MoneyLion is part of a new breed of financial technology (fintech) companies that are changing the way people handle their money and pushing the boundaries of traditional banks. Instead of offering a single product, MoneyLion uses artificial intelligence to help borrowers manage money issues from start to finish. Their financial products include services like MoneyLion Personal Loans, which will be covered in-depth in this article.
MoneyLion is a New York-based lender that was founded in 2014. It uses a proprietary risk assessment model and decision-making algorithms to provide credit products and data-driven recommendations tailored to each borrower’s financial circumstances. It is a “one-stop” shop, so to speak, that allows you to apply for loans, get money management and plan for long-term goals.
This review focuses on MoneyLion’s personal loans but also looks into the pros and cons of its other financial products.
Who are MoneyLion’s personal loans designed for?
MoneyLion targets borrowers with a credit score of 640 to 750, which represents about 40% of borrowers (source). However, borrowers who don’t meet MoneyLion’s eligibility criteria may be offered a LionLoans loan, which has a much higher interest rate.
Borrowers with a higher credit can certainly apply, but they may be able to get a better rate from lenders who target borrowers with excellent credit scores, such as SoFi and LightStream.
How do MoneyLion’s personal loans work?
MoneyLion provides loan amounts ranging from $1,000 to $35,000, with a maximum term of 36 months. The online application only takes a few minutes to fill in, and it won’t hurt your credit score to check your rate. Want to know what personal information you need provides to get a quote? Read below for a step-by-step analysis of MoneyLion’s application form.
If your application is approved, you can expect funds to arrive in your account within one to seven days.
What are MoneyLions interest rates and fees?
MoneyLion has a two-tier loan system. Its prime loans range from 7% to 30% annual percentage rate (APR). However, borrowers who don’t meet the eligibility criteria of MoneyLion’s prime loans may be offered a LionLoans loan with rates as high as 200%.
Borrowers can earn lower rates over time by making on-time payments and receiving endorsements from friends and family. An endorsement does not include any financial responsibility; it’s a show of support that you think your friend is trustworthy. The more endorsements borrowers receive, the lower their rate. For example, borrowers with five to nine endorsements receive a 2.5% rate reduction on all future loans. Borrowers with 30 or more endorsements receive a 15% reduction.
MoneyLion charges a 2% to 6% origination fee for its loan. Keep this in mind when deciding how much you need to borrow, because the origination fee is deducted from the loan amount. For example, if you borrow $10,000 and have a 5% origination fee, MoneyLion deducts $500 from your loan amount and deposits $9,500 in your account.
There are no prepayment penalty fees, so you can save money in interest payments by repaying your loan early. There is a $25 fee for borrowers who make their payments late.
What do you need to qualify for a MoneyLion loan?
To qualify for the lower interest rates (7% to 30% APR) applicants must:
- Have a credit score of at least 640 and a minimum annual income of $36,000.
- Have a checking account.
- Be a U.S. citizen or a permanent resident.
- Have a debt-to-income ratio of less than 40%.
- Borrowers who don’t meet those requirements may qualify for a LionLoans loan, which has interest rates of up to 200% APR.
What is MoneyLion’s loan application process like?
MoneyLion’s application form takes a few minutes to complete, and you usually get an approval decision within 24 hours. Here are screenshots of the application form, so you know what to expect.
Step 1: Provide the loan amount, the purpose of the loan, your full name, address, date of birth and Social Security number.
Step 2: Tell MoneyLion about your work history, annual income, whether you rent or own your home, and create a password.
Step 3: Provide the details of the bank where you want the money deposited.
Checking your rate at MoneyLion does not hurt your credit score. Even if you’re not approved for the loan you want, you can still benefit from the free financial tools that come with membership.
What other products does MoneyLion offer?
MoneyLion offers four services: money and wealth management, free credit monitoring, loans and other credit products, and data-driven financial recommendations.
The money and wealth management services work like other popular budget apps, such as Mint. However, along with tracking and categorizing your spending, MoneyLion helps you make long-term goals and alerts you when you’re spending more than normal.
Credit reporting is offered through a partnership with TransUnion. Users receive free access to their TransUnion credit report and score. Members can also use a credit simulator that allows them to estimate the affect potential financial decisions would have on your credit score.
MoneyLion as an alternative to banks
MoneyLion is positioning itself as an alternative to traditional banks, which makes sense when only 27% of Americans have confidence in the banking institution. Compare that to 1985, when 51% of Americans expressed confidence in banks (source).
MoneyLion offers services and products you wouldn’t expect from a lender, such as financial advice, credit score reports, money management apps and access to investment products. By increasing the range of products it offers to customers, MoneyLion is tackling one of the biggest challenges for personal lenders: the acquisition cost of new customers. Lower marketing costs are good news for borrowers because it translates into lower rates and more forgiving credit eligibility requirements.
To illustrate, in 2016, LendingClub – the largest lending marketplace in the world – spent $67.0 million in sales and marketing in 2016, but finished the year with a net loss of $83.0 million (source). OnDeck, the online platform for small-business lending financed by Google Ventures, invested $67 million in sales and marketing and ended 2016 with an $83-million net loss (source). As you can see in the graph below, acquisition costs have increased significantly since 2014.
The problem for lending platforms is that a lot of the money they invest in marketing only helps them acquire customers for one transaction. MoneyLion, on the other hand, uses the data it gathers from the bank accounts of borrowers to recommend relevant products and services, which opens additional sources of revenue.
How does MoneyLion compare with other lenders?
MoneyLion does not offer the lowest rates, longest terms or largest loan amounts, but it offers competitive rates to borrowers with credit scores from 640 to 750. Borrowers with a lower credit score can still apply, but the interest rates get expensive.
Here are the main pros and cons of MoneyLion loans:
Compare the pros and cons to make a better decision.
- Interest rates range from 7% to 30% APR for prime borrowers
- Loan amounts from $1,000 to $35,000
- Loan terms of up to three years
- Provides free TransUnion credit reports and scores
- No prepayment penalties
- Reports payments to TransUnion
- Provides free money management app and data-driven financial advice
- Interest rates of up to 200% APR for borrowers with poor credit
- Origination fee of 2% to 6%
- Requires regular income, a checking account and a credit score of 640
- Not available in all states
- $25 late payment fee
Checking your rate with MoneyLion does not hurt your credit score, so there’s no downside for seeing what rate you can get. Even if you do not need a personal loan, the free credit reports and money management apps are worth signing up for.
Curious how MoneyLion’s rates compare with other lenders you qualify for? Get lenders to compete for your business and see which one offers the lowest rates and best terms by clicking on the link below. It won’t hurt your credit score, and you’ll see how much money you can borrow and what your monthly payments would be in a matter of minutes.