Personal loans are a popular and useful type of loan. One of the biggest factors in their popularity is their flexibility. You can apply for a personal loan for nearly any reason. Whether you need cash from home improvement, debt consolidation, or something else, a personal loan might be able to help.
American Express is best known for its credit cards. Given that experience in lending, it’s no surprise that the company would start to offer personal loans.
Learn everything you should know about American Express’ personal loans if you’re considering it.
American Express Unsecured Personal Loans Pros & Cons
Loan Size and Terms
American Express is flexible when it comes to the size of its loans. You can borrow as little as $ 3,500 or as much as $ 25,000. This means a loan from Amex should be enough to cover most of your needs. If you need a larger amount, this loan won’t do the job as well as other lenders.
American Express offers terms of 12, 24, or 36 months. Which terms you can choose will vary based on the size of your loan and your credit score. Take note that shorter borrowing terms will mean higher monthly payments and lower interest costs. Longer terms lead to lower payments, but higher total costs.
These borrowing terms are rather good for people who need a personal loan for short period of time. Sometimes, you don’t want to sign up for a 3-year or a 5-year loan. On the other side, if you’re seeking a longer borrowing term American Express isn’t a viable option.
When applying for a personal loan, no matter the lender, you should try to strike a balance when choosing the term of the loan. Aim for a monthly payment that you can manage while getting the shortest term possible. This will let you pay as little as possible for the loan without stretching your budget too thin.
Requires Existing Cardmembership for Application
American Express doesn’t post any application requirements because American Express’ application process is unique among loan providers. There is no way to apply for an American Express personal loan without being pre-approved to apply.
What that means is that you won’t be able to apply for a loan unless you’re already an American Express card customer. Additionally, unless you already have good credit, you might not be pre-approved for a loan. This means that this loan might not be the best choice for people with an immediate need for cash. You can’t be waiting to get a preapproval offer when you need money now.
Fees and How Long It Takes to Get the Money
American Express doesn’t nickel and dime its personal loan customers, making most of its profit off the interest you pay. Some lenders charge application fees or origination fees. An origination fee is a fee that is taken out of the amount you borrow and can often be a few percent of the loan.
The only fees charged by American Express are late payment fees and fees for not making a payment in full. The late payment fee is $ 39.
Once you apply for a loan you can get a lending decision in minutes. It may take longer if American Express requires additional information from you. If you’re approved, it takes a few days for the money to arrive in your account.
Apply Without Impacting Your Credit
One of the benefits of the unique structure of American Express’ personal loans is that applying for the loan won’t impact your credit. Because you can only be preapproved for a loan if you’re an existing Amex customer, the company already knows a lot about you. That makes it much easier for American Express to decide whether to offer you a preapproval for a loan.
If you are offered preapproval and decide to apply, it will not generate a credit inquiry on your report. That means that you have nothing to lose by applying. If your application is approved, then the loan will appear on your credit report. In the short term, your score will go down as you take on more debt. Once it is paid off, your score will likely increase beyond what it originally was.
What You Need to Get Approved
Despite the fact that you can only get a loan from American Express if you’re pre-approved, you’ll still need to fill out an application. When you apply for the loan, you’ll do so using the company’s online form. You’ll have to provide a variety of information, including:
- Date of birth
- Proof of identity, such as a driver’s license
- Social Security number
- Annual income
- Proof of income, such as bank statements or pay stubs
- Verification of employment
American Express will use that information, plus what it knows about you as an existing customer, to make a decision.
Though gather the paperwork may sound daunting, it’s important to do. If you don’t submit the proper paperwork it may delay the approval of your loan. In the worst case, you might not get the loan at all. The fewer questions you leave the lender with, the better.
American Express isn’t the only lender offering personal loans. You should certainly take the time to assess your options.
When you are comparing loans, there are a few things to consider.
The first is the interest rate. The higher the interest rate of the loan, the more it will cost in total. Always look for loans that have lower rates. Similarly, look for loans that have low or no fees. Origination or early payment fees can be just as expensive as a higher interest rate. Do the math to determine the total cost of every loan you consider.
Also, make sure that the loan offers a term that you can handle. Some banks specialize in short-term loans while others offer terms of 5 or 6 years.
Finally, read the fine print. Some banks have strict rules surrounding late payments or prepayment of the loan. Know what you’re getting into when you apply for the loan so there aren’t any surprises down the road.
Should You Take Out an America Express Personal Loan?
American Express’ loans are great for people who get preapproved. They are flexible and don’t charge any fees, putting them ahead of the competition. If you aren’t an existing customer or don’t have a preapproval, look elsewhere.
Improve Your Chances of Approval
There are a few things you can do to improve your chances of getting a loan offer from American Express.
Increase Your Credit Score
Their credit score is probably the first thing people think about when they apply for a loan. Credit scores impact all aspects of borrowing, including, eligibility, the amount that can be borrowed, and interest rates.
A credit score is a numerical representation of a person’s financial trustworthiness. The higher someone’s credit score, the more likely they are to pay back the money they borrow. The lower the score, the more likely they are to default.
The best way to improve your credit score is also the slowest way. The single biggest factor in your score is your history of making on-time payments. Going years without missing a payment is how you wind up with an excellent score.
The best quick-fix for a credit score is to remove black marks from your report and to reduce how much you owe.
If you have any accounts that you’re late on paying, try to get them back up to date by paying the bills and any late fees. Also, try to pay down your debts in general. Avoid using a credit card in the month prior to applying for your loan to reduce your utilization ratio (the amount you’ve borrowed compared to your total credit limit). All these tricks will give your score a short-term boost.
Reduce Your Debt-to-Income Ratio
Your debt-to-income ratio is the amount of money that you owe divided by the amount you make per year. The lower this ratio is, the better it is for your odds of getting a loan.
This is important because the amount you can safely borrow is closely tied to the amount of money you make. Someone who makes $ 20,000 a year will have no chance of paying back $ 100,000 in debt in a reasonable amount of time. Someone with the same amount of debt but who makes $ 80,000 could pay it all off in a few years and might be able to handle another loan while still making monthly payments.
You can improve your debt to income ratio in two ways.
One way is to make more money. Whether you find a second job, earn a raise or promotion at work, or find another way to increase your income, your income will increase, reducing the ratio. If you do decide to get a side job, make sure you can provide proof of that income. Otherwise, the lender won’t consider it when calculating your debt-to-income ratio.
The better solution is to try to reduce your existing debt. This can be difficult but has the additional benefit of boosting your credit score. Try making extra payments on your loans or using savings to pay off high-interest debt.