Karrot an online personal loan service owned by Kabbage, an Atlanta-based startup that raised more than $300 million. Kabbage used this funding to to create a loan platform for small, online businesses. Launched in September 2014, Karrot is the company’s first service for consumers.
Karrot loans can be used for almost any purpose. But, it turns out about 65% of Karrot borrowers are interested in debt consolidation and 12% want to fund a new business or make home improvements.
Not sure if Karrot is the right loan provider for you? Here’s what you need to know.
Karrot Loan Program Overview
Karrot primary targets prime consumers and up. This is reflected in the minimum credit score requirement and other loan program terms:
Borrow up to $35,000
6.44% to 29.27% APR
Origination fees range from 1.05% to 4.75%
Terms of 36 months or 60 months
660 minimum credit score
Rate request will not impact your credit score
Like a lot of online lenders, Karrot loans include an origination fee that is deducted from your loan.
Karrot’s origination fee is comparable to what is charged by other lenders.
Karrot also has the following fees:
Late payment fee of $15
Unsuccessful payment fee of $15
Check processing fee of $15
Document request fee of $15
Want to learn more about Karrot’s origination fee? Check out their video.
So, if you are ever going to need to pay by check, or request copies of your loan documents, be prepared to feel nickled and dimed.
What Makes Karrot Different
Karrot takes its own approach to underwriting that makes it a bit different from other personal loan providers. Karrot considers many factors to determine if applicants will be approved, including the number of credit cards an applicant has and any outstanding liens on property.
Karrot also does something different than most lenders: it requires borrowers provide bank account numbers and online login information to verify income by analyzing deposits.
Karrot itself does not access consumers’ accounts or store the information; this is done through a service called Yodlee.
While this is a more invasive step than most lenders use, Karrot will use the information to schedule automatic loan payments at the best possible time for consumers.
Do You Qualify?
Karrot does not advertise its loan qualification standards, although you will need a credit score of at least 660 to be approved. Karrot targets prime and up borrowers with excellent credit and a good payment history.
Karrot assigns each loan a grade with a corresponding interest rate. While the lender considers many factors, the final interest rate you receive will be determined by your credit history. Every loan gets a rating from A-1 to G-5.
As an example, an A-1 rated loan will get an interest rate of 5.73%, or a 6.44% APR on a 36-month loan and a 6.94% on a 60-month loan. A G-5 loan will get an interest rate of 25.56%, which comes out to 29.27% APR for a 36-month loan or 28.04% on a 60-month loan. The origination fee you will pay depends on the loan term and it will come out of the upfront loan amount.
Toggle to Display All Karrot Loan Grades
Is Karrot the Right Choice for You?
Karrot has a unique approach to lending by verifying income information through your bank account.
Still, its interest rates are fairly high and you probably won’t get a good rate if your credit is not up to par.
So, after you check your interest rate with Karrot, and before formally applying, you may want to check out alternatives lenders.
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