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Upgrade vs Upstart

REVIEW
 
 
REVIEW
 
 
Loan Amount
$1,000 - $50,000
$1,000 - $50,000
Maturity
3 to 7 Years
3 years or 7 Years
Origination Fee
1.85% 9.99%
0% to 12%
APR
8.49% - 35.99%
4.6% to 35.99%
Joint Application or Co-signing
Joint Application allowed, no co-signing
No joint application or co-signing
By : Mr Credit Card

Executive Summary

Both Upgrade and Upstart offer personal loans to consumers for up to $50,000 and have maturities ranging from 3 to 7 years. In these areas, they appear quite similar and many consumers would want to compare them and decide which is a better fit. But there are also differences which you should be aware of between the two lenders. Upgrade is more suitable for those who want to get a debt consolidation loan as they can pay off your creditors directly and also for those who want to apply for a joint loan. Upstart is more suitable for those who have little credit history and are looking for a lender that can give them quick approvals.

We are now going to compare both Upgrade and Upstart and at the end of this comparison, you should be decide which lender is better for you.


Introduction to Both Upgrade and Upstart

Before we start to compare these 2 lenders, I am going to give you a brief background about both of them.

Upgrade

Upgrade is a lender that not only provides loans to consumers but also issues credit cards that works like a line of credit and with payment terms that are similar to a personal loan. Upgrade is one of the few lenders that will pay off your creditors directly if you take a debt consolidation loan with them. They will also reduce your rate if you sign up for autopay. They are known to request a few documents from applicants and aren't known to give fast approval for their loans.

Upstart

Upstart is an AI based lending platform founded by a group of ex-Googlers. Instead of merely looking at your FICO scores, Upstarts also considers variables like your which college you attended, your GPA score, test scores and work history. Upstarts says their AI model is able to approve about 43% more applicants than conventional credit scoring models and yet give consumers an interest rate on the loan that is on average 43% lower. Upstart's own internal study found that they were able to process 73% of their loans automatically with just AI and without any human interaction. Upstart is able to process your loans very quickly (many customers have reported that the whole process just took a couple of hours - including uploading of required documents) and get get your cash deposited into your banking account the next business day.


Credit and Approval Requirements of both Upgrade and Upstart

Below are the requirements you need to maximize your chances for approval for both Upgrade and Upstart. You will notice that Upstart gives more granular details than Upgrade. Nevertheless, please bear in the mind that since both Upgrade and Upstart offer loans of similar amount and maturities, I would expect that both have requirements that are quite similar. Upstart does state however, that they do not really rely on FICO scores, but on other factors of which free cash flow is very important. Let's start by looking at the requirements that Upgrade has provided.

Upgrade Requirements

  • Credit Score - Upgrade has said that you would need a minimum credit score of 560 to get approved. Applicants have given feedback that Upgrade uses TransUnion FICO 9 score. Upgrade has also said thta despite accepting scores as low as 560, the average score of those approved by Upgrade is 672.

  • Minimum Length of Credit History - Upgrade requires you to have a credit history of at least 2 years. This is in contrast to Upstart, who will accept and approval applicants who have a very new credit history.

  • Number of credit accounts - Upgrade requires you to have at least 2 credit accounts in your credit report. This may include a mortgage, auto loans, student loans or credit cards. Once again, this goes to show that Upgrade will not approve you if you have very little credit history.

  • Income Requirements - Upgrade does not have any minimum income requirements. Having said that, the average income for those who are approved for an Upgrade loan is $80,000.

  • Debt-to-Income Ratio - Upgrade does not publish its debt-to-income (DTI) ratio requirements. Having said that, Upgrade reportedly gives extensive weight to free cash flow, with approved borrowers having a minimum of $1,000 in free cash flow each month and a DTI of around 40%.


Upstart Requirements

UPstart gives a lot of details you need to meet to have a chance of getting approved. In particular, they are very precise about the debt to income ratio, about the number of years a bankruptcy has to be discharged before you can apply and even the number of inquiries 6 months prior to applying for an Upstart loan.

  • Credit Scores - Unlike Upgrade, Upstart will accept applicants with no credit history or at least fair credit scores. Despite this, most successful Upstart customers who have decent rates have at least a mid 600 credit score when they apply.

  • Debt to Income Ratio - Upstart is very precise in the details of what they are looking for in this area. Specifically, Upstart looks at your monthly debt to pre-tax income ratio. They have stricter criteria for applicants who reside in Connecticut, maryland, New York or Vermont, and their debt payments (excluding rent or mortgage) cannot exceed 45% of their income. For all other states, your debt to income cannot exceed 50%. Applicants from their partner coding bootcamps are exempt from this requirement.

  • No Bankruptcy within the last 12 months - That means you have to be discharged for at least 12 months.

  • No public records within the last 12 months, unless the public records consist only of paid civil judgments or paid tax liens - This criteria really applies to any loan or credit card issuer. You will never be approved if you have very recent public records.

  • No Delinquent accounts - Ditto for this.

  • Number of Inquiries - You must have fewer than 6 inquiries on your credit report in the last 6 months, not including any inquiries related to student loans, vehicle loans, or mortgages. So if you intend to apply for a loan from Upstart, do not go on an app spree for at least 6 months before you intend to apply.

  • Job Requirements - Applicants need to have a full-time job or a job offering starting in 6 months. This requirement is exempted if you are accepted to Upstarts partner coding bootcamp and will seek employement after graduation.

  • Income Requirements - Upstart has stated that their minimum income requiement is $12,000 a year.


Similarities

Now that we have gotten the requirements for both Upgrade and Upstart out of the way, let's look at how they are similar.
  • Same Loan Amounnts Offered - Both Upgrade and Upstart will lend you anywhere between $1,000 to $50,000.

  • Roughly the same repayment period - Both Upgrade and Upstart have loan maturities from 2 years to 7 years. There are some subtle differences though. With Upstart, the loan maturity is either 2 years or 7 years. With Upgrade Personal Loans, the loan maturity RANGES from 2 years to 7 years. So it may be 3 years or also 5 years.

  • Both Charge Origination Fees - Both Upgrade and Upstart have origination fees. For upstart, it ranges between 0% to 12%, while Upgrade charges between 1.85% to 9.99%.

  • Pre-qualify with No Impact on Credit Score - Both Upstart and Upgrade allow you to pre-qualify for their loans with no impact on your credit score.


Differences

  • Upgrade Has Lower Rates For Debt Consolidation Loan and with Autopay Opt-in - Upgrade will give you a lower loan rate if the purpose of your loan is debt consolidation and you opt-in for autopay.

  • Upgrade pays your creditors directly with debt consolidation loans - If you get a debt consolidation loan with Upgrade (ie you state in your application that debt consolidation is the purpose of your loan), Upgrade will pay off your creditors directly. This will save you the hassle of paying each creditor off directly. In contrast, Upstart will deposit the loan amount in your bank account, like most typical lenders.

  • Upgrade Pays Creditors Directly - If you get a debt consolidation loan from Upgrade (they will ask you the purpose of your loan during the application process), you will be given the choice to let Upgrade pay off your creditors directly. This will save you the hassle of paying off each creditor yourself. Upstart does not offer this option.

  • Co-signing and Joint Loans - Upstart does not allow you to co-sign for a loan and neither does it offer any joint loan application. Upgrade does not allow co-signing of loans but they do allow joint loan applications.


Which is Better? Upgrade or Upstart?

I think the decision whether to apply for a personal loan with either Upgrade or Upstart depends on how fast you want your loan. If you want you get approved quickly with as little hassle and get the cash in your account the next business day, then you might want to give Upstart a shot. Upstart was perhaps the first online loan provider to use Artificial Intelligence rather then solely relying on FICO scores to approve your loans. They claim to have a higher rate of approval than other lenders and a faster approval time. If you have very little credit history or no credit history, Upstart is probably the better choice because you do need at least 2 credit accounts if you want to apply for an Upgrade personal loan.

Those of you who are looking for a debt consolidation loan might want to consider Upgrade first before Upstart. The reason is because Upgrade will pay off your creditors directly and hence save you the hassle of paying each creditor off yourself. They will also reduce your rate if you sign up for autopay. If you are also looking to apply for a loan as a joint applicant, then you have to go with Upgrade because they do allow joint application whereas Upstart does not.

Having said all these, both Upgrade and Upstart allow you to go through a pre-qualification process with no impact on your credit scores. So you might just want go through the process and see which will give you the better deal. You can also read both their approval requirements above and pick the one that fits your financial and credit situation.