Lender review: Discover personal loans

Discover personal loans within the bigger bank

Discover personal loans may be one of the bank’s smaller business lines, but it’s an important and growing one. In terms of loans, it’s less than one-tenth the size of Discover’s card operations. But that still means it has $7 billion worth of current personal loans on its books, according to its 2018 annual report.

For a company that started as recently as 1985, Discover feels as if it’s been around forever. But it’s used to moving fast. It took it just three years from launching its first card nationwide to signing up its millionth merchant. You don’t achieve that by being complacent.

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Competitiveness

The advertised rates for Discover personal loans aren’t all that eye-catching. They range from 6.99% to 24.99% APR. That’s not bad but it’s not as low as some.

Wells Fargo, for instance, advertises rates as low as 5.24%, though that’s available only to existing customers.

However, it can be a mistake to look only at advertised rates. Sometimes, they’re teasers designed to lure unwary borrowers.

The only rate you care about is the one you pay. And you won’t know that just by looking at published rate ranges. You’ll need competitive quotes from multiple lenders to be sure you get a great deal.

Everything you need to know about personal loans

Fixed rates on all Discover personal loans

There’s something unusual about Discover personal loans. They all come with fixed interest rates.

And that delivers a great deal of certainty. You know on day one that your last payment will be exactly the same as your first — and all the ones in between. So you never need to worry about rising interest rates making your monthly payments higher and less affordable.

Now, it’s true that higher rates seem a remote possibility at the time of writing. All the talk is about rates being cut. But financial markets are nothing if not unpredictable. And, especially if you want a longer-term loan, you might well end up benefitting from a fixed rate.

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Origination and other fees

Some lenders charge to set up loans. But you won’t pay anything for Discover personal loans.

Its setup (aka origination) fees are zero. In fact, it promises never to charge you any fees whatsoever — providing you keep making on-time payments.

How long your loan can last

Discover personal loans don’t come with very short terms. The briefest period they last is three years.

However, they can last longer than those offered by many competitors. Choose from 36, 48, 60, 72 or 84 months. You’ll want to pick the number of installments that leaves you debt-free quickest while making each payment comfortably affordable.

How much can you borrow?

Discover will lend you anything between $2,500 and $35,000. And that’s a tighter range than some others.

Many personal loan lenders start at $1,000 and go up to $50,000. Some go way higher: up to $100,000 and beyond. If you want a loan at either extreme, you’ll need a different lender from Discover.

This bank wants you to have a credit score of 660 or better before it will approve you for a personal loan. If yours is lower than that, you’ll again need to look elsewhere.

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How quickly can you get your money?

Like most lenders of personal loans, Discover can move quickly. In an ideal situation, you can complete your application and get approved on one business day and get the funds in your checking account on the next business day.

Of course, if your application throws up queries or is unusual in some respect, it can take longer. And Discover says, “Disbursement of personal loan funds can take up to seven days.”

Any purpose — including debt consolidation

Of course, you can use Discover personal loans to pay for anything. One of the advantages of personal loans generally is that you can use the money you receive for any purpose.

But taking the proceeds for debt consolidation is especially popular. You pay down your credit card balances and higher-interest loans with a single personal loan, meaning you make just one, smaller payment each month.

When Discover commissioned a survey among its personal loan customers, it found that 79% said they’d saved money by using their loan to consolidate debt. On average, they reckoned they’d saved $308 a month by doing so.

If you prefer, you can ask Discover to pay your creditors directly, rather than take the money and pay them yourself.

How to use a personal loan for debt consolidation

Reputation

Discover’s website has a star rating system that’s based on reviews collected by an unbiased third party. It currently gets 4.9 stars out of five.

It received the best personal loans award 2019 from NerdWallet. (Who?)

Discover on Discover personal loans

We asked Discover to tell us what it thought you, the reader, should know about its personal loan offerings. Dan Matysik, Vice President of Personal Loans at Discover, responded:

At Discover Personal Loans, we offer a flexible product from a brand customers know and trust. Our loans have no fees as long as a customer makes their payments on time, multiple repayment terms to choose from, and fixed rates. Customers can use our loan for a variety of purposes like debt consolidation, home improvement and other large expenses. Our customers tell us they have saved money using a Discover personal loan to consolidate debt and we are proud of our high customer satisfaction rating overall.

*TheMortgageReports and/or our partners are currently unable to service the following states - MA, NV