Know how to apply for a personal loan when you have a bad credit score through this Upstart review.
Upstart.com is a company which gives individuals the chance to make their dreams come true through monetary support on an installment plan. The idea has gained momentum since it was revealed that 1 in 3 employed graduates are receiving financial support from friends and family. Upstart aims to provide working-age adults with fair and accessible financing options for college tuition, starting a business, or buying a home while solving the problem of indebtedness through a pay-as-you-wish repayment schedule. Here's my Upstart review to help you get started with your application.
The innovative online platform enables investors who have extra money lying around to invest it in individuals' futures without any risk because repayments depend only on the borrower's income success. Borrowers make low monthly payments until their loans are fully repaid, which could be just a few years or decades depending on the size of their loan and salaries.
Click to check your rate on a loan from Upstart. Won’t affect your credit score.
Upstart also provides a novel way to invest money for those who want to diversify their portfolio by investing in promising young adults rather than companies. Potential investors can contribute as little as $1 towards a borrower's cause, giving them the chance to fund dozens of different people around the world which was not possible before. In order to ensure that borrowers have some skin in the game and are really committed, Upstart takes a small percentage (10%) from paid tuition and invests it into all other recipients' accounts until they graduate. This innovative concept has been deemed “peer-to-peer” lending but with social responsibility plugged in. There is no catch as Upstart only aims to reduce the amount of indebtedness and create a win-win situation for both investors and borrowers.
Upstart Review: How Upstart Works
Upstart members must be employed and make at least $50K a year. Loans are repaid weekly or monthly depending on the borrower's preference which should result in all loans being fully paid off within 5 years. This is perfect for small business owners who want access to capital in order to grow their businesses, as most small companies fail within five years.
If borrowers pay less than the amount owed each week/month, the difference rolls over into their next payment so they always owe more money than they did before even if their paychecks have not increased. In this way, interest accumulates faster through smaller payments while borrowers are able to save some cash flow especially during slow months by making partial payments. This system is designed to help rather than hinder borrowers when times are tough, which is why repayment plans do not have penalties for late payments or missed days.
Borrowers also have the option of paying off their loans early in order to start saving money on interest before they retire and get back some control over their financial situation.
However, there are no prepayment fees and loan terms can never be altered by the borrower during repayment or once a loan has been fully paid off.
Loans cannot be transferred to other members as Upstart does not intend to make a profit on individual transactions but only shares trading gains with lenders at an annual rate of 8% instead. Their main goal is to grow the community and help more people, not charge them extra fees.
Upstart Review: How It Works for Lenders
Investors can choose from a curated list of promising borrowers or upload their own profiles in order to find individuals with whom they would like to invest (i.e: a medical student who needs money to study abroad, an aspiring athlete looking for funding so that he can train full time without having a job, etc). Most loans bear an interest between 6-12% but rates fluctuate depending on each borrower's default risk which is rated from A-G where “A” represents 0% chance of nonpayment while “G” signifies 100%. Upstart screens all potential borrowers before making them visible to potential investors so that only trustworthy individuals are displayed.
Investors can then decide which loans they want to support through a tiered system that gives them more control over their individual portfolios. The more money an investor contributes, the better loan terms he/she gets (i.e: lower interest) but also greater accountability due to increased visibility on Upstart's website.
If a borrower misses a payment or is late in making one, investors who invested “A” rated loans will be notified immediately while those whose recipients have less desirable credit may never know about it unless they check the borrowers' profiles themselves from time to time (source: Upstart.com).
Interest rates range between 6%-12% per year and are automatically taken out of borrowers' accounts every Monday/Friday depending on each individual's repayment plan. The more money a loan recipient can repay, the lower the interest they get is which is why “D” rated borrowers pay 6% while those who only make partial payments towards their loans have to pay 12%.
Interest rates are not fixed and will decrease once members invest enough capital in order to gain access to better loan terms. This way, lenders always get the best available deal for the risk that a certain borrower might represent at that given time.
What Credit Score Qualifies for an Upstart Loan?
Upstart does not give a clear indication of the credit scores they require from borrowers but it is very likely that their average APR falls between 12%-18% because somebody who has poor credit (below 640) would never be able to secure a loan or even find an investor willing to finance their journey.
It is important to note that most traditional lenders such as Payday Loan To Start Up Business check borrower's credit before approving them for loans so if Upstart members have access to this type of information then there must be some truth in what I'm saying.
How to get an Upstart Personal Loan?
To apply for a personal loan, one has to create an Upstart profile first which requires Facebook Authentication because the website does not want to be flooded with fake accounts that will never pay back their lenders.
Once you have created your account, you have access to thousands of opportunities so it's just a matter of finding good deals and offering loans yourself (your risk-empowerment point).
Upstart offers borrowers loans from $1,000 up to $50,000 at very low interest rates (i.e: 6% per year) but when compared to traditional lenders such as credit unions or low APR banks, those numbers seem unconvincing even though UPstarts entry barrier is way lower than what we see in most financial institutions.
Upstart is bringing modernity to the lending field so it's easy to understand why they have managed to attract 10000+ registered members in just 1 year time but I believe that more traditional lenders such as credit unions, banks and even Kiva do a better job at offering their services because of their transparency and the fact that they are not hiding anything from customers. Kiva loans can be defaulted but Upstart loans cannot, which might seem appealing for borrowers looking for money quickly without having to wait too much before being able to get on with their lives (i.e: college students taking out student loans).
If you want to apply for an Upstart personal loan, sign up here.
Can Upstart Be Trusted?
This question can only be answered after taking a closer look at the company's history, their transparency and all other details that are being shared with potential investors.
Upstart is based in Palo Alto, California, United States but they also have offices in New York which means that this platform was made to target US citizens first mainly because regulation is way stricter when it comes to giving out business loans (i.e SBA loans).
Upstart wants to implement a new type of lending so there has been no shortage of criticism online especially because of how different it looks compared to traditional financial institutions such as credit unions or banks.
There are tons of positive feedback from people claiming that they have successfully received money from Upstart lenders and they kept their promise about retaining 9% of somebody's income until their debt has been paid off so this platform might be reliable after all. I guess we have to dig deeper before making any final assumptions about this company.
The key takeaway here is that Upstart personal loans are becoming more popular by the day so things might change really quick in regards to how traditional lenders will act once the competition grows bigger and they start feeling threatened because of low interest rates (i.e: payday loan companies).
How is Upstart Different from the Others
Upstart's main advantage over other lending sites such as Lending Club and Prosper seems to be its transparency when it comes to fees.
Members always know how much they have made or lost and because their rates are not fixed, they benefit from the most competitive interest rates available on the market at that given time (i.e: if a borrower with bad credit has enough money to pay back his/her loan in full in order to get an A-rating, the lender gets a better interest rate than somebody who always only pays back part of his/her debt).
This is way better than having fixed percentage taken out every time regardless of how much money someone has actually returned its investors' trust so Upstart seems like a great alternative for those looking for more flexibility without giving up any stability
Upstart claims to be more transparent than other investment platforms so it is always better for investors to pay attention to their returns and fees before making any decision in case they want to take advantage of the best deals possible.
Read the Entire Personal Loan Series
- Starting a Business with a Personal Loan [3 Loan Rules]
- SoFi Loans and $100 Cash Back Personal Loan Program
- What to Consider before taking a Personal Loan
- How to Qualify for a Personal Loan with Bad Credit
- Cash Advance vs Personal Loans: Which is Best for Fast Cash?
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.