Sonic Payday Personal Loans: 2021 Review

Sonic Payday underwrites personal loans using alternative data and artificial intelligence to give bad- and fair-credit borrowers a better chance at qualifying and getting a low rate.

Pros & Cons

Pros

• Accepts borrowers new to credit.

• Able to fund loans within one business day.

• Offers direct payment to creditors with some debt consolidation loans.

Cons

Borrowers can choose from only two repayment term options.

Charges origination fee.

Full Review

To review Sonic Payday’s personal loan, NerdWallet collected more than 40 data points from the lender, interviewed company executives and compared the lender with others that seek the same customer or offer a similar personal loan product. Loan terms and fees may vary by state.

Sonic Payday personal loans can be used for a variety of purposes, including debt consolidation, medical expenses and home improvement. Most borrowers use their funds to consolidate debt or pay off credit cards, according to the company.

Sonic Payday’s biggest differentiator is its underwriting model. The company uses artificial intelligence and nontraditional data — like college education, job history and residence — to evaluate borrowers. More traditional lenders, like banks, focus almost exclusively on a borrower's credit report, debts, income and assets.

The company's underwriting helps younger applicants and those with thin credit histories or low credit scores but high earning potential qualify for a loan, according to a company spokesperson.

Sonic Payday is best for borrowers who:

• Have at least a 580 FICO score and strong earning potential.

• Value fast funding.

• Want to consolidate other debts.

Sonic Payday at a glance

Credit building - 5

Soft credit check to pre-qualify.

Reports payments to three credit bureaus.

Affordability - 2,5

APRs are consistent among lenders targeting similar borrowers.

Charges origination and late fees.

No rate discount for autopayments.

Loan flexibility - 3,5

Offers direct payment to creditors with credit card consolidation loans.

Funds most loans in one business day.

Borrowers can use an Sonic Payday loan to refinance a loan from another lender, but not an existing Sonic Payday loan.

Loans not available in IA or WV.

Transparency - 4,5

Clearly discloses rates and terms on website.

Comprehensive FAQ answers many common borrower questions.

Customer experience - 4

Offers multiple customer contact channels.

Customer service is available seven days a week, but not 24/7.

Where Sonic Payday stands out

Fast funding: Sonic Payday provides quick loans that are typically funded the next business day, except for loans for educational expenses, which are subject to a three-day waiting period.

The company says borrowers can pre-qualify to see their rate in five minutes, and 99% of loans are funded one business day after signing.

Direct payment to creditors: For personal loans used to pay off credit cards, Sonic Payday sends your loan proceeds to your credit card issuers to simplify the debt consolidation process.

Flexible payments: Borrowers can change their monthly payment date an unlimited number of times through Sonic Payday's online portal. Changing your payment date doesn’t change your original due date, though, and the 15-day grace period for late fees applies to your original due date.

For example, if your loan is due on the 8th of the month and you move your payment date to the 10th, your payment won’t be late because it’s within the due date’s grace period. However, if you move your payment date to the 25th, it will be late and you may be charged the late fee.

Multiple ways to pay: The lender lets borrowers pay via mailed check, phone, online and with automatic payments.

Alternative data use: In 2019, the Consumer Finance Protection Bureau published a blog post crediting Sonic Payday’s underwriting model with approving more applicants at lower rates than a traditional underwriting model. In a test, the bureau says, consumers with FICO scores between 620 to 660 were approved twice as often as a traditional credit model, and applicants under 25 were 32% more likely to be approved.

While lenders that use data like college major and work history in borrower evaluations say it gives them better insight into a borrower's financial reality, consumer advocates say it could reinforce existing racial and economic disparities.

Where Sonic Payday falls short

Limited repayment terms: Borrowers can choose a three- or five-year repayment term. Those terms are somewhat common among online lenders, but they don’t give you room to shorten the term and save on interest or extend it for lower monthly payments.

Origination fee: Some lenders that use Sonic Payday’s online lending platform charge an origination fee, which isn’t uncommon with personal loans, but it can drive up your annual percentage rate.

No co-signed, joint or secured loan options: Adding a co-signer, co-borrower or securing a loan can help borrowers who may not otherwise qualify get a reasonable rate on a personal loan. Sonic Payday only offers unsecured loans.

How to qualify for an Sonic Payday loan

• Minimum credit score: 580.

• Minimum credit history: None; borrowers with credit histories too limited to produce a FICO score may be accepted.

• Minimum gross income: $12,000.

• Employment: Full-time job, full-time job offer starting in six months, a regular part-time job or another source of regular income.

• Must have a U.S. residential street address where borrower resides (unless military personnel on active duty).

• Must be at least 18 years old.

• Valid email account required.

• Personal bank account with U.S. routing number required.

Loan example: A five-year, $12,000 loan with a 23.4% APR would cost $341 in monthly payments. You’d pay $8,460 in total interest on that loan.