Upstart Loans have quickly and massively gained popularity as an accessible personal loan option, particularly for individuals with limited credit history. Unlike traditional lenders, Upstart leverages artificial intelligence (AI) and machine learning to evaluate borrowers. Also, they consider factors like education, employment history, and earning potential, alongside credit scores.
This unique approach helps borrowers, especially younger or with low credit, access funding that might otherwise be out of reach. Whether you’re looking to finance a large purchase, consolidate debt, cover medical expenses, or even fund a business venture, Upstart offers an alternative way to secure personal loans with competitive rates.
What Are Upstart Loans?
Upstart is an online lending platform that provides personal loans to individuals using a different underwriting process than most traditional lenders. Founded in the year 2012 by ex-Google employees, this financial platform focuses on expanding access to credit by assessing a broader range of factors.
What’s more, Upstart offers loans ranging from $1,000 to $50,000, depending on the borrower’s eligibility, with repayment terms ranging from three to five years.
Additionally, this company incorporates additional data points, such as education level, area of study, job history, and even standardized test scores. Upstart aims to provide fairer access to credit, particularly for those who might not have an extensive credit history but show promising potential for financial stability.
How Upstart Loans Work
The process of applying for an Upstart loan is simple and entirely online. Here’s how it works:
Prequalification: Firstly, borrowers can start by checking their rate on the Upstart website which doesn’t affect their credit score. This involves answering basic questions about your personal information, income, and loan purpose. Based on this, Upstart will provide potential loan offers.
Loan Offer: If you prequalify, you will receive various loan offers with different interest rates, loan amounts, and repayment terms. You can select the one that best suits your needs.
Final Application: Once you’ve selected your loan offer, you’ll need to submit a formal application. This will involve you providing additional information, such as your proof of income, your Social Security number, and employment details. At this stage, Upstart performs a hard credit inquiry, which may slightly affect your credit score.
Loan Approval: Once you have submitted the application, Upstart will review your information. If you are approved, the funds will be disbursed as soon as the next business day.
This is how the process of borrowing a loan from Upstart works, and how simple it is to achieve it online.
What Do The Eligibility Criteria Include?
Even though it is easy for borrowers to take out a loan, there are still eligibility standards that must be met. They include:
Credit Score: While Upstart accepts borrowers with credit scores as low as 300, they may deny applicants with insufficient income or high debt-to-income ratios.
Income: A minimum annual income of $12,000 is required.
Education and Employment: Upstart will consider your educational background and job history as part of its approval process.
Residency: You must be a U.S. citizen or permanent resident.
Minimum Age: The applicants must be at least 18 years of age or older.
These are some of the eligibility requirements set in place for borrowers to qualify for a loan from Upstart.
Upstart Loan Terms
Here are the loan terms, interest rates, and fees associated with an Upstart loan that you take out:
Loan Amounts: Upstart offers loans from $1,000 to $50,000, depending on your credit profile and income.
Repayment Terms: The loan terms are either three or five years, which gives you the option to pay off your loan more quickly or spread payments over a longer period.
Interest Rates: The interest rates on an Upstart loan vary depending on several factors, including your credit score, income, and the data points from their AI evaluation. Typically, they have rates that range from 5.40% to 35.99% APR. Although borrowers with stronger financial profiles can secure lower rates, those with lower credit scores or higher risk factors may see higher interest rates.
Fees and Penalties
Upstart usually charges a one-time origination fee, which ranges from 0% to 10% of the loan amount. This fee is deducted from the loan disbursement, meaning the amount you receive will be less than the amount borrowed. Additionally, there may be other fees to consider:
Late Payment Fee: If you fail to make your payment on time, Upstart will charge a late fee, which is typically greater of 5% of the past due amount or $15.
No Prepayment Penalty: Upstart does not charge prepayment penalties, so you can pay off your loan early without incurring additional fees.
Pros and Cons of Upstart Loans
Here are the pros and cons of taking out an Upstart Loan that you can consider:
Pros
AI-Based Evaluation: This is one of Upstart’s approaches that benefits borrowers with limited or no credit history by considering factors like education and job potential. Eventually, it provides borrowers access to credit that might not be available through traditional means.
Fast Funding: Loan funds can be disbursed as soon as the next business day, making Upstart an excellent option for borrowers who need quick access to cash.
Competitive Rate: For borrowers with good credit and strong financial profiles, Upstart offers competitive rates, especially compared to credit cards or payday loans.
No Prepayment Penalty: Borrowers can pay off their loans early without facing additional fees, which saves on interest payments.
Cons
With all the advantageous benefits the loan offers, here are some drawbacks that you might face:
High Interest Rates: Upstart generally offers low rates to highly qualified borrowers. However, individuals with lower credit scores or higher risk profiles may see rates as high as 35.99%.
Origination Fee: Additionally, Upstart charges an origination fee of up to 10%, which reduces the loan amount you received and can increase the overall cost of the loan.
Limited Loan Terms: Upstart only offers loan terms of three or five years, which limits the flexibility compared to other lenders that provide a broader range of terms.
How Upstart Compares to Other Personal Loan Lenders
Here is some healthy comparison of how Upstart and the loans they offer compare to other online lenders:
(1)Upstart vs. LendingClub
Here are some noticeable differences between Upstart and LendingClub financial platforms:
Interest Rates: Upstart tends to offer slightly lower minimum rates, especially for borrowers with strong financial profiles. Meanwhile, LendingClub has its rates to be slightly higher.
Application Process: Upstart has an AI-based approach that allows for a broader range of borrowers to qualify, including those with limited credit history. On the other hand, LendingClub focuses more on credit scores.
Loan Terms: LendingClub offers more flexible loan terms, while Upstart only provides three- and five-year options.
(2)Upstart vs. SoFi
Here are some noticeable differences between Upstart and SoFi lending platforms:
Loan Amounts: SoFi offers larger loan amounts than Upstart, with their loan going up to $100,000 compared to Upstart’s maximum of $50,000.
Additional Perks: SoFi offers more benefits, such as unemployment protection, career coaching, and member events, which Upstart does not provide.
These are some differences in varying online lending platforms and how they compare to Upstart loans and terms.
Frequently Asked Questions
Here are some frequently asked questions you can check out:
How long does it take to get approved for an Upstart loan?
The pre-qualification process is really quick and can only take a few minutes. If you are approved, you can expect to receive your loan funds as soon as the next business day, although it may take up to a few days for the money to be deposited.
What can I use an Upstart loan for?
Upstart loans are personal loans that can be used for a variety of purposes, including medical expenses, debt consolidation, home improvements, and even starting a business. However, Upstart loans cannot be used for illegal activities or to pay for educational expenses.
Can I get an Upstart loan with bad credit?
Upstart typically lends to borrowers with low credit scores, since they consider other factors in their evaluation process, such as education, job history, and potential earning capacity. However, interest rates will likely be higher for borrowers with poor credit.