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LoanWell no longer offers this service. Visit our guide to borrowing from friends and family for more tips.
Varies by lender
APR
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Max. Loan Amount
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Product Name | LoanWell |
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Max. Loan Amount | Varies |
APR | Varies by lender |
Interest Rate Type | Fixed |
Review by
Anna Serio is a trusted lending expert and certified Commercial Loan Officer who's published more than 1,000 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like Business Insider, CNBC and the Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
LoanWell could be a much less expensive alternative to student loans if you have friends and family with enough cash to cover your costs up front. They can benefit from it too by effortlessly collecting on interest each month. You can choose your own interest rates and terms, and you won’t need a credit history or cosigner to qualify.
However, while it comes with a lot of perks most private lenders don’t offer, relying on friends and family to lend you money can be awkward if you’re unable to pay them back. What you might save on interest, you may lose in love — in the worst case scenario. But if you’re confident you’ll be able to pay back what you owe, then you might want to consider this option.
Need to think about it? Check out our list of traditional student loan providers that might be a better fit for you.
LoanWell is an online platform that draws up legal paperwork for loans between family members and friends. It combines peer-to-peer lending — which connects borrowers with investors — and crowdfunding — which allows people to raise donations through their social network.
Founders Bernard Worthy and Justin Straight created it in 2017 to help cover educational expenses that students have trouble getting a competitive rate for — like coding bootcamps — but friends and family don’t have a real reason to invest in. Making it official allows you to customize and negotiate your rates and comes with terms and conditions that can save your personal relationships if things go sour.
Don’t have family and friends to borrow from? You also have the option of borrowing from one of LoanWell’s bank partners. However, you likely won’t be able to have as much of a say in your loan’s interest and terms, and you’ll need good credit to qualify for the lowest rates.
Let’s take a look at how LoanWell and private student loans compare.
LoanWell | Traditional private student loan | |
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How much can I borrow? | You set the amount | Set by your lender or school, usually up to around $60,000 per year for undergraduates |
What can I use it for? | Any legitimate personal expense — doesn’t have to be education-related | Education-related expenses and traditional post-graduate costs like bar exam courses or medical residency relocation expenses |
Credit score required? | No | Yes, or a cosigner with a strong credit score |
Income required? | No | Yes, or a cosigner with a high income |
What are rates and terms based on? | Your negotiating skills and personal relationships | You or a cosigner’s credit score, credit history, income, debt-to-income ratio (DTI) and other factors like your loan amount and term |
How much does it cost to apply? | $29.99–$149.99 per year | Typically no application or origination fees |
LoanWell works by formalizing the family and friend borrowing application process. You’ll create a network of lenders and then come up with your loan rates and terms before signing the contract.
Before you apply, figure out how much you need to borrow based on your school expenses. Most private lenders recommend you fill out the FAFSA before looking at alternatives, since it can include federal grants and work-study programs, which you don’t have to repay. Federal loans might also be less expensive than what your relatives are willing to let you borrow and even come with forgiveness programs.
Once you know how much you need to cover after getting a federal financial aid offer, talk to your friends and family to find out how much they’re willing to lend. You’ll have the option to spread out your loan between multiple people or just have one person fund it.
Then, follow these steps to set up your contract.
Go to LoanWell’s website, select the type of loan you’d like and click Start. You’ll have the option to choose between three plans: One person, multiple people or a bank partner.
Click Start underneath the plan that works best for you.
In this step you’ll either set your loan terms or choose a partner lender to apply through if you went for the bank partner option.
First, enter your name, address and email. Then enter the contact information of each person you’d like to ask to finance your loan. Take advantage of LoanWell’s repayment calculator to come up with rates and terms that work best for you (and that your friends and family are likely to accept).
You’ll need to enter the following information for each person you want to finance your loan.
After you’re done, click Create.
Once you’ve saved your potential agreement, you’ll get a popup asking you to log in to complete your application. Click Login/Signup.
Enter your name, create a password and check the box verifying that you’re over 18 before hitting Sign Up. Click the verification link in your email and sign in to your account. Then click Save Previous to continue with your application.
LoanWell breaks down each loan payment you’ll make by month, including the principle balance and the amount of interest you’ll pay. If this looks like something that works for you, click Save & Sign.
After you sign and save your repayment schedule, you’ll get a popup asking you to select a billing plan. Click through and select either the single loan agreement, starter plan, fundraiser plan or pro.
Once you select a plan, pay with a credit card or through your PayPal account.
Once you’ve paid for your plan, you’re nearly there. The next few steps involve setting up your repayment plan, verifying your identity and sending out a message to the people you want to fund your loan. Generally, its a good idea to ask beforehand so they aren’t surprised with the email.
Once they get the email, they’ll receive instructions on how to fill out their part of the loan. Once you’re both satisfied, sign the loan documents and start making repayments through LoanWell’s servicer, Dwolla.
It depends on several factors: Your plan, how many loans you think you’ll take out in a year and, of course, interest.
Use LoanWell’s calculator when coming up with your interest rate to find one that you can comfortably afford while also letting your friends and family make a profit they’ll be happy with. LoanWell suggests a rate in the range of 2% to 10%.
When it comes to choosing your plan, it depends on how frequently you’re going to be borrowing. Take a look at how much you’ll pay per loan to find a plan that works for you.
Cost | Loan Credits | Cost per loan | |
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Single loan | $29.99 | 1 | $29.99 |
Medium | $99.99 | 5 | $19.99 |
Large | $149.99 | 10 | $14.99 |
Your friends and family can also reap rewards from funding your loan.
LoanWell wasn’t around when you were in school? You can still use it to save on your student debt by refinancing your student loans. Since you set the rates and terms, you might be able to come up with more favorable terms than what you’d get with any lender.
While you might be able to get a better deal even on federal loans, it’s important to understand what you’re giving up by refinancing them. Federal loans offer extensive deferment and forbearance programs, as well as forgiveness for public service and highly flexible repayment plans — things your friends or family might not want to or be able to give you. Think carefully about what you stand to lose before refinancing any federal student debt.
Curious about your other student loan options? Check out our student loans guide to compare lenders and learn about how it all works.
Pictures: loanwell.com