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Upgrade Debt Consolidation Loan Review

Upgrade’s mission is to provide customers with financial options that fit their circumstances, as well as offer a more streamlined experience than what they’d receive from a bank.

The company, which also does business as Universal Credit, has launched some innovative products that go beyond typical online lenders, including a credit card with a fixed payment term, rather than revolving credit.

Upgrade was started in 2016 by Lending Club founder Renaud Laplanche, and it uses the marketplace model that Lending Club used when it began. This means it’s not a bank. Debt consolidation loans, and other Upgrade personal loans, are funded by small banks and more than 100 credit unions. Partnering with small banks and credit unions keeps rates lower than what many traditional online lenders offer, and also gives potential borrowers a greater range of offers to choose from.

Upgrade debt consolidation loans are $1,000-$50,000 with 24-84 month terms and 8.49%-35.99% APRs. There is an origination fee of 1.85%-9.99%, depending on the lender and the applicant’s qualifications.

Applicants with good credit will see multiple offers with a variety of terms and rates, then choose the best fit. The best Upgrade debt consolidation rates are reserved for borrowers with good credit who opt for autopay and opt for a portion of the loan to go directly to creditors. Applicants with poor-to-bad credit can expect to get fewer offers, and the ones they do get will likely have high APRs and origination fees.

Snapshot:

  • Type of Debt Relief – Debt consolidation loan
  • Eligibility and Requirements – Minimum credit score 580-620
  • Rates and Fees – 8.49%-35.99% APR, 1.85%-9.99% origination fee; $10 late fee, $10 returned payment fee.
  • Credit Score Impact –Minimal to check rates; hard pull to apply
  • Consumer Reviews – Positive

How Upgrade Debt Consolidation Loans Work

A debt consolidation loan is a loan that pays off a borrower’s high interest debt, usually credit cards. Even though it means borrowing money to do it, the loan has a lower interest rate than what’s being paid off, and fixed repayment term, so it saves money. The right debt consolidation loan will cost you less both monthly and in the long run.

Let’s look at the steps to apply for an Upgrade debt consolidation loan.

Pre-approval process

Like many online lenders, Upgrade has a pre-approval process that allows a potential borrower to check rates and terms without a hard credit pull. That means shopping around doesn’t lower your credit score.

To check Upgrade’s rates on the company’s website, you fill in how much you want to borrow and what the money is for, then click on “check your rate.” It will ask for your name, address, income, and Social Security number so it can check your credit score.

Loan Offers

When you check your rate, Upgrade will show you loan offers that include amount, term, APR and how much the monthly payment would be.

If you don’t have good credit, or have a lot of debt, you may not see offers with the amount you requested, but Upgrade will show offers that reflect the highest amount you qualify for. You also may not see much of a choice of loan terms or rates.

To get the lowest rates on an Upgrade debt consolidation loan, you must elect autopay – which means that your monthly payment is taken directly from your bank account – and you must also have a portion of the loan go directly to pay creditors.

Applying for a Loan

When you move forward with an offer, Upgrade will run a hard credit check. This causes a brief negative impact on your credit score; the more hard pulls you have in the space of two or three years, the more negative effect it has.

If you are approved, the money will be in your account as soon as the next business day. If Upgrade is directly paying creditors, that money may take up to two weeks to clear.

You can ask for more than what you need to pay creditors and the money that doesn’t go directly to creditors will go into your account.

If the offer is through a credit union, you may be asked to become a member. This usually means opening a checking or savings account for an among between $5-$25. Upgrade will give you details in these cases during the application process before the loan is funded.

Direct Payment Option

Upgrade debt consolidation loans let you choose to have payments go directly to the creditors that you want to pay off. Picking this option gets you a lower APR. You tell Upgrade which creditors to pay and what amounts, and the money is sent directly to them upon approval.

Origination Fee

The origination fee of 1.85%-9.99% is based on your creditworthiness and deducted from your loan amount upon disbursement. That means, for example, if you are approved for a $10,000 loan, and the origination fee is 9.99%, then $999 will be deducted from the loan and you will receive $9,001. Keep this in mind when you are figuring out what amount you will apply for, particularly if most of your loan will be going to pay creditors. You want to be sure you have enough money to do what you had planned.

Upgrade Eligibility and Requirements

Credit profile will have a significant impact on what rate you are offered when you apply for an Upgrade debt consolidation loan. This includes your credit score, debt-to-income ratio (the amount of your monthly debt payments vs. your gross monthly income), and how long your credit history is.

Since Upgrade is a marketplace lender, and loans are sold to banks and credit unions, the requirements for getting a loan will vary. Industry experts say that a credit score minimum between 580-620 is necessary to qualify. Upgrade says many of those who don’t qualify don’t have a substantial enough credit history.

Stronger credit profiles will qualify for higher loan amounts and more of a variety of term and rate options.

To be considered for an Upgrade debt consolidation loan, you must:

  • Be a U.S. citizen or permanent resident, or living in the U.S. on a valid visa.
  • Be at least 18 years old (age may be higher in some states).
  • Provide a verifiable bank account.
  • Provide a valid email address.
  • Have a credit history.

Upgrade Debt Consolidation Loan Fees and Rates

Upgrades APRs are 8.49%-35.99%, and origination fees are 1.85%-9.99%. Both are based on credit score and credit history, as well as employment situation and income.

But decisions you make while applying for the loan also have an impact on the rate. To get the lowest APR on an Upgrade debt consolidation loan, you must also elect autopay and designate a portion of your loan to directly pay off creditors.

Upgrade has a returned payment fee of $10 for payments that are 15 days or more late, and a $10 late payment fee. Both are lower than many other online debt consolidation loan companies.

Be sure you understand that you will pay interest on the entire loan, even if a portion of it goes directly to creditors. Borrowers who get a debt consolidation loan are borrowing the full amount, then using some or all of what they’ve borrowed to pay off other debt. The borrower repays Upgrade (or any other lender), for the total amount borrowed and pays interest on that totally amount, including the portion that went directly to other creditors.

Pros and Cons of Upgrade Debt Consolidation Loans

Upgrade offers a variety of loan options, giving borrowers who want to pay down, or eliminate, debt a lot of leeway in choosing the best fit. The better your credit and track record when it comes to borrowing, and paying back, money, the more options you’ll have. The lowest APR is less than what many online lenders offer, but to get it you must meet several requirements, with good credit just one of them. The more serious you are about using the loan to pay off other debt, the more the pros will outweigh the cons.

Pros of Upgrade

  • Partnerships with small banks and credit unions mean a variety of offers.
  • Minimum APR is lower than many online lenders.
  • Option to directly pay creditors.
  • Cash back option, even with direct pay.
  • $1,000 minimum loan amount.

Cons of Upgrade

  • Origination fee, which may be as high as 9.99%.
  • Origination fee deducted from approved loan amount.
  • Potentially high APR.
  • Must enroll in autopay, directly pay creditors to get best rates.
  • If offer is a credit union loan, you may have to become a member to get the loan.

Is Upgrade Debt Consolidation Loan Right for Me?

Upgrade says that its average borrower is in their 40s with an income above $100,000. That’s probably because an Upgrade debt consolidation loan is best for someone with good credit and a solid credit history who is serious about unloading high-interest credit card debt.

Since Upgrade pulls loan offers from a variety of lenders, even those with less than good credit may find an offer that appeals to them, but the worse your credit, the more limited those options will be.

The fact that Upgrade offers a minimum $1,000 loan may appeal to some borrowers, even those who don’t get a great rate, if they just want to pay off a small high-interest credit card balance. As long as the APR offered by Upgrade is less than that on the credit card, you’ll save money.

Upgrade’s Reputation and Consumer Reviews

Upgrade has an A+ rating with the Better Business Bureau, which means that it does an excellent job of handling customer service.

Customer reviews are mainly positive, with the top reviews praising Upgrade’s transparency and timely loan funding. A speedy approval process was a common theme among satisfied borrowers, and those who needed customer service said representatives were helpful and friendly.

Negative reviewers complained about loans with interest rates higher than they expected, or not being approved at all after getting offers. Some complained about the high origination fee taking a big chunk out of their approval amount.

As with many online reviews, some negative reviewers didn’t understand the process or how Upgrade works. If you’re borrowing money, read everything in the agreement and all the other information the company offers, before you sign. That way you won’t have any unhappy surprises.

Scams Posing as Upgrade

Upgrade’s name and logo have been used in several online loan fraud scams. The company reminds potential borrowers that it will never ask for upfront fees when applying (the origination fee is taken from the loan when it’s disbursed).

Upgrade only takes loan applications online at Upgrade.com. It doesn’t accept them by email or on any other website. It has no affiliation with Priority Loan Servicing, Priority Payday Loan or Cash Priority Loan Servicing.

Alternatives to Upgrade Debt Consolidation Loan

If you don’t qualify for an Upgrade debt consolidation loan that works for you, there are online loan alternatives, including options get a loan with bad credit.

Other online loan options are:

Lending Club once had a lending marketplace model similar to Upgrade’s, but now it’s changed that, and is one of the nation’s biggest online banks. Debt consolidation loans range from $1,000-$40,000, and terms are restrictive, either 36 or 60 months. You may qualify with a credit score as low as 600, but with 3%-6% origination fees and 9.57%-36%, the rate may be high. In order to qualify, debt-to-income ratio must be below 40%.

PenFed Credit Union, officially Pentagon Federal Credit Union, is a good option if you like the low rates offered by credit unions. PenFed has 7.74%-17.99% APRs, and no origination fee. It offers loans up to $50,000, with terms up to 60 months. To get your loan, you must become a credit union member, which requires opening a savings account for a minimum of $5. It’s a great option for military personnel, particularly those who are deployed overseas, since it originated as a credit union for military and civilian defense employees and caters to that market. But anyone is eligible to join.

Prosper, the original peer-to-peer lender, doesn’t specify a minimum credit score, but its website says scores under 600 likely won’t qualify. It allows up to a 50% debt-to-income ratio, offers loans of $2,000-$50,000 and terms of 24-60 months. APRs are 6.99%-35.99%, and origination fees 2.41%-5%.

Debt Management Plan as an Alternative to Debt Consolidation Loans

Debt management plans are open to borrowers no matter what their credit score is. A poor credit score won’t stop you from consolidating high interest unsecured debts and simplifying monthly payments. And a high score won’t bar you as ineligible for the plans, which are offered by nonprofit credit counseling agencies.

A debt management plan is not a loan, but a great way to eliminate or pay down debt without borrowing more money to do it.

An agency counselor talks to you – at no charge – about your finances, budget, and debt. They are required by law to make suggestions that are in your best interest rather than sell you a product.

If you and the counselor agree that a DMP is a good option, the credit counseling agency works with your creditors to lower your interest rates and waive fees. You make one fixed monthly payment to the agency, based on your budget, and the agency pays your creditors. The plan will eliminate your debt in 3-5 years.

About The Author

Bents Dulcio

Bents Dulcio writes with a humble, field-level view on personal finance. He learned how to cut financial corners while acquiring a B.S. degree in Political Science at Florida State University. Bents has experience with student loans, affordable housing, budgeting to include an auto loan and other personal finance matters that greet all Millennials when they graduate. He has a prodigious appetite for reading, which he helps feed with writing from Scottish philosopher Adam Smith, the “Father of Capitalism.” Bents writing also has been published by JPMorgan Chase, TheSimpleDollar and Interest.com.

Sources:

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