Upstart Review

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Date Established

2012

Location

San Carlos, CA

Pros

• Suited for startups
• Relaxed credit score requirements
• Competitive terms and fees
• Easy application process
• Typical time to funding: 2 – 7 days
• No prepayment penalty

Cons

• Unsuited for established businesses
• Potentially high origination fee

Overview

Upstart is an online lender that offers consumer loans to qualified borrowers.

Founded in 2012, Upstart began as a truly bonkers idea, in which students agreed to part with a certain percentage of their income for the next 10 years in exchange for capital and mentorship from investors. One fellow, for example, gave up 3.32% of his earnings for the next 10 years in exchange for a $25K loan. While I’m sure there’s some alternate universe where this model works perfectly, the (hilarious) fact that the co-founder had to assure people that the program was not indentured servitude meant that something had to change.

In 2014, change did happen: Upstart discontinued their income share agreements and began offering fixed-term P2P loans. The latter is by no means new territory — Prosper and Lending Club, two of the biggest names in P2P lending, have been at it since the mid 2000’s. The difference is, Upstart has preserved the same target audience — young adults.

As a result, while credit scores are a consideration, those with little or no credit history are still eligible to receive capital. The underwriting process takes characteristics into account like your “education, credentials, work experience” and, of course, the aforementioned credit (if you have it). It’s worth noting that, while it was required in the past, Upstart no longer requires applicants to have a college degree. In other words, they’ll work with what you’ve got. If you don’t have a credit score or a college education, it’s not the end of the line.

All this is not to say that Upstart will accept anybody. It just means that Upstart has different criteria about who they accept and what rates those customers get. Instead of largely judging a potential borrower by their trustworthiness, which is reflected by a credit score, Upstart takes all the information you give them and compares it to other historical borrowers with the same characteristics.

Technically, Upstart offers consumer loans. Their big thing is credit card refinancing, which, according to the website, accounts for a whopping 77% of their loans. They’re also known for offering loans so that people can attend coding boot camps. More tailored to the purposes of this website, these loans can also be used for business purposes. However, I see very little difference between a loan used for businesses as opposed to loan used for anything else.

But let’s cut to the chase! You are likely here because you want to know if Upstart offers good rates. The answer is: yes. The APRs, which currently max out at 29.99% are, on paper, a little bit better than most of their competitors.

What more, Upstart’s website claims that their APRs are, on average, “30% lower than those of other lenders.” This claim may very well be true, but big data means nothing in individual situations. I’d encourage anybody who is considering getting a loan from Upstart to (at the very least) also get rates from some competitors such as Prosper and/or Lending Club. These services make it easy to get a quote, and don’t damage your credit score; there’s no reason to not make some comparisons.

Because these loans are tied to your personal ability to repay, and not your business’s, they’re very startup friendly. So if you’re confident enough that your startup will be able to sustain repayments, go right ahead.

In all, Upstart is an easy-to-get loan with excellent customer service, very competitive rates, and an impeccable online reputation. Read on for the details!

Services Offered

Upstart offers personal loans that can be used for businesses, among other purposes.

Borrower Qualifications

These are the requirements to get an Upstart loan:

Because its primary audience is consumers (not businesses), Upstart doesn’t require any time in business or set amount of revenue.

To qualify for an Upstart loan, you must meet these requirements:

• Be a US citizen (not living in West Virginia)
• Be at least 18 years old (19 in Alabama and Nebraska)
• Have an email account
• Have a name, date of birth, and social security number
• Have a regular source of income
• Have a bank account
• Have a credit score of 620 or above (however, Upstart might accept applicants with insufficient credit history to produce a score)

Rates & Fees

Here are the stats posted on Upstart’s website:

In addition, Upstart may charge a fee for the following situations:

• Late payment: The larger of 5% of unpaid amount or $15
• Insufficient funds fee: $15
• Paper copies request fee: $10

Your interest rate is determined by a number of factors that Upstart considers to evaluate how risky a bet you are. The more risky you are perceived to be, the higher your interest rate.

One factor that will affect your interest rate is your term length. Three-year loans have smaller APRs, because lending somebody money for three years is less risky than five. The downside is that three-year loan terms will have higher monthly repayments.

Keep in mind that Upstart usually requires an origination fee. This fee comes right out of the principal, so if you need a specific amount of money, make sure that you ask for enough to cover the cost of the origination fee. While some customers are annoyed by this fee, an origination fee is standard in the industry; most of Upstart’s competitors charge an origination fee.

Upstart does not charge any other fees, such as prepayment penalties, aside from the origination fee and potential late fees.

Application Process

Upstart’s application process works much like that of any other online lender. You’ll begin by filling out an online form via Upstart’s website. The form will ask you for information such as:

• How much you’d like to borrow
• Approximate credit score
• Highest level of education
• Primary source of income
• Personal information (name, date of birth, etc.)
• Residential information
• Financial information

After you’ve completed the form, you’ll get a preliminary approval or denial. If you are approved, you’ll get an estimated rate, which details your interest rate, origination fee, and other important information about your potential loan. Use this information to decide if you’d like to continue the process.

Before you get an official rate, you will have to provide more substantial information, and a real human (the underwriter) will have to look through your application. During this step, you’ll be asked to provide a bunch of documents. For the most part, these documents will serve to verify all that information you provided earlier. For example, Upstart might ask you to provide transcripts, test scores, pay stubs, tax forms, and other official documentation. At this step, you’ll also have to talk to an Upstart representative to verify some information.

When you’ve submitted all that, an underwriter will go over your application and (assuming you’re accepted) make you a real loan offer. If you accept that offer, your loan will be funded.

The time from application to funding is generally less than a week. You can get an estimated quote within minutes, the underwriter typically takes 24 to 48 hours to make a decision, and funds can be transferred in one business day.

Sales & Advertising Transparency

It’s clear that Upstart isn’t trying to trick anybody. All the relevant terms, rates, and fees are clearly stated on the front page of the website in a useful and easy-to-understand manner. You shouldn’t come across any surprises during the application and funding process.

Customer Service & Technical Support

Upstart offers a large, labyrinthine FAQ that will answer 99% of the questions you have about their service. I’m happy to see that their FAQ includes a section on repayments, as many lending FAQs are dedicated to answering only questions that potential borrowers might have.

If your question can’t be answered via the FAQ, Upstart is available by email or phone. Although some customers have reported difficulty getting in touch with the staff, most customers report satisfaction with the promptness and level of support offered by the customer service representatives.

Negative Reviews & Complaints

This company has a stellar online reputation. That’s not to say they’re completely devoid of negative reviews (we’ll get to those in a moment), but a 9.6 of 10 on TrustPilot isn’t easy to maintain. The company also has a very good record on Credit Karma and only a few complaints on the Better Business Bureau.

Regardless, here are the most common complaints I came across regarding Upstart loans:

• Rejections: The majority of negative reviews are from customers who were rejected for a loan for one reason or another. Unfortunately, Upstart may find reasons to reject you, even if you met their minimum qualifications or got a preapproval letter in the mail.
• Origination fee: A few reviewers claim they were not aware of the origination fee before accepting a loan. However, I saw the fee disclosed multiple times across the website. The origination fee is taken directly out of the principal, so if you need a certain amount, ask for a slightly higher amount when applying to cover the extra cost.
• Customer service: Some customers have complained that they’ve had trouble getting in touch with customer service.

Positive Reviews & Testimonials

Customers have a lot of good things to say about Upstart. Most commonly, they praise the:

• Customer service
• Smooth application process
• Lenient underwriting
• Quick time to funding

Upstart is also set apart due to its flexible repayment schedules. Like with many P2P lenders, once your due date has been set, it’s not possible to change it. However, Upstart solves this problem in a simple and convenient way: customers can set up monthly recurring payments at any time before their real due date. You can even set up bi-weekly repayments if that works better for your finances.

Final Verdict

Because this lender is willing to evaluate non-traditional sources of creditworthiness (such as your schooling history), Upstart is an excellent resource for many people who do not fit the traditional model of a loan borrower. If you don’t have an established credit history for whatever reason, you may still qualify for affordable rates from this lender.

Although there are a few complaints circulating about Upstart, its evident that most borrowers have a very good experience. Furthermore, those complaints are common in the loan industry at-large; you risk being turned down for a loan or paying extra fees from any of Upstart’s competitors as well.

Once again, it would behoove anybody who is getting a business loan from Upstart to make a few comparisons before settling on a lender. Most lenders will be able to give you an estimated rate without affecting your credit. Curious about your other options? Check out our full list of startup business loan reviews.

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Bianca Crouse

Bianca is a writer from the Pacific Northwest. As a product of the digital age, she likes absorbing large amounts of information and figures she might as well pass it on. When not staring at a screen, she is probably foraging for food outside, playing board games, or harassing somebody with theories about that movie she just watched.

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