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June 29, 2017

Upstart Reviews

Written By Jack Ryder
Last updated September 7, 2018

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Recent college graduates and other “newbies” to the loan world may find that their lending options are more than slightly limited. Whether you have bad credit or no credit at all, as a general rule most lenders aren’t exactly eager to lend money to recent college graduates. But Upstart is not like most lenders. In fact, Upstart is the lending company that’s specifically designed for college graduates and other young adults who are just starting out in the world of lending. In our Upstart reviews, we’re going to discuss a few essentials about Upstart in the hopes that it will give you some insight as to how well it can — and should — work for you.

Upstart Loans Review

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  • Best for: Upstart debt consolidation is a good option for those who can’t get approved for a personal loan. Upstart looks at a wide range of factors to approve you, and it is known for approving those with 40 percent to 50 percent debt-to-income ratio, which is very uncommon for a loan company.
  • Price: Interest rates for loans from Upstart range from 8.36 percent to 29.99 percent, which is pretty standard for a loan.
  • Loan length: Upstart has a shorter loan length period than many banks, at 3-5 years, although that is still a good amount of time to pay off your loan.
  • Loan amount: Your loan amount will depend on your financial history and what you are using your loan for. Loans for paying off credit card bills will tend to be lower, while business loans will tend to be higher. Upstart’s loan amounts range from $1,000 to $50,000.
  • Criteria: An Upstart loan review determines who is eligible for a loan using a range of criteria, which include your credit score, years of credit, education, area of study and employment history.

The simplest way to define Upstart is this: it’s an online loan-servicing clearinghouse that specializes in unsecured, fixed-rate personal loans. Though it was originally designed strictly for college students, Upstart has expanded its customer reach to include a wide variety of credit profiles, whether they’re new to lending or not.

The algorithm that Upstart uses is very different from traditional lending options: it uses a combination of standardized test scores, educational status, job status and career choice to determine credit-worthiness. That sounds a little untraditional — and perhaps a bit risky — but it’s proven to be a successful model for them, which is why they’ve expanded their customer base and reach.

As it was hinted above, Upstart has different lending requirements than your traditional bank or credit union. Rather than look at your credit history — which may be short depending on your age, or nebulous depending on such things as identity theft — Upstart calculates credit worthiness based on your career (for example, a lawyer is deemed more credit worthy than, say, an actor), your educational status, your job status (obviously, if you’re employed, you’re more credit worthy than someone who isn’t) and standardized test scores to determine if you’re worthy of a loan from them.

Upstart requires that all of their potential lendees have a minimum credit score of 620 (which, incidentally, is also the minimum Federal requirement to get an FHA loan). And though there is no minimum income required to qualify for the loan, Upstart requires that all of their potential lendees have no greater than a 50-percent debt-to-income ratio (which means that, if you make $50,000 a year, you cannot have more than $25,000 in debts).

As has been mentioned above, Upstart is very different from traditional lenders. To give you an example, today’s minimum mortgage requirements have become so strict that it’s nearly impossible for the average American to get a home loan. For example:

  • You need a minimum of 80-percent LTV (loan-to-value) ratio. That means that you cannot take out a mortgage that is worth more than 80 percent of the value of the property.
  • You need a low debt-to-income ratio — typically, a mortgage requires that you have no more than a 30-percent debt-to-income ratio (meaning that your debt cannot be equal to more than half of your income).
  • You need to earn a minimum of three times the amount of the monthly mortgage payment. In other words, if your monthly mortgage payment is $1,000 per month, you must demonstrate that you have a monthly income of at least $3,000 per month, so that you can demonstrate your credit-worthiness to potential lenders.

Upstart requires none of these things. In fact, Upstart determines your credit worthiness by factors other than the ones mentioned here, so you can get approved for a loan without being a multi-millionaire. Best of all, it’s much easier to get an Upstart loan than it is any other type of loan.

Like any other loan, Upstart has a series of fees and penalties that you have to consider before applying for the loan.

First, and foremost, there is a loan origination fee, which is 0-8 percent of the value of the loan, depending on the grade of your loan. The loan origination fee is “rolled into” the APR when you finally get the loan, meaning that you’ll ultimately be paying the cost of the loan (let’s say $10,000) plus the origination fee (let’s say $300) when you make your monthly payment.

Second, if you fail to make your payment within 10 days of the due date, you will incur a late fee of the greater of 5 percent of the past due amount, or $15. If you are more than 30 days late on your loan, Upstart is required to report your loan as delinquent to the credit bureaus.

Third, while there is no prepayment penalty if you wish to pay the loan back early, there are interest rates that you have to consider before applying for the loan. Typically, the interest rate for an Upstart loan is between 6.25 percent (for well-qualified lendees) and 25.99 percent (for those that are a bit riskier to lend to). Considering that many comparable lenders can have interest rates as high as 35 percent for risky lendees, Upstart’s rates are very reasonable.

This is not to say, however, that they may be affordable for you when the time comes to apply for a loan. Having a decent credit score, of course, will mean that you’re more likely to qualify for loans with lower interest rates, but those rates are comparable to those you’d get on a credit card. In addition, you have to bear in mind that unlike a mortgage (which allows you to pay off the balance over the course of 10 years, 15 years or 30 years), an Upstart loan’s maximum payoff time is five years. That means that the entire balance of the loan — no matter how big or small, and including origination fees and any penalties — must be paid off within five years. So if for the next five years you cannot foresee yourself making a payment of about $300 a month (at the very least), you shouldn’t be applying for an Upstart loan.

Applying for an Upstart loan is very simple: it can be done online at their website, which you can find here. Most applicants are instantly verified through Upstart’s online verification system.

In some cases, however, Upstart may need a few documents to help verify you for the loan:

  • You will need proof of identification (a driver’s license or, preferably, a passport), proof of income (two paystubs or, preferably, your previous year’s tax returns) and proof of employment (which can typically be provided in an employment verification letter). If your job provides you with bonuses or commissions, you must provide proof of that as well, usually in the form of a commission structure letter as defined in your employee handbook. Have your boss provide you with this if necessary.
  • “Side gigs” or consultancy work may not be taken into consideration unless you’ve made income from this work for at least six months prior to applying for the loan. In addition, if you have any other type of income (like rental income, spousal support or child support), it will help to disclose that to Upstart when applying for the loan.
  • If you are self-employed, you must provide your previous year’s tax returns and include your Schedule C. If you can, you must also provide your invoices to date for your work performed this year.
  • If you have applied for the loan within four years of your graduation date, you must also provide your standardized test scores results.
  • In the event you have all of these documents, and Upstart still requires additional proof of your income, they will be more than happy to provide you with a list of all you need before your application can be considered complete. For many, this involves at least three months of bank statements (to prove income as well as monthly expenses) and proof of homeownership (if you own a home).

You may not need every document listed here, but having them prepared could help speed up the process if you do end up needing them.

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