Discover Review: Personal Loans for Debt Consolidation

Americans who are struggling to pay down debt are at the core of Discover’s personal loans business.

The online financial company, best known for its credit cards, offers personal loans mainly for those looking to consolidate debt. While Discover loans can be used for other purposes, such as paying for a vacation or financing a big purchase, the company provides free tools to manage debt and estimate monthly payments on its personal loans website. It also gives borrowers the option to send money straight to their creditors to pay off debt; not all lenders offer that.

“We are focused on helping consumers manage debt better,” says Dan Matysik, vice president of Discover’s personal loans division.

Discover’s minimum credit score requirement is 620, but its borrowers have an average credit score of 750, according to the company. Its minimum income requirement is $25,000, but borrowers usually make more, Matysik says.

Applicants can enter their desired loan amount and their credit score range on Discover’s site to get a rough estimate of APR and monthly payments without triggering a credit check. Those who decide to apply receive a hard credit check (also called a hard pull, this affects your credit score). Borrowers go through a phone call to verify identity before the loan is issued.

Discover reports repayments to all three credit bureaus, so on-time payments can help build your credit score.

» MORE: Compare Discover with other personal loan companies

What makes Discover different

Discover is among a small number of online lenders that don’t charge an origination fee. Its APR range starts at 6.99% and goes up to 29.99%, which is competitive with other lenders.

The company also allows payment flexibility. Borrowers can change their payment due date twice during the lifetime of the loan, with a minimum of one year between changes. The company charges a late fee for missed or delayed payments, but those who have trouble making payments can call the company to discuss their options.

All online lenders accept electronic payments and many charge a fee for paying by other means, such as by personal check. Discover lets borrowers pay over the phone, by personal check or by other means, at no extra charge, in addition to automatic electronic payments.

The lender also provides next-day funding.

Here’s what you need to know before applying for a Discover personal loan:

Discover’s credit standards

  • Minimum credit score required: 620, but borrowers’ average score is 750
  • Minimum gross income required: $25,000, but typically much higher
  • Minimum credit history: Not provided
  • Maximum debt-to-income ratio: Not provided

Discover’s lending terms

  • APR: 6.99% to 29.99%
  • Minimum loan amount: $2,500
  • Maximum loan amount: $30,000
  • Minimum loan duration: 3 years
  • Maximum loan duration: 7 years
  • Time to receive funds: Next-day, up to a week

Discover’s fees and penalties

  • Origination fee: None
  • Prepayment fee: None
  • Late fee: $39
  • Personal-check processing fee: None
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