LightStream Debt Consolidation Review

LightsStream’s selling point is that it offers loans “that reward good credit.” Be warned that if you have bad credit or a low credit score, you should look somewhere else for a debt consolidation loan.

If you do have good credit, LightStream offers APRs from 8.99%-25.49% on loans from $5,000-$100,000. It also has a “rate beat program” that slices .10 percentage points off any approved loan offer from a competitor.

It’s an offer hard to pass up, but it also may be hard to qualify for if your credit isn’t pristine.

Even borrowers with good credit can get in over their head with debt. A loan that consolidates high interest credit card debt, student loans or medical bills can lower your monthly payment, and one fixed amount to pay makes it easier to budget and stay on top of payments. That’s why debt consolidation loans are often a good option to get a handle on debt.

Borrowers already need good credit to qualify for a LightStream debt consolidation loan, but the company says that your credit will get even better once you’ve borrowed. LightStream claims that “in a four-month period, 62% of customers who took a LightStream debt consolidation loan saw their FICO score increase by more than 20 points.”

LightStream is a national online lending division of Truist Financial Corp., formerly SunTrust Bank, based in Charlotte, N.C. LightStream started out as an auto loan company in 1995, and now offers unsecured loans that would traditionally require collateral to borrowers with good credit. It has specific loans for autos and homes, but also for things like pools, horse trailers and tiny homes.

Let’s take a look at the pros and cons of LightStream’s debt consolidation loans.

Snapshot:

• Type of Debt Relief – Debt consolidation loan
• Eligibility and Requirements – Credit score of 680, income and assets to comfortably make debt payments
• Fees – None
• Credit Score impact – High
• Consumer Reviews – Mixed

How LightStream’s Debt Consolidation Loans Work

LightStream debt consolidation loans can only be applied for online, not on the phone or with email.

Loan terms begin at 24 months, and LightStream says it offers loans up to 144 months “depending on the type of loan,” but doesn’t specify the maximum term for a debt consolidation loan. You’ll find out the term options when you apply.

Amounts of loans range from $5,000-$100,000. The money can be available that day if it’s a business day, as long as you complete the approval process, including verification, before 2:30 p.m. Eastern time.

LightStream does not offer pre-approval, which means applying will trigger a hard pull on your credit report, which has a negative impact on credit score.

Steps to apply for a LightStream debt consolidation loan are:

• LightStream will ask what you are using the loan for. The best use is to consolidate and pay off unsecured debt, like credit cards and medical bills. You can’t use a LightStream debt consolidation loan to pay off a student loan or a previous LightStream loan.
• You will provide personal information, including name, Social Security number, income, and employment details, as well as documentation to support all of it.
• You’ll be asked to agree to receive electronic records and agree to use electronic signatures to sign your loan agreement as part of the application.
• You’ll be asked if you want to enroll in auto pay. If you decline, you’ll have a rate that’s 0.50% higher than if you agree. You have to agree before accepting the loan to get the discount.
• If you’re approved, you’ll be asked to supply a valid Visa or MasterCard credit card for verification purposes before you get the money. The card won’t be charged.

LightStream Eligibility and Requirements

LightStream makes it clear from the start that its loans are for consumers who have good-to-excellent credit. LightStream uses FICO scoring, which means a good score is at least 680. If you’re on the edge and aren’t sure if you will qualify, you may want to look elsewhere since applying means a hard pull on your credit report, which will have a negative impact on your credit score.

While the company looks at each applicant on their own merits, LightStream points out that, besides a good score, good credit means:

• At least several years of significant credit history with a variety of account types (major credit cards, installment loans, vehicle loans and mortgage debt, if applicable.)
• A proven ability to save money, evidenced by retirement/investment accounts and liquid assets including checking and savings accounts.
• Stable, sufficient income and assets with the ability to easily repay current debt obligations (including little, if any, revolving credit card debt) in addition to any new loan with LightStream.
• An excellent payment history with no delinquencies or other problems repaying debt obligations.

There’s also an environmental perk to getting a loan from LightStream. Since 2013, the company has planted a tree for every loan it’s funded, in partnership with American Forests.

Fees for LightStream Debt Consolidation Loans

LightStream doesn’t charge any fees for its debt consolidation loans, unlike competitors who often charge an origination or application fee. It also doesn’t charge a prepayment penalty if you pay off the loan early.

LightStream’s debt consolidation loans begin at 8.99% interest and are capped at 25.99%. Applicants who choose autopay when they apply – which means payments come directly from your bank account automatically each month – pay a rate 0.50% lower than they’d pay without it. You must choose autopay at application to get the discount.

Only applicants with excellent credit and autopay qualify for the 8.99% rate. Around 17% of approved applicants who applied for the lowest rate qualify for it, according to LightStream.

LighStream will slice .10% off the rate of a competing offer if the applicant has been approved by the competitor within the previous two days. The competing loan offer must be unsecured, and the rate that comes with it must be one the competitor would offer to any applicant with a similar credit profile.

Pros and Cons of Debt Consolidation with LightStream

On paper, a borrower with good credit will find the pros for LightStream’s debt consolidation loan outweigh the cons, with low rates and no fees. In fact, the better your credit, the more the pros shift in your favor. However, if you need less than $5,000, or your credit score doesn’t cut it, look elsewhere.

Pros of LightStream

• Interest rates capped at 25.99%
• No fees
• Rate beat program
• Auto-pay discount

Cons of LightStream

• No pre-qualification options
• $5,000 minimum loan amount
• High credit score requirement
• Lowest rate only available to borrowers with excellent credit, auto-pay

Is LightStream Right for Me?

A LightStream loan will work best for borrowers with comfortable incomes and excellent credit looking to streamline monthly unsecured debt payments. The company is clear on its website that only customers with good or better credit need apply.

If you are unhappy with the amount of unsecured debt or revolving credit you have, don’t like keeping track of multiple due dates or are getting blindsided by late fees, a LightStream debt consolidation loan can help.

If your credit score is not good, or it is, but you’re not sure you’d qualify for a LightStream debt consolidation loan and don’t want it to take a hit to your credit score, then LightStream isn’t right for you. The hard credit pull is one reason why some lenders offer preapproval applications. That way, potential applicants can know whether they’ll be approved before fully diving in. It’s likely LightStream doesn’t offer pre-approval in order to discourage applicants who likely won’t qualify because of less-than-good credit.

You also can’t use a LightStream debt consolidation loan to refinance student loans or another LightStream loan, so if either of those are part of your debt consolidation plan, find another lender.

LightStream Reputation and Consumer Reviews

LightStream has an A-plus rating with the Better Business Bureau. In a 2020 Consumer Lending Satisfaction Survey by J.D. Power, LightStream was the top-ranked lender for customer satisfaction. On its website, out of 27,244 ratings, LightStream has an average 4.9 out of 5 stars.

Positive reviews focus on how easy it is to apply and get the money, and those who needed to contact customer service said they were happy with the interaction and result.

Negative reviews focus on technical issues with the application process, unhappiness with the online-only format, and difficulty contacting or hearing back from customer service. Some consumers (especially those with lower credit scores) didn’t like the fact that there was a hard credit check during the application process or that some of the loan elements, like term, aren’t clear before applying.

Debt Consolidation Alternatives to LightStream

If LightStream’s qualifications and your credit don’t match up, or you need a loan for less than $5,000, there are other companies that offer debt consolidation loans that may be a better fit.

Some of the alternatives are:

Discover has APRs that are a little lower than some online lenders, including LightStream, at 6.99-24.99%. It offers debt consolidation loans for $2,500-$40,000 with repayment terms of 36-84 months. Discover has a $25,000 minimum income requirement. It also has a “buyer’s remorse” option that allows a borrower to return the loan money within 30 days of receiving it with no interest charged.

Lending Club, one of the nation’s biggest online banks, offers debt consolidation loans that range from $1,000-$40,000. The borrower must choose a term of either 36 or 60 months. A credit score of 600 will get you in the door, but if you’re approved, expect to pay a 3%-6% origin fee and 9.57%-36% APR. The lower the borrower’s credit score, the higher the origination fee and interest are.

SoFi is similar to LightStream, and a good choice for borrowers with a credit score of 680 or higher. APRs are 8.99%-25.81%, with no origination fee. Loan amounts are $5,000-$100,000 and repayment plans range from 3-7 years. SoFi also offers unemployment protection for borrowers.

Alternatives to Debt Consolidation Loans

If you’re looking to reduce or eliminate debt, but don’t want to borrow more money to do it, there are some good options, no matter what your credit score.

Credit Counseling

Credit counseling at nonprofit credit counseling agencies, local Community Action Programs and other nonprofits will talk to you at no cost. They offer guidance on budget, will review your finances, and discuss your options with you, with no pressure to go with a specific solution. It’s a good way to have a neutral third party help you assess your debt and work out ways to deal with it.

Debt Management

Debt management plans are not loans, and your credit score won’t be a factor. You work with a nonprofit credit counseling agency, which pays your creditors while you pay the agency one fixed monthly amount. The credit counselor and your creditors agree on lower interest rates, which means you pay less both in the short and long term. You get the same benefit that comes with streamlining and simplifying your debts through consolidation, but without borrowing money to do it.

A debt management plan takes 3-5 years, but that’s less time than it will likely take to pay down revolving credit and it’s similar to the term of a debt consolidation loan.

Nonprofit Debt Settlement

Nonprofit debt settlement, also known as credit card forgiveness or Less Than Full Balance, may be a good option for people with a lot of unsecured debt and limited income. It’s offered by nonprofit credit counseling agencies as an alternative to traditional for-profit debt settlement. With nonprofit debt settlement, there is no negotiation. You agree to pay 50%-60% of your debt balance in equal payments over 36 months. You don’t pay any interest during the repayment period. Because it’s a new program, not all card companies or credit counseling agencies offer it.