Qualifying for a personal loan can be daunting for borrowers with limited credit, especially if they are trying to consolidate credit cards or finance a project.Thankfully, companies like Upstart are challenging the traditional loan approval metrics and using their artificial intelligence (AI) platform to connect borrowers with more lenders than they may have had access to before.While Upstart currently only offers two loan repayment plans, they can still be an excellent resource for potential borrowers who can manage a personal loan but may not qualify with traditional metrics.This review will discuss how Upstart approaches personal loans and help you decide if they may be a good fit for your finances.
Traditional lenders generally only take debt, income, assets, and credit score into account when deciding whether to approve an applicant for a loan. Upstart turns this model on its head by using their AI platform to check for factors such as college education, home location, work history, and more to provide credit to many more applicants.
If you are interested in applying for a loan on Upstart, remember they may charge origination fees and only offer three and five-year repayment options. Thankfully, Upstart accepts most payment options, including checks, online autopay, and more.
Personal loans are installment loans provided by banks and other financial institutions to consumers who meet predetermined lending criteria. Most lenders specialize in working with borrowers across different credit scores and financial positions.
Most personal loans are either secured or unsecured. Secured loans have collateral attached to them, such as a bank account, a car, or another asset that can be sold to guarantee the lender will not lose money in case of default.
Unsecured loans are more common because they are easier to underwrite and often carry higher interest rates to offset the financial institution’s lending risk.
Personal loans are often excellent tools for consolidating high-interest debt and tying many smaller lines of credit into one simple monthly payment. For example, many credit cards have interest rates above 20%, and revolving credit lines can continue to grow if left unchecked. By consolidating a handful of credit cards into a personal loan, borrowers can lower their overall interest paid and potentially save thousands of dollars over the loan term.
Since personal loans have a fixed end date, borrowers do not need to worry about the balance growing as long as they meet their monthly payment obligations.
Upstart and other lenders provide a predictable monthly payment schedule for their borrowers. One of Upstart’s monthly payment benefits is the option to change the monthly payment at the borrower’s discretion.
Changing payment dates can be beneficial for managing cash flow or accommodating a job change that may result in a different payday. However, potential applicants should understand that changing the payment date with Upstart does not change the original duedate. For example, if the actual date is the 3rd of every month, borrowers can change the payment day to the 13th because it does not break the 15 day grace period. But if they changed the date to the 20th, then the payment would be considered late and could incur late payment fees.
The Upstart application process begins with filling out an online application. Upstart can run a soft credit check to see if you prequalify for funding.
After filling out the initial application, you can complete your profile and verify your bank information and personal credentials. If your profile matches Upstart’s criteria, you will receive an approval notification and begin the funding process.
Funds can be sent in as little as one business day after approval, and once you have them, you can begin your monthly payments. If you use the funds for credit card consolidation, Upstart can send the funds directly to your creditors, which streamlines the entire debt consolidation process.
Upstart is taking a new approach by leveraging AI and alternative data to help connect new borrowers with personal loans. Since Upstart utilizes information like college experience and home location to bolster their models, more applicants than ever can qualify for credit.
If you are considering Upstart, you probably prefer quick access to funds and may have a limited credit history but a strong work history.
To learn more about personal loans, be sure to check out our other guides and reviews!