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Upstart Review: Loans For Young Adults With No Credit History

If you’re a young working professional without a solid credit history, UpStart is probably your best chance at getting a loan. The streamlined application process takes only two minutes, and you can have the money you need the very next day.

Upstart

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    With so many lenders relying on your FICO score, it’s difficult for young adults without a credit history to get a loan. If you have a job that pays well and don’t have any debt, it’s likely you don’t have a credit history, making it nearly impossible to qualify for traditional credit. That’s because more than half of your FICO score depends on the amount you owe and your payment history.

    If you’re getting rejection letters from banks and aren’t getting anywhere with popular peer-to-peer lending sites, how can you borrow the money you need? In 2012, two former Google employees started asking themselves that same question. Their solution was to form a new company called UpStart. They created it to help young adults with little or no credit history get qualified for a loan.

    Whether you’re fresh out of college or have a few years of quality employment under your belt, UpStart is here to help you get a loan even without an extensive credit history.

    What is UpStart?

    UpStart is a peer-to-peer (P2P) lending model that matches borrowers with lenders to cut through the red tape of traditional banking procedures. People looking to borrow money but who might not qualify under usual standards are flocking to P2P marketplaces like UpStart because it makes borrowing so easy.

    With P2P platforms issuing $5.5 billion in loans in 2014, the rising popularity is expected to increase this to $150 billion or more by 2025, according to a PriceWaterhouseCoopers report. But unlike most P2P lending sites, UpStart doesn’t rely solely on the traditional FICO score for your loan approval.

    Even though you need a minimum credit score of 620, UpStart looks into other financial indicators to see if you’d be a reliable borrower. Using their unique algorithm, they review your income, education, job history, and standardized test scores to determine if you’re a good candidate for a loan.

    UpStart has been able to increase the number of people who are approved for a loan by 173 percent compared to large banks. At the same time, they’ve significantly reduced the rate of non-paying accounts through their in-depth underwriting process, and see 75 percent fewer defaults than traditional lending institutions.

    How does UpStart work?

    After entering a few personal details, and authorizing a soft pull on your credit, you can get approved for a loan with an UpStart-powered lender in as little as two minutes. And one of the best features of UpStart is that it doesn’t affect your credit score when you apply because it makes a “soft inquiry” of your credit history.

    Assuming you review and accept the terms of your loan by 5 p.m. EST, your money is deposited into your bank account the next day.

    Taking a minute to set up automatic payments makes paying back your loan easy because you can set it and forget it. Plus, there’s no penalty for paying back the money you borrowed early. So, if you suddenly come into some extra cash, you can use it to pay back the money you borrowed without worrying about added fees some banks charge for an early payoff.

    How can you use an UpStart loan?

    You can use loans from UpStart for almost anything. Borrowers typically use their funds to refinance their credit cards, but you can put it toward everything from repaying a student loan to buying a car or starting a business.

    A few other options to consider using a loan from UpStart include:

    What are UpStart loan requirements?

    UpStart targets borrowers who are in their 20s and 30s and who might not have a promising credit record. But even with their relaxed credit requirements, there are other qualifiers to meet to get approved.

    If you want to qualify for a loan with UpStart, you must:

    • Be at least 18 years old, unless you live in Alabama or Nebraska where you’re required to be 19 years old.
    • Have a residential U.S. address that you currently live at, though this requirement is waived if you’re on active military duty.
    • Reside in any U.S. state (except West Virginia or Iowa).
    • Have a valid email account.
    • Provide a verifiable name, date of birth, and social security number.
    • Provide a routing number from your U.S. bank account.
    • Have either a full-time job; full-time job offer starting in the next six months; or a regular part-time job or another source of steady income.
    • Meet UpStart’s minimum credit requirements.

    Who should consider UpStart?

    If you have a good job with a decent income but have been rejected by other lenders because you don’t have a long credit history, UpStart can work for you. You’re an ideal candidate for borrowing with UpStart if you have a minimum credit score of at least 620 and an annual income of $12,000 or more.

    With the low credit rating and minimal income requirements, UpStart is an excellent choice for college students working part-time and for individuals receiving disability benefits.

    Though P2P lending options like UpStart are increasingly popular for the younger generation of people in their 20s and 30s, you aren’t automatically rejected if you fall outside that age range. For young working professionals who need cash fast, UpStart may be a good fit even if you’re new to using credit.

    Who is UpStart NOT ideal for?

    UpStart goes beyond traditional lending requirements to consider other factors like education, employment history, and income to approve loans. But you might not qualify if your credit score is below 620 even if you have an excellent income.

    Sometimes you might meet the minimum requirements but are seen as so much of a risk that your interest rate is sky-high. In this instance, UpStart might not be your best option. After all, if your APR is nearing 30 percent, you could potentially qualify for a better rate on a credit card.

    Pros and cons of the UpStart loan program

    UpStart sets itself apart from other P2P lenders through their proprietary underwriting process, making them a better choice for people without a credit history.

    Before you jump in, you’ll want to consider the good and the bad of borrowing money with an UpStart Lending Program.

    Pro

    • Soft credit inquiry for checking rates protects your credit score.
    • Can be used to cover coding boot camp.
    • Eligibility doesn’t solely rely on your credit score.
    • Other factors like income and education help to determine loan eligibility.
    • No down payment.
    • No prepayment penalty.
    • Great customer service.
    • Get your money fast.

    Cons

    • Loans not available in West Virginia or Iowa.
    • Origination fees can be as high as eight percent.
    • Late payment fee is the greater amount of five percent of the monthly past due amount or $15.
    • Charged up to $10 to receive a paper copy of your records.

    UpStart compared

    Let’s compare Upstart’s to two other popular peer-to-peer lenders: Prosper and LendingClub.

    UpStartProsperLendingClub
    Best forYoung borrowers with little credit historyBorrowers with good creditBorrowers with good credit
    Credit needed620+640+ (but higher scores are more
    typical in Prosper borrowers)
    640+ (but higher scores are more
    typical in LendingClub borrowers)
    Loan amount you can borrow1,000 – $50,000$2,000 – $40,000$1,000 – $40,000
    Loan type(s)Personal loansPersonal loans
    Auto loans
    Small business loans
    Personal loans
    Business loans
    Auto refinancing
    Medical loans
    APR7.98% – 35.99%6.95-35.99%6.95%–35.89%

    Summary

    As one of the few lenders willing to go beyond traditional qualifiers to determine credit eligibility, UpStart is an excellent choice if you are rejected from other lenders. If you’re a young working professional without a solid credit history, this is probably your best chance at getting a loan.

    Keep in mind that taking on debt isn’t something you should consider lightly even if you can easily qualify for a loan. At times, borrowing is the best option, but sometimes the better solution is to cut back your spending and stick to a budget.

    If you do decide to borrow money, UpStart is a company that has earned high marks from its customers and offers competitive rates. The streamlined application process takes only two minutes, and you can have the money you need the very next day.

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    About Aja McClanahan

    Aja McClanahan is a best-selling author, blogger, and writer who covers personal finance and entrepreneurship. Her family's personal story of getting out of over $120,000 in debt has been featured in places like Yahoo! Finance, Kiplinger's, MarketWatch, U.S. News and World Report. She also writes regularly at her website, Principles of Increase, on topics related to money and business. You can connect with her on Twitter.

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