Review of Upstart Personal Loans | CreditShout

Review of Upstart Personal Loans

By Kevin / December 4, 2015
Review of Upstart Personal Loans

Upstart offers personal loans for paying off credit card debt, refinancing student loans, paying for college, or any other purpose. Unlike traditional lenders, Upstart considers many factors to determine qualification and interest rates, including your academic performance, work history, and even SAT scores.

In this review, we will provide you the information you need to decide whether a personal loan from Upstart is right for you.

Loan Program Overview

Before we really dive into our review, here are some basics about the Upstart installment loan program:

  • Loans range from $3,000 to $35,000
  • 4.66% to 29.99% APR based on your creditworthiness (which Upstart calls your "loan grade")
  • 36-month term is your only option
  • Origination fee of 1-6% based on loan grade
  • No prepayment penalty

Who is Upstart?

Originally, Upstart was a platform that connected borrowers with young professionals in an income-sharing agreement. From there, it began facilitating peer-to-peer personal loans in 2014. (Yes, you can also invest in peer-to-peer loans on the Upstart platform.)

Today, you get started by submitting an online application. After that you will be presented with loan terms you can accept or reject.

Upstart grades loans from AAA to E. Loans with an AAA grade will receive an interest rate of 4.0% to 4.23% (4.66% to 4.9% APR) with a 1% origination fee.

On the other end of the scale, a loan with an E grade will have an interest rate of 20.16% to 25.26% (24.74% to 29.99% APR) and a 6% origination fee.

According to Upstart, the average loan has a 15% APR with a 36-month term.

FYI: Just checking your rate on Upstart will not affect your credit score. But if you decide to move forward, Upstart will do a hard credit pull - which will impact your score. And, if you receive an Upstart loan, they will report your payment obligations.

What Makes An Upstart Loan Different?

Unlike traditional lenders, Upstart considers a variety of factors aside from an applicant's credit history, employment history, and income. Depending on the purpose of the loan, Upstart may consider factors like the applicant's SAT scores or chosen college to predict the likelihood of repayment and earning potential.

Will You Qualify for an Upstart Loan?

Upstart's alternative underwriting process makes it easier to qualify if you have a limited credit history but have other positive attributes. Alternative factors Upstart considers include excellent academic performance.

Upstart says it uses more than 150 data points to create an applicant's loan grade along with third-party data to determine the value of each of these data points.

Since many Upstart borrowers are borrowing for a secondary degree or to pay off student loans, the lender bases its underwriting on the idea that a borrower's experience and education should be considered.

While your credit score, income, and employment history are not the only factors Upstart considers, you will still need a FICO score of at least 640 to get approved. The average Upstart borrower has a FICO score of 692.

You must also have a full-time or regular part-time job or a full-time job offer that begins within the next 6 months unless you are accepted into a partner bootcamp and want to seek employment after you graduate.

While you can use an Upstart loan for many purposes, Upstart generally focuses on loans and refinancing for student loans, school expenses, debt consolidation, credit card debt, job relocation, business expenses, and medical bills. The documentation you will need to provide will depend on your history and how you want to use the loan. You may need to provide a college transcript, SAT scores, or pay stubs, for example.

Is Upstart the Right Choice for You?

Upstart's nontraditional underwriting process makes it a good choice for college students and graduates who have limited credit history. Still, the average Upstart loan has an APR of 15% and they do have an origination fee of up to 6%. In fact, most borrowers pay are charged the maximum 6% origination fee.

Still, an Upstart loan may be the best option for you if you want to pay off student loans or fund education expenses - especially if you have limited credit history. 

But read on to get an understanding of how Upstart compares to some top competitors.

Upstart Personal Loans Compared to SoFi

Like Upstart, SoFi primarily targets millennials who want to refinance student loans or pay for college. In fact, SoFi is our preferred lender as they offer loans of up to $100,000 -- about three times Upstart's maximum -- while offering very low cost fixed-rate and variable rate loans.

While SoFi has higher credit standards, they do offer more flexible loan terms of up to 7 years with absolutely no origination fees. On a $30,000 loan, this would save $1,800 compared to the average loan from Upstart.

If you want to learn more about SoFi loans, read our review.

The Bottom Line

As a peer-to-peer personal loan lender that offers among the lowest interest rates available with a minimum credit score of just 640, Upstart loans are a good choice for:

  • Recent college graduates with good academic credentials
  • Borrowers with good credit who want an affordable way to pay off credit card debt

The big drawback, however, is the origination fee of 1-6%.

If you have excellent credit, a lender that doesn't charge origination fees such as SoFi may be a better choice, especially if you want more flexible repayment terms. (Upstart only offers 3-year loans).

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