You might consider taking a personal loan for different reasons, maybe you are looking to consolidate debt, make a large purchase, start a business or cover some personal expenses, an Upstart personal loan may be able to help you do it.

But how do the Upstart personal loans and what are some important points you need to keep in mind when considering a personal loan from Upstart? These and some other points will be addressed in this article. Let’s get started. Here are the talking points.

• How does the Upstart Personal Loan work?
• Who Should Apply for an Upstart Personal Loan
• Upstart Personal Loan Rate and Terms
• Is Upstart Good for Loans
• Advantages and Disadvantages of Upstart Personal Loan
• Does Upstart Loan affect your Credit Score?
• What Banks does Upstart Use
• Upstart Investing Review
• Upstart Payment Options
• Upstart Personal Loan Verification Process
• What Are Upstart’s Credit Requirements?
• What documentation will verify my income?
• Upstart Compared with other Lenders
• Is peer-to-peer lending a Good Investment?

How does the Upstart Personal Loan work?

Upstart is a unique online lender that was founded by former Google executives in 2012. As the first lending platform to use artificial intelligence to automate the lending process, the company goes the extra mile to offer loans to a wider range of consumers. Since their inception, Upstart has originated $3.2 billion in loans, 60% of which have been automated.

Read Also: PNC Personal Loans Review

Where most lenders focus on your FICO score when approving you for a personal loan, Upstart uses their advanced technology to look beyond your credit score to quantify risk. Based on their calculations, Upstart believes lenders who use a more intuitive credit model may be able to approve twice as many borrowers without increasing defaults.

What does this mean for you? On the consumer side, Upstart has been able to offer high-quality personal loans with low rates and fair terms to borrowers with less than perfect credit. Upstart also features mostly five-star reviews from users on TrustPilot, and many of their applicants get their loans funded as soon as the next business day.

Also, the online platform partners with banks to provide personal loans to borrowers with short credit histories but regular income and high earning potential.

The direct-to-consumer lending platform offers loans of up to $30,000 to borrowers with fair credit or better, and it doesn’t charge a fee if you pay off your debt early. Watch out for Upstart’s one-time origination fee, which can be as high as 8 percent of your loan amount and which will be deducted from your loan proceeds.

Who Should Apply for an Upstart Personal Loan

Upstart is in the business of lending money to future prime borrowers. What sets its model apart from many other lenders is that it bases credit risk not so much on the past of borrowers but on what borrowers are expected to earn in the future. Upstart does this by attempting to identify well educated and motivated borrowers who are likely to achieve financial success before other lenders do.

So what does Upstart look for when identifying future prime borrowers? Earning a degree from a top university helps a lot. But so does your area of study and your employment history. For example, a registered nurse may receive just as good a rate as a literature major from an Ivy League university because Upstart’s credit model focuses on earning potential.

Borrowers with advanced degrees and good grades on standardized tests, such as SAT and ACT, can also expect better rates with Upstart. Generally, borrowers must have a FICO score of at least 640, stable employment, and an income of at least $40,000 a year. However, borrowers who are attending a partner boot camp are exempt from the employment requirement.

Upstart still cares about borrowers’ credit history, but it is willing to look at a variety of markers of prime borrowers depending on each applicant’s credit profile. If you have an established credit history, Upstart will focus on that. If you don’t have much of credit history (less than 10 years), Upstart will concentrate on other variables, such as your academic performance.

Upstart Personal Loan Rate and Terms

Upstart offers fixed interest rates ranging from 7.16% to 29.99% APR. This rate includes Upstart’s origination fee, which ranges from 1% to 6% depending on the borrower’s credit grade. Origination fees are included in the loan’s APR but are deducted from the loan balance before it’s deposited.

For example, if you borrow $30,000, and you’re charged a 5% origination fee, you will only receive $28,500 in your bank account. However, you will pay interest on the entire $30,000. Check Upstart’s SuperMoney profile page for the latest rates.

Loan amounts range from a minimum of $1,000 to a maximum of $50,000. Loans have terms of three or five years, but there is no prepayment penalty so borrowers can pay off loans early.

There is a late fee of $15 or of 5% of the payment amount, whichever is larger. There are no fees for paying with a personal check, as with other lenders.

Is Upstart Good for Loans

If your credit isn’t perfect or you have a thin credit profile, applying for a loan through Upstart can make a lot of sense. This lender will consider more than your credit score when assessing you for approval, which can help you get the money you need even if your credit needs some help.

However, Upstart may not offer the lowest rates or the best loan terms available. If you want to end up with the most affordable personal loan available to you based on your creditworthiness, it’s crucial to shop around and compare loan rates, terms, and fees. The right loan is out there waiting for you, but you’ll need to do some legwork to find it.

Advantages and Disadvantages of Upstart Personal Loan

Advantages

There are many reasons to consider a personal loan from Upstart, but it all starts with the dynamic way this lender approves consumers for their loan products. Upstart looks at more than just your FICO score to approve you for a loan, including non-conventional variables such as the number of hard inquiries on your credit report, whether you have a college degree, and your earning potential.

The fact that Upstart looks at a broader number of factors when approving you for a loan can make the process easier if you have only “okay” credit, or any score close to the 620 minimum this company requires.

However, it’s important to know that Upstart does require you to have no bankruptcies or delinquent loans. You may also need to submit additional information to qualify if your credit isn’t great, including SAT scores, information on your area of study, or detailed employment information.

We like the fact Upstart lets you borrow up to $50,000 for debt consolidation, a wedding, a home remodeling project, or nearly any other reason. Since many lenders only offer personal loans in amounts up to $35,000 or less, this can be a huge benefit if your borrowing needs are high.

Upstart also offers flexible repayment terms with the option to repay your loan over three years or five years. Upstart loans also come with no prepayment penalties and no hidden fees.

Disadvantages

With all the attractive features available on the Upstart personal platform, you can bet there are also some shortcomings. We have highlighted them below.

One of the shortcomings with Upstart is the fact they may charge an origination fee of up to 8% of your loan amount. This fee amount can represent huge costs for the borrower. Plus, paying up to 8% of your loan amount in an origination fee is pretty much unprecedented in the personal loan space. Many of the best personal loans don’t charge an origination fee at all, and even the lenders who do tend to limit them to 5% or 6% of your loan amount.

Another downside of Upstart is the fact their minimum interest rate starts at 7.54%. That’s considerably higher than some other personal loan companies that offer interest rates as low as 5.99% for borrowers with excellent credit.

Here’s an example of how your personal loan might look if you borrowed money at one of Upstart’s highest interest rates:

With the example loan above, you’re expected to pay an origination fee of over 5% plus an APR of 29.75%. Over the lifetime of this loan in its present form, you would wind up paying $17,484.45 in interest if you wrapped the origination fee in your loan amount — almost as much as the loan itself.

Finally, Upstart personal loans are not available in West Virginia or Iowa. If you live in one of those states, you’ll need to shop for a personal loan with a different lender.

Does Upstart Loan affect your Credit Score?

Checking your rate on Upstart will not affect your credit score.  If you proceed with your application after receiving a rate your credit score may be impacted.

When you check your rate, we make a “soft credit inquiry.”   Soft credit inquiries on your report do not lower your credit score, but you may see when you view your report that this inquiry was made. If you are offered a loan and proceed with the application, we will then make a “hard credit inquiry” to verify the accuracy of your application.  This action will be recorded as an inquiry on your report and it may impact your credit score.

What Banks does Upstart Use

Upstart is presently working with some banks to make your loans possible, we will mention them and their review about Upstart.

First National Bank of Omaha

“We chose to partner with Upstart because their approach to modernizing lending is well aligned with FNBO’s focus on a customer-centric experience. Upstart’s AI/ML-based pricing engine and automation will allow us to profitably serve a broader set of customers, within a great digital onboarding experience, than we could before”.

First Federal Bank of Kansas City

The best part of working with Upstart has been the ability to put the consumer on a better financial path to meet their goals, extinguish debt, and save for a home.

TCF Bank

Upstart’s digital experience is seamless and feedback from our customers is exceptional, with NPS of more than 80. We’re excited to bring such a high-quality product to our customers

Upstart Investing Review

Upstart Payment Options

Recurring payments via ACH is a popular payment method as it allows you to set it and forget it so that you can spend your valuable time on more important things and ensure that you’re paying on time.

If your account is already set up for recurring payments, you will be able to see all upcoming payments on your dashboard under scheduled payments. Individual recurring payments cannot be changed or canceled and must be turned off in bulk. You can, however, still schedule, change, or cancel one-time payments.

Turn off recurring payments

If you’d prefer to turn off automatic recurring payments, click on “Manage recurring payments”, then select “Turn off recurring payments”. Make sure to save your changes. Please allow at least 2 business days for the change to take effect. Turning off recurring payments within 2 business days of an upcoming recurring payment may not cancel that payment.

Also, any scheduled one-time payments will not be affected.

Update recurring payments

If you’d like to update the day, amount, bank account for the recurring payment, select “Manage recurring payments”, then select “Monthly recurring payment” or “Bimonthly recurring payment” (depending on your preference), and then select the bank account, payment day, and recurring payment amount. Then save your changes. 

Please allow at least 2 business days for the change to take effect. Updating off recurring payments within 2 business days of an upcoming recurring payment may not change that payment.

Turn on recurring payments

If a recurring payment is disabled for your account, you can re-enable it at any time.

To re-enable recurring payments, click “Set up recurring payments”, then “Monthly recurring payment” or “Bimonthly recurring payment” (depending on your preference), and select the bank account, payment day, and recurring payment amount. Then save your changes.

Upstart Personal Loan Verification Process

Interest rates are proportionate to risk.  Based on their own individual underwriting, each lender assesses each borrower’s risk of defaulting. The lower the risk, the lower the rate the lender will offer. Lenders also look to make a profit on the loans they make, so the interest rate includes both the cost of the risk and the cost of servicing the loan.

Upstart’s application process works much like that of any other online lender. You’ll begin by filling out an online form via Upstart’s website. The form will ask you for information, such as:

• How much you’d like to borrow
• Approximate credit score
• Highest level of education
• Your primary source of income
• Personal information (name, date of birth, etc.)
• Residential information
• Financial information

After you’ve completed the form, you’ll get a preliminary approval or denial. If you are approved, you’ll get an estimated rate, which details your interest rate, origination fee, and other important information about your potential loan. Use this information to decide if you’d like to continue the process.

Before you get an official rate, you will have to provide more substantial information, and a real human (the underwriter) will have to look through your application. During this step, you’ll be asked to provide a bunch of documents. For the most part, these documents will serve to verify all that information you provided earlier. For example, Upstart might ask you to provide transcripts, test scores, pay stubs, tax forms, and other official documentation. At this step, you’ll also have to talk to an Upstart representative to verify some information.

When you’ve submitted all that, an underwriter will go over your application and (assuming you’re accepted) make you a real loan offer. If you accept that offer, your loan will be funded.

The time from application to funding is generally less than a week. You can get an estimated quote within minutes, the underwriter typically takes 24 to 48 hours to make a decision, and funds can be transferred in one business day.

What Are Upstart’s Credit Requirements?

Because of Upstart’s flexible credit analysis model, its minimum credit criteria is short:

• Have a credit score of at least 640
• Have a full-time job or a job offer
• Have a four-year college degree and be looking for a job
• And NOT live in West Virginia

The college degree and employment requirements can be waived for applicants who want to use the loan to pay for the tuition of one of the coding boot camps that have partnered with Upstart. Note that Upstart uses TransUnion’s FICO score. It’s not a bad idea to check that there are no mistakes on your credit report with TransUnion before applying.

Read Also: Best Egg Personal Loans Review

Apart from that, there is no minimum income, no minimum credit history, and no maximum debt-to-income ratio. However, Upstart does not accept people who have bankruptcies or public records on their report or who have six or more credit inquiries on their credit report for the last six months. Upstart also prefers borrowers not to have a debt ratio above 16%.

What documentation will verify my income?

All documentation must:

• have your name and the company name listed
• be recent – normally within the last 30 days
• be clear and complete (make sure we can see all 4 corners and can read everything)
• be your personal income
• If you don’t have the documents we’ve asked for, you may be able to submit something else as long as it demonstrates and confirms your reported income.

Find your income type below to see what document we’ll accept to verify your source of income. We will require different documentation depending on your employment status.

Full Time and Part Time Employment (W2 Employee)

Most recent pay stub (within 30 days) showing your salary or hourly wage.
If you do not have your first pay stub yet, please submit your official job offer stating your compensation and start date.
OR

W2 with recent paycheck image and a bank statement that shows that paycheck deposited.

Additional Compensation: Such as a bonus or commission
Include an offer letter that states your target bonus or commission structure.
OR

Provide your last pay stub of the previous year
If you don’t have either of these documents, we will consider the bonus/commission you’ve earned thus far this year that we can verify.

Multiple Jobs (W2)

Provide a pay stub for each income source

Independent Contractor or Multiple Gigs (1099 employee)

Example: Airbnb or Lyft/Uber
Current contract defining length of agreement and exact compensation expected.

OR

Completed tax return from the most recent filing year with taxable income listed from your 1099 employment AND
Proof of recent income in the form of a digital deposited check image OR business invoice. Please provide the matching bank statement that verifies the deposit into your account.

Self Employed/Sole Proprietor: Running your own business or own part of a business
Note: If you have not done this for more than a full calendar year, we will not take this income into account when evaluating your application

Last year’s full tax return that shows your personal portion of income.
Proof of recent income in the form of a digital deposited check image OR business invoice. Please provide the matching bank statement that verifies the deposit into your account.

Retirement Benefits and Income
Annual benefits letter verifying the amount awarded
Recent income to verify receipt of retirement benefits.

Alimony/Spousal Support/Child Support
Provide court order/agreement that outlines how much you receive, how often payments are disbursed and for how long.

Rental Income
Upload your lease for the rental property that shows your name, monthly amount and lease term. Additionally, please upload your most recent tax return to verify the taxable income for this property.

Trust or Pensions
Statements from your pension plan
OR

Letters from your Trust administrator

Disability Benefits
Provide benefits letter that defines the amount of income received, frequency of payment, and duration of the benefit.

Upstart Compared with other Lenders

Upstart and a small group of similar businesses have created a new way of lending that focuses on the future potential of borrowers and not exclusively on their credit history. Upstart’s rates are similar to those of SoFi, LightStream, and Earnest, but Upstart has more flexible credit score requirements. Upstart has both lower rates and a faster lending process than marketplace loan leaders Prosper and LendingClub. So check out what the best personal loans are to ensure that you choose the best option for you.

Is peer-to-peer lending a Good Investment?

The P2P lending process is safe, but as with making any loan, peer to peer lending involves a certain amount of risk. The best way to mitigate this risk is to fully research the credit rates assigned by the P2P companies, and diversify your funds across several loans.

One of the main peer-to-peer lending risks is that the person(s) borrowing your money may make late repayments or default on their loan. The chance of this happening and the consequences if it does differ by P2P lending platform.

Another risk of peer-to-peer lending is that your contributions are not covered by the Financial Services Compensation Scheme (FSCS). This means that, unlike many other forms of financial product, you cannot reclaim any money should your provider experience financial distress. However, all P2P lending providers should have an orderly wind-down plan in place to protect you should something go wrong.

The safest peer-to-peer lending platforms use a variety of techniques to protect lenders’ money and ensure they make the expected returns.

Underwriting: The stricter your platform is with who they will lend to, the lower the risk of those borrowers defaulting. However, it’s important to remember that risk cannot be eliminated, as even borrowers with a good credit history can fail to repay their loans. 

Here at Lending Works, our underwriting team perform credit checks, affordability checks, identity checks and fraud checks to help ensure that your money is only lent to creditworthy borrowers.

Contingency funds: If a borrower misses a repayment, your P2P provider should take steps to recover this debt as soon as possible and prevent them from entering default. Some platforms also offer contingency funds, which means the fund will cover a certain amount of money delayed through arrears or lost through default so that lenders are not affected.

The Lending Works Shield has covered all arrears and defaults since we launched in 2014. This means that lenders have always received their expected capital and interest payments in full and on time. This is achieved through our own contingency fund.

Diversification: Diversification means spreading out your investment across multiple borrowers so that all your eggs aren’t in one basket. This helps to average out the default rate and ensures only a small amount of your money is affected should a borrower in your portfolio fail to repay.

At Lending Works, we have an algorithm that automatically distributes lenders’ investment fairly and effectively. And, in the unlikely event that the Lending Works Shield cannot cover bad debt (and our own funds cannot make up the difference), our reserve fund trustee may declare a ‘pooling event’ to ensure that losses are fairly distributed across all investors.

Back-up service providers: Back-up service providers will take responsibility for the management, servicing and collection of outstanding loans should your P2P platform cease to operate for any reason. Otherwise, there’s potential to lose all your investment should your provider go bust, as there’s no FSCS protection.

Like any investment, it does put your capital at risk. However, given the predictability of the repayments from borrowers and other safeguards in P2P, other forms of investment are often risker. Whereas, below-inflation interest rates mean low-risk savings accounts can effectively lose you money over time. That makes P2P lending a sensible way to grow your cash.   

It’s also important to remember that the risk level differs greatly depending on the P2P platform you choose.

Conclusion

Upstart personal loans are worth considering if you have less-than-perfect credit. Additionally, people who need the ability to access their loan proceeds quickly might benefit from a personal loan through the Upstart platform. The ability to take out a second loan through Upstart, if you are eligible, may also be beneficial to some borrowers.

However, it’s important to note that borrowers with good credit or better might be able to find a better deal elsewhere. Some personal loan lenders may offer lower interest rates, fewer fees, and larger loan amounts than you can find with Upstart. 

Perhaps the best news is that Upstart personal loan makes it easy for you to compare your loan offer to deals you may be able to find from other lenders. Simply complete the prequalification process on the Upstart website to discover your rate and see if the platform gives you the best offer for your situation.