Upstart loans are great for college students and recent graduates with no credit score
I’ve been writing about personal loans and credit for a few years now and have been using since my early 20s. One of the things I’ve noticed about loans and credit over the years is that there are really no options for students or recent graduates. This portion of the population has no credit history and usually a bad credit score…and no chance of getting a loan.
A new peer lending site called Upstart is changing all that to bring loans to one of the most deserving but unserved areas of the market. Upstart loans are available to anyone but it’s really college students and graduates that have the most to gain on the platform.
I thought I would review Upstart loans site to see how it is using its unique credit rating system to help students get the money they need.
How is Upstart Peer Loan Different from Other Peer Loan Sites?
Like all other personal loan sites, Upstart uses your credit score and credit report to start your application process for a loan. It factors in your monthly income, debt-to-income and other credit measures to determine whether it can approve your loan.
This is all many people need for peer loans. If you’ve got years of credit history then you can usually get a loan from most websites. If you’ve just graduated or have no credit history then it’s an entirely different story. Few online loan sites are willing or able to measure the credit risk for someone with no credit…so you get no loan.
That’s where Upstart loans come in. The site uses a unique credit model that can take into account your academic history and student records. Upstart was founded by a group of Google employees so it should be no surprise that the peer lender is able to use software that can go beyond the traditional credit score system.
This new system is making Upstart loans extremely popular with students and graduates. Loan originations have jumped over the last two years, increasing seven-fold since the company started making loans in 2014.
Upstart is a peer lending site which means that individual investors fund the loans rather than the website. Upstart manages borrower verification, sets the interest rate and collects monthly payments but then passes the money directly on to investors.
The peer lending process means it may take a day or two longer for a loan to get completely funded but many loans are still closing within a week. The tradeoff to waiting a little longer compared to some of the instant funding websites like personalloans.com is that rates are usually lower on peer lending sites.
Upstart Peer Loans Rates and Fees
Borrowers with a credit history and an established credit score will need a 640 FICO or higher for an Upstart loan. This is similar to other peer lending sites like Lending Club but Upstart doesn’t require a minimum level of income. If your credit score is lower than 640 then you might still be able to get a loan if you are a student or recent graduate.
Students and graduates can apply for an Upstart loan by submitting their academic records along with proof of SAT scores and a college transcript. You’ll have to dig up a few documents but it may be the only loan option if you have no credit history.
Interest rates for Upstart loans are currently ranging from 4.66% up to 30% depending on your credit score or other factors. The starting rate is well below most other peer lenders and personal loan sites though the upper range is about the same. Loans are available from $1,000 up to $50,000 and for three- to five-year terms on monthly payments.
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
The fact that Upstart loans are really best for students and graduates shows through in their loan profile. Almost all borrowers are college graduates.
If you have bad credit or just a credit score under 640 FICO (which isn’t really that bad, about a third of Americans are below) then check out these three credit score hacks to boost your credit. It can take months to start increasing your credit score so it pays to get started before you need to apply for a loan.
If you don’t qualify for one of Upstart loans because of poor credit or you are not a student borrower, try some of the personal loan sites in our top 10 list of online lenders. Some can lend to borrowers with credit scores as low as 550 FICO.
How to Use Upstart Personal Loans to Build Your Credit Score
Good credit and access to low-interest loans is something of a chicken-or-egg situation. You won’t be able to get good loans until you increase your credit score but you can’t increase your credit score until you have some loans.
Fortunately for recent college grads or others with little or no credit, there are options like Upstart or shared credit cards to build your credit.
Understand getting a personal loan or a shared credit card, where you become an authorized user on someone’s card, isn’t an excuse to overspend but it can be a good tool to get started on building credit.
Remember these points when using a personal loan from Upstart to build credit:
- Only borrow as much as you need and on monthly payments you are sure you can afford
- Set up an email reminder for payments and automatic debit to make sure you make every payment on-time to build your credit history
- Use personal loans to pay off high-interest credit card debt or necessities but never for unnecessary spending
- Check your credit report at least once a year for errors
Upstart Loans Review Summary for Recent College Graduates
I like the fact that Upstart has opened up the market for loans to people with no credit history, a group that has been locked out of credit for so long. Because the website follows the peer lending model for loans, it’s able to offer lower interest rates that some other online sites.
There are a few things I don’t like about Upstart loans and I came across a few complaints about Upstart in my review. The requirement for a credit score of 640 or higher shuts out a lot of borrowers and if you are not a student or graduate then the site can’t help you. The task of pulling together all your academic records and SAT scores is kind of a pain also but really the only option for student borrowers.
Upstart Loans Review Pros:
- Unique loans model opens lending up to graduates and students with no FICO score
- Lower rates for some borrowers compared to other online lenders
- Peer lending opportunity for investors
Upstart Loans Review Complaints:
- Credit score of 640 or higher shuts out many borrowers
- Increased document verification for student and graduate borrowers
For people in their focus market, Upstart loans is a big relief to getting the money you need. If you are a student or recent graduate with bad credit or no credit history, Upstart loans may be your only option outside the Bank of Mom and Dad. For other borrowers with bad credit, there isn’t much that puts Upstart ahead of other peer loan sites but it can still offer lower rates and comparable fees.