Upstart offers a unique opportunity for peer loans to students and recent college graduates that doesn’t depend on your credit score
I still remember trying to get a loan as a recent college graduate. It was before the surge in peer to peer lending but I tried just about everywhere. The answer was the same, if you don’t have a credit history then you don’t have a high enough credit score and…no loan.
A new peer lending site, Upstart, wants to change this and may be the opportunity you need for your loan.
The Upstart review process for your loan starts like it does on any other personal loan site with your credit score and other income information. Upstart is different in that it can also look at your academic history and other factors to fund your loan.
It’s a unique way of lending and the company is living up to its name as an upstart in the universe of online loans. I decided to take a closer look at the website and reached out to Upstart customers for personal reviews of their experience.
Use this Upstart review to see if the site is right for your peer loan needs.
Upstart Review: What Makes Upstart Different?
Founded by a group of former Google employees, Upstart uses technology for a new opportunity in peer lending. The loan software created by the company has the ability to change its requirements and scoring depending on the borrower’s situation. Specifically, if the borrower is just graduating or a recent college grad then the peer lender will factor academic history in making the loan.
This opens up a whole new opportunity for graduating students trying to get started. Most have no credit score or bad credit simply because they don’t have a long credit history. On their credit score and income alone, there’s no way they would be able to get a personal loan and certainly not at a rate they can afford.
Upstart is taking a chance on younger borrowers and its paying off for the new peer-to-peer lender. Loan originations have jumped just over the last two years and more investors are signing up every day.
Click to check your rate on a loan from Upstart. Won't affect your credit score.
Upstart is a true peer lending platform in that the company doesn’t make the loans itself. Upstart handles the documentation and sets interest rates but then allows investors to invest directly in each loan, much like is done on Lending Club or Prosper.
This peer lending way of making loans is different from the old banking model where the bank makes a loan then sells it off to investors. The idea that investors can make the loans themselves has helped sites like Upstart reinvent lending in America.
Upstart’s new loan system for college graduates is a benefit to this new peer lending revolution. Traditional banks could never be so flexible as to change their credit scoring systems.
It can take a little longer to get a peer loan because you have to wait for investors to fund the loan rather than the website to originate. The upside is that rates tend to be a little lower on p2p lending sites because investors compete for loans.
Upstart Personal Loans Rates and Requirements
For borrowers with an average credit score, Upstart does require a 640 FICO for lending but doesn’t require a minimum income. If you are a graduating student or recently graduated, Upstart’s lending model kicks in and you might be able to get a loan without the FICO credit score requirement.
Younger borrowers hoping to get a loan on their academic record rather than their FICO score will need to submit proof of SAT scores and a college transcript. If you are applying for an Upstart personal loan just on your credit score and income, you may need to submit tax returns and pay stubs for verification.
Interest rates range from 4.66% to as high as 30% depending on your credit score and other factors. The lower range on rates is quite a bit lower than almost any other personal loan site so it pays to apply and compare your Upstart rate with other sites. Loans are available for $1,000 up to $50,000 and for three- to five-years.
Upstart can fund a loan in as little as the next day but most peer loans take between three to five days for document verification and funding.
- Rates between 4.66% to 30%
- Loans between $1,000 to $50k
- Terms of 3- to 5-years with monthly payments
- Origination fee of 1% to 6% depending on borrower grade
- No prepayment fees
- Late fee of $15 or 5% of loan, whichever is greater
Because of Upstarts unique loan model for graduates, most of its loans go to those with a college degree. The average income of borrowers tends to be a little higher than other peer lending sites but I would bet there are more Upstart borrowers that make little or nothing based on the fact that the site loans to recent graduates.
If you do have bad credit or just a credit score below 640, it might be difficult getting an Upstart loan unless you’re just out of school. If you are a bad credit borrower and not a recent college graduate, you’ll need to improve your credit score with these steps or try getting a loan from another peer loan website.
What I like about Upstart for a Personal Loans
Upstart’s unique loan model really sets it apart from other peer loan and personal loan sites. If you were a recent graduate with no credit before Upstart, you were pretty much out of luck when it came to loans. It’s why many people have to rely on the Bank of Mom and Dad for so long into their working lives.
Upstart has built a name for itself in the market for loans to students and graduates. It’s not a huge market compared to other personal loan segments like bad credit borrowers or other groups but Upstart does it well.
Another benefit of restricting its loans to college graduates and those with fairly high credit scores is that Upstart is able to keep rates low compared to other personal loan sites. Most people won’t get the lowest rate of 4.66% but overall rates on Upstart are still well below other peer lenders. Some of that comes from the site’s lending standards but it’s also a factor of peer lending investors competing for loans.
What I Don’t like about Upstart Compared to Other Personal Loan Sites
The credit score requirement of 640 FICO shuts out a lot of borrowers, almost a third of the people in the United States have credit scores below 649 FICO. The problem is that 640 is the arbitrary cutoff for prime loans and many lenders don’t want to make sub-prime loans after the financial crisis.
For recent college graduates or younger borrowers, Upstart is a great option since the lender will look past your credit score and extend a loan based on your academic history. You’ll need to provide test scores and your transcript but it’s a way to get the money you need instead of being locked out.
Other borrowers with poor credit scores aren’t so lucky. If you aren’t a recent graduate, check out our list of peer lending online loan sites for other options including many that will lend to bad credit borrowers.
The additional documents required for an Upstart personal loan look like they might be a pain as well but it’s the only way the site can determine credit risk without going exclusively on the FICO score. It might take longer to get an Upstart loan if you need to collect a lot of the docs but it’s not too much to ask considering it’s an unsecured loan.
More Upstart Loan Reviews from Customers
I asked a few readers what they thought of Upstart personal loans and the new system for peer lending. Most of the reviews were positive with borrowers appreciating the fact they could get a loan based on more than just their credit score. I did hear one complaint from a borrower that thought the Upstart loans credit score required was too high though it’s hard to tell because the site doesn’t publish a minimum score needed.
Two readers had gotten personal loans for recent college graduates and had been denied a loan through other p2p platforms. This shows me that Upstart’s system of scoring loans based on education and other factors is doing its job to extend credit to people that have been locked out of the system by other lenders.
Upstart shares a few customer testimonials on its website but doesn’t offer much in the way of reviews. The reviews focus on the lender’s simple and fast application, something that Upstart tries to highlight throughout the site.
Upstart Review: Summary of Upstart Student Personal Loans
Benefits of an Upstart Personal Loan:
- Opportunity for students and recent grads
- Lower starting rates compared to other peer lenders
Drawbacks of an Upstart Personal Loan:
- Credit score requirement of 640 or higher
- Increased requirement for document verification
Apply for up to $50,000 on Upstart and check your rate
For students or recent grads, Upstart is a clear winner in the universe of personal loans and peer lending. There’s been little choice for these borrowers in the past so the unique Upstart lending model is an unequaled opportunity. For other borrowers, especially those with poor credit, there isn’t as much to put Upstart at the top of the list for your personal loan. You can check your rate without hurting your credit score so it pays to apply and compare against other lending sites but the peer-to-peer lender is really focused to a specific group of borrowers.
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.