Rocket Loans markets itself as a fast and convenient way to get a personal loan. I took an in-depth look at what they offer to help you decide if their loans are the right option for you.
Rocket Loans is an online lender owned by Rocket Companies, which also owns Quicken Loans and several other fintech brands. They promote their loans as a fast funding option with transparent fees.
In this article, I will provide an overview of Rocket Loans, outline the pros and cons of using them for a personal loan, and offer additional guidance on what to consider before borrowing.
Key Takeaways:
- Rocket Loans offers personal loans from $2,000 to $45,000 with APRs from 9.116% to 29.99% and terms of 3 or 5 years.
- They advertise fast funding, usually within one business day of approval, along with no hidden fees.
- Potential downsides are high interest rates, origination fees up to 9%, and availability in only certain states.
- Carefully compare options before deciding if their loans are right for your situation. Consider alternatives like credit cards or other lenders.
Rocket Loans Personal Loan Overview
Rocket Loans provides unsecured personal installment loans from $2,000 up to $45,000. You can use the money for almost any legal purpose, like consolidating debt, financing home improvements, covering medical bills, or funding a major purchase.
Loan Amounts
Their minimum loan amount is $2,000. The maximum you can borrow is $45,000.
Interest Rates
Your interest rate with Rocket Loans will range from 9.116% and 29.99% APR. The rate you receive depends on factors like your income, credit score, and existing debt obligations.
People with excellent credit scores can potentially qualify for APRs on the lower end of their range. But borrowers with bad credit should expect rates at the higher end or possibly not qualify at all.
Loan Terms
Rocket Loans offers terms of 3 or 5 years (36 or 60 monthly payments). Longer terms mean lower monthly payments but higher total interest costs over the life of the loan.
Origination Fees
There is an origination fee capped at 9% on Rocket Loans. This one-time fee is deducted from the approved loan amount before you receive your funds. So if you borrow $10,000, as much as $900 would be taken out upfront to pay this fee.
Rocket Loans Pros
Here are some potential advantages of getting a personal loan with Rocket Loans:
Fast Funding
Rocket Loans promotes quick funding as one of its biggest differentiators.
You can complete the entire application process online, including uploading documentation and e-signing loan documents.
- If approved, most borrowers receive the loan funds deposited in their bank account within one business day. For comparison, funding can take a week or longer with some other lenders.
The speed and convenience make Rocket Loans stand out. It’s an excellent option if you need money quickly for pressing financial needs.
Transparent Fees
Some lenders bury origination fees and other charges in the fine print. By contrast, Rocket Loans advertises “no hidden fees” upfront.
The interest rate and origination fee should be clear before you complete the application. You won’t suddenly get hit with extra surprise charges at closing.
Transparency about pricing is always good for consumers.
Flexible Borrowing Limits
Rocket Loans offers borrowers reasonable flexibility on loan sizes. Whether you need something small like $5,000 or a more substantial amount up to $45,000, they can accommodate a wide range of needs.
Having customizable loan amounts and terms lets borrowers take out an affordable personal loan suited to their situation. You can borrow just what you require – no more and no less.
No Early Repayment Fees
Some personal loan companies penalize borrowers who repay early with extra fees. But Rocket Loans allows you to pay off your balance early with no prepayment penalties.
This policy provides peace of mind in case your financial situation improves allowing you to pay the loan off faster. Additional principal payments can save significant money by reducing your total interest costs.
Rocket Loans Cons
While Rocket Loans has advantages like speed and flexibility, there are also some potential drawbacks to consider:
High Interest Rates
The biggest downside is the possibility of a very high interest rate compared to alternatives. While each applicant’s rate differs based on credit, some borrowers will end up near that upper limit of 29.99% APR.
- That’s considerably higher than rates from banks or credit unions, which often fall below 10% APR for borrowers with good credit.
- Online lenders sometimes offer rates competitive with Rocket Loans, occasionally even lower for the most creditworthy borrowers.
The high interest costs substantially increase your total repayment amount. Other lenders may provide cheaper financing options.
Large Origination Fee
In addition to high ongoing interest charges, the up to 9% origination fee is another major expense. In dollar terms, that could mean paying $900+ just to secure a $10,000 personal loan.
Not all lenders charge origination fees, and ones that do typically have smaller charges around 1-5% of the loan value. Paying so much in fees at closing adds to the overall borrowing expenses.
Limited Loan Amounts
While Rocket Loans’ maximum of $45,000 gives reasonable flexibility, borrowers needing larger loans won’t qualify. For instance, you may require $80,000 or more to consolidate substantial credit card balances or pay off student loans.
In cases where you need more funding, Rocket likely won’t satisfy your requirements. And even at the top end of $45,000, you would pay over $4,000 in origination fees to borrow that amount.
Not Nationwide
A final limitation is Rocket Loans currently operates in just 16 states. That makes them unavailable for many borrowers, depending on where you live.
Be sure to check if they provide personal loans in your state before applying. Otherwise, look at alternatives that offer nationwide lending if Rocket Loans isn’t available in your area.
What to Consider Before Borrowing
While Rocket Loans provides a fast and legitimate option for personal loans, borrowing requires careful consideration for a few important reasons:
1. You May Find Lower Rates Elsewhere
- Rocket Loans’ interest rates can become exceptionally high for borrowers with less-than-perfect credit.
- Traditional banks or credit unions may offer considerably lower rates, particularly for those with good credit histories.
2. Consider Alternatives First
Before committing to Rocket Loans, explore more cost-effective solutions such as:
- 0% APR Credit Cards: These can provide interest-free financing for a limited time.
- Borrowing from a 401(k): This may result in lower interest, and repayments go back into your retirement account.
- Family or Friends: In some cases, borrowing from trusted loved ones may save on interest altogether.
3. Don’t Borrow More Than You Need
It’s tempting to take out a larger loan than required when approved for more. However:
- Paying interest on unnecessary borrowed funds can lead to a heavier financial burden.
- Borrow only the exact amount needed to manage expenses wisely.
Final Verdict
Evaluate all options thoroughly and resist borrowing unless absolutely necessary. If a personal loan is the best solution:
- Compare quotes from Rocket Loans and other reputable lenders.
- Review interest rates, fees, and loan terms carefully to make an informed decision.
Alternatives to Consider
Here are some additional financing options you may want to explore before choosing Rocket Loans:
1. Banks and Credit Unions
- Rates: Competitive, ranging between 6% to 12% for multi-year loans.
- Advantage: Local banks may prioritize your existing relationship over your credit score when making approval decisions.
- Example: Credit unions often provide lower interest rates for members.
2. Online Lenders
- Companies like LendingClub, Prosper, BestEgg, and LightStream offer online personal loans with competitive rates.
- Advantage: These lenders can often rival traditional financial institutions, particularly for applicants with strong credit scores.
3. 401(k) Loans
- If allowed by your retirement plan, borrowing from your 401(k) offers interest rates typically under 10%.
- Key Benefit: Repayments go back into your account rather than to an external lender.
- Limitations:
- Taxes and penalties apply if you leave your job or fail to repay.
- You miss out on potential investment returns during the loan term.
4. Home Equity Loans
- Advantage: Access larger loan amounts with lower interest rates compared to unsecured personal loans.
- Consideration:
- Your home serves as collateral, placing it at risk if you default.
- Closing costs apply, and you need sufficient equity in your home to qualify.
5. Credit Cards with 0% Intro APR
- Many credit cards offer 0% APR for 12-18 months, providing interest-free financing if managed carefully.
- Ideal For: Short-term expenses that can be paid off before the promotional period ends.
- Caution: Any remaining balance after the intro period is subject to high variable interest rates.
Summary
Before committing to any lender, compare the following:
- Interest Rates
- Repayment Terms
- Associated Fees (e.g., origination fees or penalties)
- Collateral Requirements
By carefully weighing options like traditional lenders, online platforms, and alternative funding sources, you can find the most cost-effective borrowing solution. In some cases, combining methods (e.g., 401(k) loans and credit cards) may optimize borrowing power while minimizing costs.
Take the time to evaluate your needs and ensure you choose the financing path that aligns with your financial goals.
Conclusion
In summary, while Rocket Loans promotes ease and speed, its high interest rates and large origination fees may negatively impact some borrowers.
ALSO SEE:
Financial Choices: Gold Loan vs. Personal Loan – What Suits You Better?
How to Avoid the 10 Most Common Personal Loan Mistakes
Secure Your Approval: How to Avoid Loan Rejection with a Good Credit Score
Financial Success: Avoid Loan Rejection and Boost Your Credit Score