Upstart Loan Review: Low Rates for Recent College Grads

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Updated July 5, 2017

Upstart is an online lender offering unsecured, fixed-rate personal loans. Although it started as a lender targeting recent graduates, it has become a lender that offers loans to a wide range of credit profiles.

The founders of Upstart wanted to provide young adults that might not have a lengthy credit history with a way to lessen their debt burdens. To do this, it came up with an algorithm to determine creditworthiness based on education, career, job history, and standardized test scores. But Upstart is not only targeting young people with a limited credit history. If you have an excellent traditional (e.g. FICO) score, you should be able to find a good deal at Upstart as well.

Upstart is one of the few lenders who don’t focus entirely on your FICO score, which means its slightly more lenient when it comes to qualifying.

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How Do Upstart’s Rates Match Up?

The APR range is 7.37% – 29.99% (the origination fee of 2.8% – 8% is included in the APR). Upstart is competitive with LendingClub*, (5.99% to 35.89% APR). However, if you have excellent credit, you should consider [SoFiPL]SoFi[/SoFiPL] instead (read our full SoFi review here). [SoFiPL]SoFi[/SoFiPL] has very low rates and charges [SoFiOrgFee]no origination fee[/SoFiOrgFee].

While the range is large, if you have a decent credit score, you should be able to obtain a loan with an APR less than what you’d normally get with a bank or credit card.

You can see our round-up of the best personal loans here.

Personal Loan Details

Upstart’s minimum loan amount is $1,000, and its maximum loan amount is $50,000.

A 3-year and 5-year term is available.

If you took out a $10,000 loan, and were able to obtain a fairly good interest rate (say, 7.55%), you would end up paying $311.29 monthly.

What Requirements Do You Need?

While Upstart prides itself on taking education, area of study, and job history into consideration, they still require a minimum FICO score of 640. They also look at your debt-to-income ratio, and you need to be in good standing on all of your accounts to qualify. You can’t have any accounts in delinquency or collections.

If you have insufficient credit history, Upstart will take your application into consideration.

There is no minimum income required to qualify, but you do need to have a debt-to-income ratio of less than 50%.

You also need to have a degree from an accredited institution or be graduating within the next 6 months. Otherwise, you must be accepted to a supported bootcamp starting within 3 weeks from when you apply for the loan, and be actively seeking employment upon graduation from the bootcamp.

Having a full time job (or a full time job offer starting in six months), or another source of regular income is recommended.

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The Fine Print: Fees

There are fees associated with Upstart. First, there is a loan origination fee, ranging anywhere from 2.8%-6%, depending on the grade of your loan. This fee is rolled into the APR.

Next, if you fail to make a payment within 10 days of your due date, you can be charged a late fee, which is the greater of 5% of the past due amount or $15. If you don’t make any payments within 30 days of the due date, Upstart will report your loan as delinquent to the credit bureaus.

If you prefer to pay by check, you will incur a $15 check processing fee.

If your check bounces, or you have insufficient funds in your bank account, you’ll incur a $15 fee.

There is no prepayment penalty.

What Documents Are Needed to Apply?

You’ll need the standard color photo ID, proof of employment, and proof of income. If you have regular sources of income from full time or part time jobs, you can upload your most recent paystubs.

If you earn any bonuses or commission, you need an offer letter that lists target bonuses or a commission structure that lists target commission levels.

If you have rental income, you’ll need your lease, which should show your full name, monthly amount, and lease term.

If you have side gigs (such as income from being an Uber or Lyft driver), you’ll need to have earned a consistent income for six months before Upstart can take it into consideration. If you meet that requirement, you just need to upload the proof of six months of consistent income.

If you’re self-employed and a sole proprietorship, you’ll need a copy of last year’s tax return and this year’s invoices. They’ll look at Line 31 of your Schedule C.

If you’re involved in a partnership or LLC, you’ll need last year’s personal tax returns that show your portion of income and this year’s invoices.

You might need to provide bank statements or proof of home ownership (if you own a home), but this will vary on an individual basis. Once you complete the application, Upstart will notify you of what you need.

Additionally, if you graduated within 4 years of your application date, you’ll also need your standardized test scores, which you can take a photo of, or take a screenshot of online, and a copy of your transcript.

Who Benefits the Most from Upstart?

Upstart is a great solution to those in their twenties who are finding it difficult to obtain a reasonable personal loan elsewhere. Their interest rates are competitive with the other peer-to-peer lending companies, plus they’re willing to lend to those who have thin credit histories, whereas many companies are not.

If you’re a young adult who doesn’t have a lengthy credit history, but has a decent credit score, and are looking to pay off debt (credit card, medical, auto, or student loans), or finance a larger purchase (such as a wedding or travel), then Upstart’s personal loan is a good fit.

Lastly, if you fit this profile and need a loan quickly, accepting your loan before 5pm ET means you’ll have the funds in your account the next business day (unless you’re paying off private student loans). The entire process is efficient and done completely online.

Remember: if you don’t accept the loan, you won’t receive a hard inquiry on your credit report, only a soft one. In any case, borrowers typically have a 45-day window to shop around for personal loans. Credit bureaus recognize that you’re attempting to get the best rate possible, and will count all inquiries during this time as one inquiry.

If Upstart doesn’t sound like the right fit for you, then explore other personal loan offers with our customizable table

The post Upstart Loan Review: Low Rates for Recent College Grads appeared first on MagnifyMoney.

Attention Online Loan Shoppers, There’s Now a Place to Take Your Gripes

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Consumers with complaints about firms offering person-to-person loans can now register their displeasure with the Consumer Financial Protection Bureau, the federal regulator announced this week. The watchdog also published a consumer bulletin with general information about the “P2P” lending industry, also known as “marketplace lending.”

“When consumers shop for a loan online we want them to be informed and to understand what they are signing up for,” said CFPB Director Richard Cordray in a press release. “By accepting these consumer complaints, we are giving people a greater voice in these markets and a place to turn to when they encounter problems.”

There’s no reason to believe complaints are swirling around P2P lending at a higher rate than traditional lending. The CFPB has merely updated its systems to account for this new segment of the financial industry. But the announcement comes as the marketplace lending industry has hit a few bumps in the road.

What Is P2P Lending?

P2P lending is mostly what it sounds like: market makers like Prosper.com match people who want to borrow money — in Prosper’s case, up to $35,000 — with people who want to lend and get decent returns. Interest rates are high, averaging around 15%, but can be substantially lower than bank personal loan rates or credit card rates.

Lenders must follow consumer protections like the Truth in Lending Act and the Fair Debt Collection Practices Act, so the marketplace is fairly heavily regulated. Still, growth has been explosive. From 2010 to 2014, the national online lending market grew from $1 billion in loans to $12 billion, and Morgan Stanley estimates that by 2020 the volume will grow to $122 billion.

But there have been bumps in the road recently. In December, the California Department of Business Oversight announced it had opened an inquiry into the industry.

“These online lenders are filling a need in today’s economy, and we have no desire to squelch the industry or innovation,” CDBO Commissioner Jan Lynn Owen said in a press release. “We have a duty, however, to protect California consumers and businesses, and they have more and more at stake as this industry grows. We want to assess the effectiveness and proper scope of our licensing and regulatory structure as it relates to these lenders.”

Prosper told Credit.com it’s cooperating with the CDBO.

In February, citing a “turbulent market environment,” Prosper announced it was raising interest rates by an average of 1.4% to 14.9%. (Lending Club announced it was raising its rates back in December.)

At nearly the same time, Moody’s said it placed bonds linked to Prosper loans “on review for downgrade,” warning of higher default rates.

“Moody’s original estimates of loss were well below Prosper’s internal forecasts as well as those set by rating agency Fitch,” said Sarah Cain, Prosper spokeswoman. “Most importantly, our portfolio of unsecured consumer loans continues to deliver net returns between 6-8%.”

Vetting P2P Loans

Of course, plenty of other loans — like car loans — are also facing higher default rates. And an “inquiry” should not be considered an investigation. Still, the activity has spooked investors; Lending Club, which is publicly traded, has seen its share price cut by more than half in the past year. (Lending Club did not respond to request for comment regarding the CDBO investigation and the recent Moody’s downgrade.)

Consumers, however, should maintain a critical eye when considering marketplace loans, as the CFPB suggests. The traditional advice about obtaining any kind of loan applies – shop around, know your credit score before you apply, borrow as little as possible. (You can check your credit by pulling your credit reports for free each year at AnnualCreditReport.com and viewing your credit scores for free each month on Credit.com.) The CFPB also makes a critical point to potential P2P borrowers: When using a new loan to repay an old one, make sure you are not losing any important protections.

“While some marketplace lenders may advertise lower interest rates, in some cases consumers could lose important loan-specific protections by refinancing an existing debt,” the CFPB warns. “Specifically, consumers should know that they may sign away certain federal benefits, such as income-driven repayment for federal student loans or servicemember benefits related to debt incurred prior to entering active duty.”

The CFPB marketplace lending brochure is available here.

Have you tried P2P lending? What did you think?

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Image: DragonImages

The post Attention Online Loan Shoppers, There’s Now a Place to Take Your Gripes appeared first on Credit.com.