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The online lending marketplace continues to attract new entrants. One of the newest personal loan providers is Pave, which offers personal loans with a unique underwriting process. Here's what you need to know before you apply for a Pave loan.
What is Pave?
When Pave launched in 2013, it targeted college students and young professionals with affordable personal loans to pursue an education. When it began, Pave was a platform that matched backers (or investors) with prospects (borrowers). Backers, who were more experienced professionals, could invest money upfront in prospects, who would then owe backers a percentage of their annual income for 10 years.
Today, Pave is a loan servicer that underwrites loans that are originated by Cross River Bank.
Pave still focuses on young professionals and college students, although it doesn't restrict who can borrow money and what the money can be used for.
Pave Loan Program Overview
Of course, you want to know the essentials of what you get with a Pave personal loan:
- Loan amounts range from $3,000 to $25,000
- APR of 6.00% to 16.00%
- Origination fee of 1% - 6% of the loan amount
- Loan term of 2 to 3 years
- No prepayment penalty or fees
- Minimum credit score of 660
A Pave loan is a fixed rate installment loan. This means that from the day you are funded you will know your payment schedule for the term of the loan. Each payment amount will be an equal amount - and your principal balance will amortize over the term of your loan. This is quite an advantage over the variable rate APR offered by credit card debt.
Pave considers many factors when underwriting loans. These factors include your employment history, education, and cash flow.
Why Pave is Different
As more lenders are attracted to the personal loan space, they will need to differentiate themselves. And this is good news for consumers. Because these online lenders will need to offer better rates or other terms, go after a wider range of credit scores, or come up with some other way to distinguish themselves from the competition.
While Pave is similar to many online lenders that target millennials, Pave puts a special emphasis on future earning potential. Even thought there are no restriction on how you can use your finds, Pave focuses on borrowers who are using the loan for self-improvement and employment purposes.
The bottom line is that Pave customizes interest rates based on what the applicant wants to do with the loan.
Some examples of how these underwriting can impact your loan terms are:
- If a borrower is using the money to complete an education, Pave considers information about the specific course and the borrower to estimate how the course will impact the borrower's earnings after graduation.
- A borrower with greater earning potential can qualify for a lower interest rate than someone who is borrowing money to pay down debt or buy a car.
- Borrowers who are using their loan for self-improvement like an education can also qualify for deferred payments for the first three months.
Will You Qualify for a Pave Loan?
While your credit does matter when you apply for a Pave personal loan, it isn't the only factor.
Pave does require a minimum credit score of 660 to get approved and they use Vantage and FICO scores. The applicant's credit score is then used as a baseline before considering other factors.
Pave calls its underwriting process "holistic," which means it considers not only the applicant's credit history but also current employment, work history, education, future earnings potential, and how the money will be used. If an applicant is using the money for an education, Pave considers the school's graduation rate and how likely graduates of the specific program or school are to be employed. For this reason, there are no specific debt-to-income ratios or income requirements.
Is Pave the Right Choice for You?
It can be hard to find the right lender when the marketplace is so saturated. Pave's unique approach to underwriting makes it a good choice for people who want a loan for education, employment opportunities, or to increase their earning potential.
If this doesn't describe you, these lenders may be a better option. You can also read our more in-depth comparison of personal loan offerings.
Pave vs. SoFi Personal Loans
SoFi has been a leading student loan provider for years and it branched into personal loans in 2015.
SoFi offers loans of $5,000 to $100,000 -- far greater than Pave's maximum of $25,000 -- with no origination fees. Pave, meanwhile, has an origination fee of 1-6% of the loan amount, depending on how the money will be used.
SoFi offers both variable and fixed rate loans with fixed rate personal loans starting at 5.50%, which is more competitive than Pave. SoFi also offers more flexible terms as you can choose between 3, 5, and 7 year loans all with low late payments.
SoFi is our recommended lender for its low rates and flexible terms but you need excellent credit to qualify. You can read our review of SoFi here.
Pave vs. Payoff Personal Loans
Payoff is a relatively new lender that specializes in personal loans to pay off high-interest credit card debt.
Whereas Pave loans are designed for self-improvement, education, and employment opportunities, Payoff offers credit card refinance loans that can save you money on interest.
Both companies offer similar terms: fixed rate loans starting at 6% with the ability to borrow between $5,000 and $25,000. Payoff does have an orogination fee of 2-5%, however, and stricter credit requirements. If your credit history isn't up to par with Payoff's standards, Pave is a good alternative.
To learn more about Payoff, you can read our review.
The Bottom Line
While Pave offers fairly competitive rates for borrowers with limited credit history, there are more flexible lenders out there in terms of late payments. If you have excellent credit, you can probably find a lender who will offer a better APR than 6.5% or more.
Pave is best for people who are working on improving their situation as the lender focuses on young borrowers who want money to pay down debt, pay for relocating for a new job, or want to pay for an education.