Upstart vs Upgrade: Which Personal Loan is Right for You?
- September 9, 2024
- 10 min read
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When it comes to personal loans, Upstart and Upgrade are two popular options for borrowers. Both lenders offer competitive rates and flexible terms, but which one is right for you?
Quick Answer: Upstart vs Upgrade
- Upstart: Ideal for those with thin credit files or non-traditional financial backgrounds. Uses AI for a holistic assessment.
- Upgrade: Best for debt consolidation, offering direct creditor payments and longer repayment terms.
- Choose Upstart if you have limited credit history or want a more comprehensive evaluation of your financial situation.
- Choose Upgrade if you’re consolidating debt, need a co-applicant, or prefer longer repayment terms.
- Compare offers from both lenders to find the best rates and terms for your specific needs.
If the answer is still not clear, let’s dive into a deeper comparison of Upstart vs Upgrade to help you make an informed decision about your personal loan.
Overview of Upstart and Upgrade
Both Upstart and Upgrade provide personal loans for various purposes, including debt consolidation, home improvements, and major purchases. Here’s a quick comparison:
| Feature | Upstart | Upgrade |
|---|---|---|
| Loan amounts | $1,000-$50,000 | $1,000-$50,000 |
| APR range | 7.8%-35.99% | 8.49%-35.99% |
| Loan terms | 36-60 months | 24-84 months |
| Minimum credit score | None specified | 600 |
| Origination fee | 0% to 12% | 1.85% to 9.99% |
| Funding time | As soon as one business day | As soon as one business day |
Upstart: Ideal for Thin Credit Files
Upstart, founded in 2012, is known for its innovative approach to lending that goes beyond traditional credit scoring.
Key Features:
- AI-Powered Underwriting: Upstart uses artificial intelligence and machine learning to assess borrower risk, considering factors like education, area of study, and job history.
- Fast Funding: Loans are typically funded within 1-2 business days after approval.
- No Prepayment Penalty: Borrowers can pay off their loans early without additional fees.
- Soft Credit Pull: Upstart performs a soft credit pull for initial rate checks, which doesn’t affect your credit score.
- Financial Education: Offers free credit counseling and financial education resources.
Upstart’s Unique Loan Approval Approach
Upstart takes a holistic view of applicants, moving beyond traditional credit scoring. Their evaluation process incorporates:
- Academic achievements
- Career progression
- Overall financial picture
This comprehensive assessment allows Upstart to consider applicants as more than just a credit score number.
Ideal Borrowers for Upstart Loans
Upstart’s innovative approach makes it particularly well-suited for:
- Those new to credit or with minimal credit history
- Individuals with average credit scores
- Applicants with strong educational credentials or promising career trajectories
By looking at these broader factors, Upstart aims to provide loan opportunities to qualified borrowers who may be overlooked by more conventional lenders.
Pros of Upstart
- No minimum credit score requirement
- Considers factors beyond credit score
- Competitive starting APR
Cons of Upstart
- Higher maximum origination fee
- Shorter maximum loan term
Further reading: How to Get a Personal Loan with Bad Credit
Upgrade: Best for Debt Consolidation
Upgrade, launched in 2017, focuses on providing accessible credit and mobile banking services.
Chosen 2,265 times- High Trustpilot Rating
- No prepayment fees
- Fast Funding
- Helpful Support Team
Key Features:
- Credit Health Tools: Offers free credit monitoring and educational resources to help borrowers improve their financial health.
- Direct Payment to Creditors: For debt consolidation loans, Upgrade can pay creditors directly.
- Joint Application Option: Allows co-applicants, which can help borrowers qualify for better rates.
- Flexible Loan Use: Loans can be used for various purposes, including home improvements, major purchases, and business expenses.
- Rewards Checking: Offers a checking account with cash back on debit card purchases and no account fees.
Ideal Borrowers for Upgrade
Upgrade’s unique features make it an excellent choice for specific types of borrowers, particularly those looking to consolidate debt:
- Long-Term Debt Planners: With repayment terms extending up to 84 months, Upgrade caters to borrowers who prefer smaller monthly payments spread over a longer period.
- Debt Consolidation Seekers: Upgrade’s direct payment to creditors simplifies the consolidation process, making it ideal for those juggling multiple debts.
- Co-Borrowers: The option for joint applications allows couples or partners to combine their financial strengths, potentially qualifying for better rates or higher loan amounts.
- Credit Improvers: For those aiming to streamline their finances and boost their credit score, Upgrade’s debt consolidation features offer a structured path to financial health.
These tailored features empower borrowers to take control of their debt, potentially reducing interest costs and simplifying their financial lives in the process.
Pros of Upgrade
- Longer repayment terms
- Direct payment to creditors
- Allows co-applicants
Cons of Upgrade
- Higher minimum APR
- Requires a minimum credit score of 600
How to Choose Between Upstart and Upgrade
When deciding between Upstart and Upgrade, consider the following factors:
- Credit profile: If you have a thin credit file, Upstart might be more forgiving.
- Loan purpose: For debt consolidation, Upgrade’s direct payment feature is advantageous.
- Repayment flexibility: Upgrade offers longer terms, which could mean lower monthly payments.
- Co-applicant option: If you want to apply with a co-borrower, Upgrade is the way to go.
Remember to compare offers from multiple lenders to find the best personal loan for your needs.
How to Improve Your Chances of Approval
Whether you choose Upstart or Upgrade, improving your loan application can increase your chances of approval and potentially secure better terms. Here are some steps you can take:
1. Check Your Credit Report
Before applying, obtain a free copy of your credit report from each of the three major credit bureaus. Review them for errors and dispute any inaccuracies.
2. Improve Your Credit Score
- Pay bills on time: Set up automatic payments to ensure you never miss a due date.
- Reduce credit utilization: Try to use less than 30% of your available credit.
- Keep old accounts open: Length of credit history positively impacts your score.
3. Increase Your Income
- Consider taking on a part-time job or freelance work.
- If you’ve recently received a raise, make sure your application reflects your new income.
4. Lower Your Debt-to-Income Ratio
- Pay down existing debts where possible.
- Avoid taking on new debt before applying for a loan.
5. Gather Necessary Documentation
Have these documents ready:
- Proof of income: Recent pay stubs, tax returns, or bank statements
- Identification: Government-issued ID
- Proof of address: Utility bills or lease agreement
6. Consider a Co-signer (for Upgrade)
If you’re applying with Upgrade, a co-signer with strong credit can improve your chances of approval and potentially lower your interest rate.
7. Be Honest on Your Application
Provide accurate information about your income, employment, and debts. Lenders verify this information, and discrepancies can lead to rejection.
8. Apply for the Right Loan Amount
Request only what you need and can afford to repay. This demonstrates financial responsibility to lenders.
By following these steps, you can present a stronger application to either Upstart or Upgrade, increasing your chances of approval and potentially securing more favorable loan terms.
Further reading: What Credit Score is Needed for a Personal Loan?
How to save $619.00 on your loan
The price difference for a $500.00 loan in 90 days is $619.00.
Frequently Asked Questions
Can I get a personal loan with bad credit?
Both Upstart and Upgrade consider borrowers with fair credit. Upstart may be more flexible for those with lower credit scores. Learn more about bad credit loans.
How fast can I get my loan funds?
Both lenders offer funding as soon as one business day after approval.
Is there a prepayment penalty?
Neither Upstart nor Upgrade charges prepayment penalties on their personal loans.
Can I use these loans for any purpose?
Yes, both lenders offer personal loans for various purposes, including debt consolidation, home improvements, and major purchases. However, it’s important to understand the terms and conditions of your specific loan agreement.
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