Upstart, like several other new online lenders, looks at more than just a borrower’s credit score when deciding whether to approve a loan application.
The personal loan provider, which focuses on recent and upcoming college graduates, evaluates applicants’ potential on factors that can include which college they attended, their GPA and even their SAT scores. Upstart says it can even lend to borrowers who haven’t had enough time building credit to have a credit score at all, provided their academic history and other financials are strong.
Upstart does consider traditional credit information, too. Applicants who have a credit score need at least a 640, and the company does indeed look at your credit report. But it doesn’t have minimum requirements for income or for length of credit history.
Jeff Keltner, head of business development at Upstart, says that the company aims to serve a population that is likely to build a solid credit profile, but just hasn’t had the chance to do it yet.
An Upstart borrower typically:
- Has a credit score of 692
- Has a debt-to-income ratio of 15% to 16%
- Is between 22 and 35 years old
The key to Upstart’s underwriting process is that it changes depending on each person’s credit profile, says Dave Girouard, the company’s CEO and co-founder.
For example, a recent grad with little or no credit history would be assessed mainly on academic performance, but those factors wouldn’t be as important in sizing up a borrower with years of credit experience, says Girouard.
Upstart doesn’t directly lend money to borrowers; it charges an origination fee to connect borrowers with accredited investors who fund their loans. All borrowers receive a grade based on their profiles. The grade is then used to determine the interest rate on the loan.
Applying for an Upstart loan can take a little longer than the process at other online lenders, based on your background. Borrowers can check their potential interest rates in minutes without their credit scores being affected. But if you decide to take a loan, you may need to have additional documents handy, such as your college transcript, SAT scores or pay stubs.
What makes Upstart different
Upstart offers interest rates starting at 4.66% to well-qualified borrowers; that’s lower than many other online lenders.
The company also gives borrowers a degree of flexibility regarding loan payments. Borrowers cannot alter the monthly due date once it has been selected, but they can choose to pay at any time before the due date every month. They can also make payments monthly or biweekly.
If a borrower becomes unemployed or runs into financial trouble, he or she can contact Upstart to set up a different payment plan, according to the company.
As a technology company founded by ex-Google employees, Upstart also rewards those who use a loan to build technical skills. The lender has partnerships with more than a dozen coding bootcamps. If a borrower is accepted into any one of them and wants to take a loan to cover tuition, Upstart waives its requirement that the borrower should have a college degree or job offer to qualify for the loan.
Like many online lenders, Upstart reports credit payments to credit bureau TransUnion, which means that borrowers with thin credit files can build their score by making regular, on-time payments.
Here’s what else you need to know before applying for an Upstart personal loan:
Upstart’s credit standards
- Minimum credit score required: 640
- Minimum gross income required: None
- Minimum credit history: None
- Maximum debt-to-income ratio: None, but generally 15% to 16%
Upstart’s lending terms
- Minimum loan amount: $3, 000
- Maximum loan amount: $35, 000
- Loan duration: 3 years
- Time to receive funds: Next-day; three-day waiting period for education loans
Upstart’s fees and penalties
- Origination fee: 1% to 6% of loan amount, depending on borrower’s grade
- Prepayment fee: None
- Late fees: Greater of 5% of payment amount or $15
- Personal-check processing fees: None
Upstart review: The bottom line
Upstart is a good option for borrowers who are just out of school or have thin credit histories, and may not be able to qualify for traditional forms of credit.
If you have poor credit, you can also consider a secured loan, which typically offers lower interest rates. But you will have to pledge something you own (such as a car, savings or house) as collateral, and you could lose it if you don’t make payments. Upstart doesn’t make secured loans, but many other online lenders and your local banks and credit unions do.
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