Upstart is a popular online lender that touts itself as a lending platform powered by artificial intelligence designed to make affordable credit more accessible to borrowers through the power of technology. Founded by former Google employees, Upstart has originated $10.8 billion in loans, with 71% of them fully automated. Upstart says its personal loan interest rates are 10% lower than traditional lenders. Plus, the lender says it accepts 26% more applicants because it can evaluate nontraditional data when reviewing an application. That means borrowers who are new to credit could have a better chance at qualifying compared to other lenders.
What to Know Before Getting a Personal Loan
Personal loans can be a quick way to access cash, but it’s important to use them wisely. Before applying, you should know how you’ll use the money and create a plan for repaying the loan. Then, you should compare multiple lenders to find the best interest rate and loan terms.
When shopping for lenders, keep in mind your interest rate may differ slightly from the advertised rates. That’s because rates and loan terms are based on factors like your credit score, income, and loan amount. Some lenders will let you pre-qualify for a loan or check your rate with only a soft credit inquiry, which won’t affect your credit score. You should also check out the fees you’ll pay (like origination fees and prepayment penalties) and the length of the loan term, which can influence the cost of the loan.
Most lenders offer unsecured personal loans, which means you won’t need to put down collateral to secure the loan. Secured loans may offer lower interest rates, but they come with more risk because you could lose your collateral if you fall behind on payments.
Alternatives to Personal Loans
Although a personal loan could be a good way to cover expenses, it’s not the only option. Some alternatives to personal loans include:
- Cash-out refinance, home equity loan, or home equity line of credit (HELOC): If you qualify for one of today’s low refinance rates, you could use a cash-out refinance to access some extra cash. Or, if your home value has recently increased, you might decide to take out a home equity loan or a home equity line of credit. But make sure you understand the pros and cons of a HELOC before moving forward.
- Balance transfer credit card: A balance transfer credit card allows you to move unpaid debt to a credit card. These usually come with a 0% introductory APR for a set amount of time, around 15 to 18 months. This could be a good option for consolidating multiple debts, such as credit card balances and personal loans. But make sure you check for any fees involved and create a plan to pay off the debt before the promotional period ends; otherwise, you’ll pay a high APR on the balance.
- Savings strategy: You can also save money for a big upcoming expense instead of taking out debt. This could be a good option if your money needs aren’t urgent, you don’t want to pay interest on a loan, and you don’t want your credit to be impacted. Once you’re done saving for the purchase, consider saving for an emergency fund. Having three to six months’ worth of expenses in savings can help you avoid debt in the future because you’ll have money to cover emergencies.
- Credit counseling: Credit counseling may help if you’re struggling with debt or need help creating a realistic budget. When you meet with a credit counselor, they can provide financial advice and direct you to available resources in your area. Some services are free, while others are low-cost. They won’t provide you with money directly, but they can help you find long-term solutions for debt management.
Pros and Cons of Upstart
Upstart doesn’t charge prepayment penalties
Can check your rate without a hard credit inquiry
Upstart can evaluate nontraditional data when reviewing your application, potentially giving you better approval odds
Borrowers without full-time or part-time jobs may qualify if they have another source of regular income
Borrowers may qualify either with no credit history or with a credit score of at least 600
Loans typically start as low as $1,000 (the minimum may be higher in some states)
Borrowers may get the loan funds within one to two business days
Upstart may charge an origination fee equal to 0%–8% of the loan amount
If your payment is 15 or more days past due, you may pay a late fee of 5% of the unpaid balance or $15, whichever is greater
Doesn’t offer an autopay discount
Doesn’t allow co-signers
Not available to residents of West Virginia or Iowa
Upstart Compared to Other Lenders
|Loan term range||3 or 5 years||2 to 5 years||3 years or 5 years|
|Loan amount||$1,000–$50,000 (minimums vary by state)||$2,000–$35,000||$1,000–$40,000|
|Credit score needed||600||580||600|
|Origination fee||0%–8% of loan amount||Administration fee up to 4.75% of loan amount||3%–6% of loan amount, based on creditworthiness|
|Unsecured or secured debt||Unsecured||Both unsecured and secured options||Unsecured|
How to Qualify for an Upstart Loan
To qualify for an Upstart personal loan, you must have a credit score of at least 600. This is in the “fair” credit range, according to credit bureau Experian. If you’re new to credit, this lender says you still may qualify. Upstart will also take a close look at your credit reports. You might not qualify if there’s a bankruptcy listed within the past 12 months, any of your accounts are currently delinquent, or you’ve had six or more hard inquiries (not including inquiries for student loans, vehicle loans, or mortgages) in the last 6 months. But even if you meet the minimum requirements, having a lower score will likely mean getting a higher interest rate.
When you need a personal loan, it’s a good idea to shop around. Start by getting rate quotes from multiple lenders that offer a prequalification. This process allows you to check your rate and loan terms without hurting your credit. Once you have a few offers in hand, use the information to find the best deal.
Upstart wants to make sure you have the income to make your monthly payments, so they’ll ask how you earn money. You must either have a full-time job, a full-time job offer starting within six months, a part-time job, or another source of regular income. There’s no minimum income requirement specified, although your debt-to-income ratio can’t exceed 45% to 50%, excluding rent and mortgage payments.
In addition to the income and credit requirements, you’ll also need to:
- Be at least 18 years old (or 19 in Alabama and Nebraska)
- Reside within the U.S. (except West Virginia and Iowa) and have a Social Security number
- Have a personal bank account within the U.S.
Upstart does not allow adding a cosigner to a loan, so only your individual information will be taken into consideration when evaluating your application.
Who Should Get an Upstart Loan
If your credit score is at least 600, Upstart’s personal loans could be a good option. You’ll also need a clean credit history with timely payments, no bankruptcies, and few or no hard inquiries.
Upstart’s personal loans can be used to:
- Pay off credit cards
- Pay off student loans, take a course or bootcamp, or pay for college or grad school, except in California, Connecticut, Illinois, Washington, and Washington, D.C.
- Start or expand a business
- Pay medical bills
- Make a large purchase
- Receive athletic training
- Make home improvements
People who take out personal loans typically finance large expenses, consolidate debt, or cover an unexpected bill. Because of Upstart’s relatively flexible credit score and income requirements, these personal loans are best for those who are new to credit or have fair credit (but no negative marks on their credit reports). But because you need to show you have a job or otherwise earn money, Upstart’s loans might not be best if you’ve recently lost your source of income.
How to Apply for an Upstart Loan
1. Calculate how much you need to borrow
Figuring out the amount you need will help you avoid borrowing too much, and understanding how much you can spend on the monthly payment can help you choose the best loan term. A shorter loan term comes with higher monthly payments, but you’ll pay less interest overall. Upstart offers loan amounts between $1,000 and $50,000 with loan terms of three or five years. Other lenders might have different loan ranges and more flexible terms.
2. Get prequalified online
Upstart allows you to check your interest rate by prequalifying online, which won’t hurt your credit. This will give you a good idea of how much you can borrow and your interest rate and loan term. We recommend getting rate quotes from multiple lenders to find the best rate.
3. Submit your application
When you’re ready to apply for an Upstart personal loan, you’ll fill out the application and submit any required documentation, such as a photo ID, proof of address, and proof of income. Upstart will perform a hard credit check at this stage, which may lower your credit score by a few points.
4. Wait for your loan to be approved, signed, and funded
Upstart says it processes applications quickly. If the lender approves your application, you’ll typically receive your funds in your bank account within one or two business days.