Upstart, based in San Mateo, California, was founded by former employees of Google and uses an artificial intelligence (AI) platform to improve consumers’ access to affordable loans while simultaneously lowering the risk and costs for Upstart’s bank clients. The loans that Upstart helps facilitate can be used for debt consolidation, to cover medical expenses, fund home improvement projects and pay college tuition. Upstart claims that most borrowers use the loans they receive to consolidate debt and pay off credit cards.
As far as the AI platform is concerned, Upstart uses it to support its underwriting model, which looks at non-traditional data such as college education, job history and place of residence when determining a borrower’s ability and likelihood of repaying a loan. More traditional lenders focus almost exclusively on a person’s credit report, debt level, income, and assets when evaluating their creditworthiness. Upstart’s novel approach to underwriting enables the company to help younger applicants and those with short or limited credit histories qualify for a loan. Here we look at the loan service offered by Upstart and how it compares to other, similar companies.
What Upstart Offers:
Upstart offers fast online loans that range from $1,000 to $50,000. Funds are often made available to consumers the next business day after approval, except in the case of educational loans, which are subject to a three-day waiting period. Upstart says 99% of its loans are funded one business day after signing. For personal loans that are used to pay off credit cards, Upstart sends money directly to the credit card issuers to simplify the debt consolidation process.
The average three-year loan with Upstart has an annual interest rate of 15%. Some borrowers with better credit may qualify for a lower interest rate. But the interest rate charged on a three-year personal loan can be as high as 21.8%. At that rate, Upstart is basically charging as much interest as a credit card company. The lowest interest rates charged by Upstart is about 7.35% and the highest rate is 35.99%. Consumers will want to be mindful of the interest rate they’re offered by Upstart and opt for the lowest rate possible.
The company primarily offers loans for refinancing, debt consolidation, education expenses, to cover medical bills and for home improvement projects. Of course, consumers can ultimately use the loan for whatever they want. On the positive side, the interest rates charged by Upstart are fixed, so the rates won't change over the life of the loan. Consumers have a choice of a three-year or five-year repayment term and there's no prepayment penalty, so customers can pay Upstart personal loans off early without incurring any additional fees.
Qualifications and Process:
In terms of qualifications for a loan, Upstart requires applicants with a credit history to have a minimum credit score of 600, no recent bankruptcy or delinquent loans, and fewer than six inquiries on a credit report in the past six months, not including inquiries related to student loans, car loans or mortgages.
The company also accepts applicants whose credit isn't sufficient to produce a FICO score, typically younger applicants who do not yet have an established credit history. Additionally, Upstart requires customers to have a minimum annual income of $12,000 and a full-time job or job offer that starts within six months, or a regular part-time job or another source of regular income. Upstart is available in all 50 U.S. states.
The application process itself is fairly easy and straightforward. Applications are done online, and each Upstart loan is subject to a “soft” credit check that will not impact the customer’s credit score. Once basic information is submitted, the interest rate offered by the company is determined by the applicant’s credit score, education history and work experience. The loan term can also impact the interest rate offered and the monthly payments. Consumers wanting to pay as little interest as possible should opt for a shorter-term loan if they can afford the monthly payments. Customers who are satisfied with the interest rate offered, can then submit a full application. A hard credit inquiry will be made to verify the accuracy of the financial information submitted, and this generally lowers your credit score by a very small amount.
Fees and Terms:
In terms of fees, Upstart charges an origination fee of up to 8 per cent on its loans, a late fee of 5% for any past due amount and an unsuccessful payment fee of $15 per occurrence. It’s worth noting that borrowers may be able to temporarily suspend payments in the event of economic hardship such as a job loss, though each hardship case is evaluated individually by Upstart and subject to the company’s approval.
Information required by Upstart includes a Social Security number and some details about academic and career backgrounds as well as current debts. Decisions are typically provided by Upstart immediately unless potential borrowers are asked to submit additional documents such as their college transcripts. Once approved, loans are made available within one business day.
- Provides loans of up to $50,000
- Fast process with approved loans made available within one business day
- Simple and easy application process that is managed completely online
- High interest rates of up to 35.99% depending on a person’s credit score and history
- Charges fees that many competing companies do not, such as an origination fee
What Others Are Saying:
Upstart has many positive reviews online. The Better Business Bureau has an “A+” rating on Upstart. Overall, the company has some very favorable reviews. Of course, there are some consumer complaints about the company to be found online, but these mostly relate to high interest rates that the company charged on the loans they provided to some customers.
The Bottom Line:
Overall, Upstart appears to be a reliable and trustworthy company that provides personal loans to people ranging from $1,000 to $50,000. While the interest rates charged can be somewhat high depending on an applicant’s credit history and employment status, Upstart is noteworthy for providing quick loans to consumers through a simple and straightforward application process. With its diverse options and streamlined application process, Upstart is certainly worth considering.