San Mateo, California, company.
Personal loans typically don’t require the borrower to use the money for a specific purpose, and those who borrow to consolidate debt may not stick to their goal. FreedomPlus customers don’t have to use the direct-payment option when consolidating their debts, but Toms says the interest-rate incentive makes them more likely to do so, improving their chances of success.
Discover offers a direct-payment option for its debt consolidation loans but does not reduce the interest rate. Payoff, which makes only credit card consolidation loans, does not directly pay creditors.
FreedomPlus, founded in 2014, is the lending arm of Freedom Financial Network. It offers personal loans for any purpose, although most borrowers take out debt consolidation loans, the company says.
FreedomPlus at a glance
To review FreedomPlus, NerdWallet collected more than 30 data points from the lender, interviewed company executives, completed the online loan application process with sample data, and compared the lender with others that seek the same customer or offer a similar product.
FreedomPlus is a good fit for those who:
- Have a credit score between 700 and 740, the average credit score of a FreedomPlus borrower.
- Have an annual income of at least $25,000 and, ideally, a low debt-to-income ratio of around 20%.
- Like a human touch. Though it’s an online lender, the company sticks to an old-school tradition: Every applicant seeking a personal loan has to talk to a loan “consultant” before being approved. In some cases, borrowers may get more favorable loan terms after a phone call than they would through the online application.
- Have a co-signer with good credit: The company encourages co-applicants and rewards borrowers who have one with a lower interest rate. Forty percent of FreedomPlus customers have co-applicants, Toms says.
How to apply for a FreedomPlus loan
Fill out an application on the FreedomPlus website. You’ll have to provide basic information about yourself, such as your income and Social Security number, to pre-qualify for a loan:
FreedomPlus conducts a soft pull on your credit profile, which won’t affect your credit score. The lender checks credit bureau Experian for your credit report. (It also reports loan payments to Experian.) You’ll see whether you qualified for a loan:
If you qualify, you’ll create an account and provide more-detailed information about your finances:
At this point, you can lower your rate in two ways: add a co-signer or — if you’re borrowing to consolidate debt — pay off your creditors directly:
Depending on your credit profile, you’ll see one or more loan options. When you select the loan you want, a FreedomPlus loan consultant will call you on a working day to finalize the approval. You can also schedule the call according to your convenience:
You will have to provide documents to verify your identity and bank account, which you can upload to the company through a secure link. Borrowers can choose their payment date within a monthly window and call the company to change the date at any time during the loan term:
Minimum requirements for a FreedomPlus loan
- Minimum credit score required: 640, but borrowers’ average score is more than 700.
- Minimum gross income required: $25,000, but typically much higher.
- Minimum credit history: Several years.
- Maximum debt-to-income ratio: 45% excluding mortgage, but borrowers’ average is 20%.
FreedomPlus lending terms
- APR: 7.93% to 29.9%. As of June 2016, FreedomPlus data show the average rates for borrowers in each credit score tier are:
Excellent (720 to 850): 15.19%
Good (690 to 719): 21.7%
Average (630 to 689): 23.62% - Minimum loan amount: $5,000.
- Maximum loan amount: $35,000.
- Minimum loan duration: 2 years.
- Maximum loan duration: 5 years.
- Time to receive funds: Three days, with approval in one day.
FreedomPlus fees and penalties
- Origination fee: 1.38% to 5%.
- Prepayment fee: None.
- Late fee: Greater of $15 or 5% of amount due.
- Personal-check processing fee: $15.
- Other fees: $15 for unsuccessful payment.
Before you take a personal loan
Consider other debt consolidation options. There may be other answers besides an unsecured personal loan. Someone with great credit might be able to find a 0% credit card promotional offer. Someone who owns a home might be able to get a home equity line of credit. And you’ll still want to compare other lenders. (See “Personal Loans for Debt Consolidation.”)
Check your credit and know your financial strengths. Loan approval and interest rates depend on your credit score, but also on the length of your credit history, your income and other debts you might carry. A high credit score may be negated by high debt level, for example, or a low score bolstered by a high income.
Learn how personal loans work. You’ll need to give lenders certain personal information to verify your identity and check your credit, and you’ll need to document your income as well.
Calculate payment scenarios. Run the numbers on different amounts at different rates; consider how the payments might affect your monthly budget.
Have a plan for getting out of debt. Personal loans may help you consolidate debt, but in the long run you’ll need a budget that allows you to live off what you earn and put something away for emergencies and opportunities.
Amrita Jayakumar is a staff writer at NerdWallet, a personal finance website. Email: ajayakumar@nerdwallet.com. Twitter: @ajbombay
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