Upstart Debt Consolidation Loan Review
Upstart is an online lending platform founded by former Google employees, Anna Counselman, David Girouard, and Paul Gu. It offers debt consolidation loans with a unique way of determining a borrower’s risk.
Upstart has radically changed the market for personal loan by taking the loan process out of any “personal” hands. Upstart instead uses artificial intelligence to look at over 1600 data points, which include education level, area of study, and employment history; along with more standard qualifications like credit score and income.
These loans can be used for consolidating debt, specifically credit card debt.
Upstart claims its model can approve more borrowers at lower rates than traditional lenders like banks and credit unions. It operates off the notion that traditional lenders are too strict and cut off a lot of borrowers who actually would repay a loan.
According to a 2019 Upstart study, four in five Americans have never defaulted on a credit product, but less than half have access to prime credit.
Below, we’ll go over the specifics of an Upstart debt consolidation loan and help you figure out if you qualify.
- Type of Debt Relief – Debt Consolidation Loan
- Eligibility & Requirements – 620 credit score; fewer than six credit inquiries in the last 6 months
- Fees – 0%-8% Origination fee; $15 late fee; $15 ACH return or check refund fee
- Credit score impact – Minimal
- Consumer Reviews – Mixed
Pros & Cons of Debt Consolidation with Upstart
Pros of Upstart
- Loans as low as $1,000
- Prequalification option
- Funds by next business day
- Users can choose a custom payment date
Cons of Upstart
- No cosigner options
- APR’s as high as 35.99%
- Origination fees as high as 8%
- There is no mobile app to help manage your loan
Upstart has a relatively low credit score requirement and offers fast funding, but no cosigner option and rates as high as 35.99% mean Upstart could be costly for those with questionable credit.
Who Is Upstart Best For?
Upstart is a good choice for those who:
- Want the ability to change their payment date.
- Need funds fast.
- Don’t need to manage their loan from a mobile app.
- Have at least a fair credit score.
How Upstart’s Debt Consolidation Loan Works
Upstart offers loans ranging from $1,000 to $50,000. It offers 3-to-5 year repayment terms, but you don’t get to choose. Your loan term and rate are non-negotiable. They’re generated by Upstart’s AI lending model, based on the information that you entered on your application and a soft credit pull. Once Upstart reveals your rate, you can either take it or leave it. Fortunately, you can check your rates without doing any damage to your credit score and it won’t take more than a few minutes.
Credit Score and Other Factors
Like traditional lenders, Upstart takes credit scores, credit reports and income information into account.
The difference is that Upstart doesn’t stop there. Its artificial intelligence-based model also considers your current occupation and employer and your educational background – degrees, areas of study, schools you’ve attended.
The accumulation of all that data means that Upstart typically lends money to people with fair or good credit scores.
Annual Percentage Rate (APR)
Upstart’s interest rates are typically higher than their competitors’ rate. The average APR for an Upstart loan is 24.53%.
The minimum loan term for an Upstart loan is 3 years. Because Upstart’s model is based on artificial intelligence, the loan-term options are non-negotiable.
How to Apply for a Debt Consolidation Loan with Upstart
Knowing how to get a personal loan is the first step toward getting control of your debts. Upstart is worth considering as a primary option for personal loans that can then be used for debt consolidation. The easiest way to apply for a debt consolidation loan with Upstart is to head to its website and click the “Check Your Rate” button. You’ll be prompted to fill out information about:
- Desired amount
- Loan purpose
- Personal info, name, address, etc.
- Income and savings
You should be able to see your rate without uploading any supporting documents, like pay stubs or ID. However, once you accept the rate you will need to verify your bank account, which may require supporting documents.
The final step is passing the hard credit check, reviewing loan disclosures, and signing a promissory note. Upstart claims 99% of personal loan funds are sent just one business day after signing.
Upstart Eligibility & Requirements
Upstart boasts it uses over 1600 data points to determine your eligibility. However, that doesn’t mean all credit users are welcome to apply. You need a minimum 620 FICO or Vantage score to qualify for a debt consolidation loan with Upstart.
Your loan amount is based on your credit, income, and certain other information provided in your loan application. You may not qualify for the desired amount.
Your location will also make a difference in how much you can borrow with Upstart.
- The minimum loan amount in Massachusetts is $7,000.
- The minimum loan amount in Ohio is $6,000.
- The minimum loan amount in New Mexico is $5,100.
- The minimum loan amount in Georgia is $3,100.
- Upstart is not available in Iowa or West Virginia.
Upstart doesn’t give a desired debt-to-income ratio (DTI), but it does take this into account when deciding loan amount and eligibility. For reference, lenders prefer to see DTI’s under 36%. This would mean just over a third of your income was going towards repaying monthly debts.
Upstart won’t approve you if you have any bankruptcies or public records on your credit report. Nor can you have any accounts that are currently delinquent. Also, if you’ve had more than 6 inquiries on your credit report in the last 6 months (not including student loans, vehicle loans, or mortgages), you won’t qualify for a loan with Upstart.
Learn more about debt consolidation loans for bad credit.
Fees for Upstart’s Services
At Upstart, you can find debt consolidation loans with fixed rates between 7.04%-35.99%. There’s no prepayment penalty so you can pay off as much as you want (above the minimum requirement) as quickly as you want.
An Upstart debt consolidation loan comes with its fair share of fees. Most won’t affect you if you pay your bills on time and in full.
The first fee is an origination fee ranging from 0%-8% of the loan. Some lenders charge origination fees to help offset the cost of underwriting a loan. It’s a service fee that gets taken out of the initial loan amount.
If you were approved for a $30,000 loan with an 8% origination fee, your actual loan amount would be $27,600 because Upstart takes out the $2,400 origination fee before sending you the money. An 8% origination fee is considered high, so Upstart loses some points with consumers here.
There’s a late fee after a 10-day grace period. Upstart will charge you either 5% of the monthly past due amount or $15, whichever is greater.
Also, it charges an ACH return or check refund fee of $15. It will charge you this for trying to pay when you have insufficient funds in your account. This may happen if you had the funds ready when you initiated the payment but (since funds may take a few days to process) your account was short by the time it went through.
Generally, banks don’t like it when you try to pay bills without enough money in your account. They often charge their own overdraft fees, as well.
Is Upstart Right for Me?
An Upstart debt consolidation loan is a good choice for borrowers with credit scores of at least 620 who need to repay between $1,000-$50,000 in unsecured debts.
Upstart will consider borrowers with insufficient credit histories for a loan, but if you fall below the minimum credit score requirement, you need to improve your credit score before applying. Upstart doesn’t budge on this point, but it does promise to consider “alternative data” when determining loan eligibility.
College graduates should check out Upstart because its lending model favors educated borrowers. Upstart claims to evaluate a load of metrics that traditional lenders won’t consider: employment history, educational background or field of study, to name a few.
Upstart Reputation & Consumer Reviews
Upstart has an A+ accreditation with the Better Business Bureau. It has received 49 total complaints in the last 3 years. Of those, 35 complaints were closed in the last 12 months. For reference, Prosper, an online lending company has received 121 complaints with 46 complaints closed.
Upstart ran a study acknowledged by the Consumer Financial Protection Bureau (CFPB) where it compared its lending model to three hypothetical lending models. The hypothetical models represented the traditional models found at most banks.
Upstart wanted to compare loss and approval rates between itself and other lenders. It found it had higher approval rates, lower interest rates, and lower loss rates.
According to the Consumer Financial Protection Bureau, “The results provided from the access-to-credit comparisons show that the tested model approves 27% more applicants than the traditional model and yields 16% lower average APRs for approved loans.”
This means, in theory, Upstart’s lending model approves more applicants than other, traditional lending models. The lower loss rate means more people are paying back their loans.
If this is true, it means Upstart’s model works better than the others because it’s able to not only approve more borrowers but approve borrowers who repay their loans.
However interesting these findings may be, keep in mind they were the result of a hypothetical study and shouldn’t be taken as a guarantee. If you have good credit, you can find loans that offer lower APRs than Upstart. Continue to rate shop if you can and don’t assume you’re saving money just because your creditor says so.
Alternatives to Upstart
Upstart won’t work for everyone. Its AI-powered lending model may expand access to loans, but this doesn’t matter if the rates are too high, or if the terms are too narrow. Here are some alternatives for consolidating your debt:
Debt Management Plan (DMP)
A debt management plan has no credit score requirement. Think of it as debt consolidation without having to take out a loan. This is how it works: DMP agencies have agreements with credit card companies to reduce your interest rates (on average 8%, sometimes less). That allows you an affordable monthly payment to retire your debt in 3-to-5 years. You pay the agency once a month and the agency repays each of your creditors for you. This saves you the hassle of doling out funds to different creditors and minimizes your chance of missing a payment and paying late fees.
Another option is do-it-yourself debt consolidation, which allows you to bypass a DMP agency.
Wells Fargo Debt Consolidation Loan
Wells Fargo offers debt consolidation loans of up to $100,000 ($250,000 secured), and it accepts credit scores as low as 600 while offering interest rates under 6%. There are a lot of perks if you can get past the F rating the bank has with the Better Business Bureau because of its somewhat recent cross-selling scandal.
» Learn more about: Wells Fargo Debt Consolidation Review
Discover Debt Consolidation Loan
At Discover, you can find rates as low as 6.99% and they’ll never exceed 24.99%, which is a nice cap compared to Upstart’s high of 35.99%. You’ll find loans between $2,500-$35,000 and the only stated requirements are that you are a U.S citizen over 18 with an income of at least $25,000. There is a prequalification option as well, which means you can check if you qualify without harming your credit score.
» Learn more about: Discover Debt Consolidation Loans Reviews
While this article was designed to provide information and background about Upstart loans for debt consolidation, it was by no means designed to be your only stop on the road to a solution.
Anyone who has struggled with debt knows the warning signs: the monthly worry that your income won’t cover your obligations, checking your account balance as big payout dates approach, moving money around to make sure you don’t fall behind on anything.
Debt consolidation is a way to reorganize those stray debt payments in a way that reduces your stress and makes sure you make all your payments.
Upstart is one, newer approach to getting a personal loan for debt consolidation. Most banks and other financial institutions have their own versions. It is up to you to learn more about debt consolidation as an option to manage your finances.
Start here to lean more about debt consolidation.
About The Author
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.
- Ficklin, P, Watkins, P. (2019 August 6) An update on credit access and the Bureau’s first No-Action Letter. Retrieved from https://www.consumerfinance.gov/about-us/blog/update-credit-access-and-no-action-letter/
- N.A. (ND) Upstart. Retrieved from https://www.upstart.com/about#
- N.A. (ND) Borrowers. Retrieved from https://upstarthelp.upstart.com
- N.A. (ND) Business Profile: Upstart. Retrieved from https://www.bbb.org/us/ca/san-mateo/profile/loans/upstart-1116-545147
- El-Bawab, N. (2022, April 13) Upstart offers accessible personal loans for people with fair or average credit – here’s our full review. Retrieved from https://www.cnbc.com/select/upstart-personal-loan-review/