Upstart review: Personal loans for workers with limited credit history or low credit scores
Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.
- An Upstart personal loan could be a good choice for you if you don’t have great credit.
- Upstart considers education and work history, along with your credit score, to make loan decisions.
- Upstart personal loans interest rates range from 7.86% – 35.99% APR, but may have high origination fees.
- See Insider’s list of the best personal loans of 2021 »
Should you use Upstart?
|You may like Upstart if you …||You may not like Upstart if you …|
The bottom line: Upstart could be the right lender if you have a strong work and education history, but you have a low credit score or limited credit history.
How Upstart works
Upstart offers unsecured personal loans, which are loans that don’t require any collateral, such as a house or car. These personal loans can be used for a variety of purposes and often have solid interest rates.
You can use an Upstart personal loan for many purposes, like debt consolidation and moving expenses, but check with the lender to see if your expense qualifies for a loan.
One of Upstart’s main distinctions is its underwriting process, which is the task of deciding who gets a loan and how much to charge in interest. Like any lender, Upstart considers credit scores as part of the process. But it also considers employment history and education history, such as where you went to school and your area of study.
While this could be an advantage for people with lots of college experience, it may work against borrowers without that experience.
If you accept your loan by 5 p.m. ET, Upstart will deposit loan funds into your designated bank account on the next business day. It may take a little longer if you’re using funds for education purposes or to pay off your credit card.
Email or call customer support Monday through Sunday, 9:00 a.m. to 8:00 p.m. ET.
While Upstart offers flexibility, you may find better interest rates through a loan intended for a specific use rather than a personal loan. If you’re buying a car, for example, you maybe be able to get a better interest rate with a car loan. Car loans use the car you’re buying as collateral to back the loan, or secure it. Secured loans generally have lower interest rates than unsecured loans, like personal loans.
Upstart loan amounts and interest rates
Upstart’s loan amounts range from $1,000 to $50,000. The minimum amount is lower than other comparable lenders, so Upstart could be a good choice if you need a little cash to tide you over. However, borrowers in four states are subject to higher minimum loan amounts:
- Massachussetts: $7,000
- Ohio: $6,000
- New Mexico: $5,100
- Georgia: $3,100
Upstart has two options for repayment, with term lengths of 36 or 60 months. There are no prepayment penalties, though. Interest rates at Upstart range from 7.86% to 35.99% APR. That’s comparable to LendingClub’s APR range of 8.05% to 35.89% and Avant’s APR range of 9.95% to 35.99%.
Upstart pros and cons
Approval isn’t dependent solely on credit scores. For people who have struggled with credit in the past, Upstart will factor in a few other pieces of information for a better shot at approval.
Low credit score requirements. While Upstart does consider factors other than credit scores, it also has a low minimum credit score requirement at 600.
Get your loan quickly. You may be able to get your loan on the day after you apply with Upstart.
Small loans are available. Upstart offers loans with a minimum loan amount of $1,000. Many competing lenders start their minimum loan amount higher.
Only 3-year and 5-year terms to repay. While other lenders offer several options on how long you’ll have to repay, Upstart only offers three-year and five-year terms. This choice could be impractical for borrowers on either extreme of the borrowing scale. However, there is no prepayment penalty, so you can pay your loan off at any time without a fee.
Potential for high origination fees. Upstart’s personal loans can have origination fees up to 8%. Compared to competing lenders, this is a very high maximum — similar lenders Avant and LendingClub top fees at 4.75% and 6%, respectively.
What credit score do you need to qualify for an Upstart loan?
With Upstart, you’ll need to have a minimum credit score of 600 to qualify for a loan. But remember that the lower your credit score, the higher your interest rate will be. If you don’t know your credit score, you can find it for free on annualcreditreport.com from any of the three major credit bureaus once per week during the coronavirus pandemic.
If you have a low credit score and want to use Upstart, here are some steps you can use to improve your credit score:
- Ask for and look over a copy of your credit report. See if there are any mistakes on your report that could be thanking your score. If so, reach out to the credit bureau to talk about fixing the error.
- Maintain low credit card balances. Having a credit utilization rate — the percentage of your total credit you’re using — of 30% or less will show lenders that you can manage your credit well.
- Design a system for paying bills on time. Your payment history makes up a significant percentage of your credit score, and lenders like to see steady and reliable payments in the past. Set up calendar reminders or automatic payments so you don’t fall behind.
Is Upstart trustworthy?
Upstart is a Better Business Bureau-accredited company, and the BBB gives the company an A in trustworthiness. The BBB evaluates trustworthiness by analyzing a business’ responses to consumer complaints, honesty in advertising, and clarity about business practices.
Upstart does not have any recent controversies. Due to its solid history and high BBB rating, you may consider using Upstart as your personal loan provider.
However, BBB scores don’t guarantee you’ll have a good relationship with the company and are merely a starting point on your search for a personal loan provider.
How to get an Upstart personal loan
The application is available online and can be completed in several minutes. You’ll need basic information for the initial application, including:
- Desired loan amount
- Loan purpose
- Contact information including your address, phone number, and email
- Date of birth
- Social Security number
- Academic credentials (such as where you attended school and what area you studied)
- Primary source of income
- Annual income
As a part of the application process, Upstart will verify your personal and credit information.
How does Upstart compare to other personal loan lenders?
Min. credit score
Min. credit score
Min. credit score
7.86% to 35.99%
8.05% to 35.89%
9.95% to 35.99%
|Apply for a loan||
Apply for a loan
Apply for a loan
*While Avant does not charge an origination fee, it does charge an administration fee of up to 4.75%.
Upstart vs. Avant personal loans
Both Avant and Upstart allow borrowers with poor credit to get approved. For borrowers who meet Upstart’s minimum credit score requirement of 600, this lender could have an advantage with a wider range of interest rates and higher loan amounts.
Upstart offers loans of up to $50,000, while Avant’s loans top out at $35,000. Interest rates start lower at Upstart, ranging from 7.86% to 35.99% APR, as opposed to Avant’s interest rates ranging from 9.95% to 35.99%.
However, Avant’s maximum origination fee is lower than Upstart’s, topping out at 4.75% as opposed to Upstart’s maximum of 8%.
Upstart vs. LendingClub personal loans
While Upstart has a clearly defined minimum credit score of 600 to apply for a loan, LendingClub is a little vaguer on requirements. Upstart has lower starting interest rates, but LendingClub has lower origination fees.
Checking your rates on both sites could be a helpful indicator of which has the best rates for you — both have a pre-approval option.
Ryan Wangman is a reviews fellow at Personal Finance Insider reporting on mortgages, refinancing, bank accounts, and bank reviews. In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
Personal Finance Insider offers tools and calculators to help you make smart decisions with your money. We do not give investment advice or encourage you to buy or sell stocks or other financial products. What you decide to do with your money is up to you. If you take action based on one of the recommendations listed in the calculator, we get a small share of the revenue from our commerce partners.
Source: Read Full Article