Upstart Loans Versus Avant Loans

There are many new start-ups in the lending world these days, but Upstart is one of the most interesting. Not only does it cater to recent graduates who need financial help, but it also specializes in funding tuition costs with student loans for those who are interested in learning how to code. This makes it a perfect lending option for young techies who not only want to get a head start on their career, but also their finances.

How Does Upstart Work

Even though their approval criteria may be a bit unconventional, Upstart operates very similarly to a traditional loan process. You go online and fill out a form that asks you for some personal and financial information. It will then send you an estimated rate for your loan. If you agree with the rate, Upstart will gather more information and prepare the loan paperwork to make it official. Once the loan is approved, you will get the money the next business day.

The approval process is a little bit different though. Upstart does look at things like credit score, employment income and income-to-debt ratio, but it also uses computer models to factor in your college degree, your major and your job history to give Upstart a fuller picture of who you are as a financial person.

These extra criteria are perfect for someone who doesn’t have much credit history but has shown great responsibility in school and previous jobs. It speaks to the problem that a lot of people have with credit scores; they don’t give the whole picture on how financially responsible a person is.

Upstart also makes it easy to set up recurring payments, and won’t penalize you for paying off your loan early, which many loan companies do. Upstart offers both three-year and five-year personal loans, so you can choose which will be easiest for you to pay off. It also offers a range of options, from student loans to debt consolidation loans.

Is Upstart Legit?

While Upstart is only 5 years old, it has been busy in those five years. It has funded more than $700 million in lending so far, and has approved 60,000 loans. Upstart is also one of the only online lenders to completely automate a portion (25 percent) of its loans, which means both the approval process and loan funding are all down through algorithms and artificial intelligence.

It was founded by two ex-Google employees and is backed by Cross River Bank, which is backed by the FDIC, so you know your money is safe. It is also consistently rated as one of the top online loan companies operating today.

Common Upstart Reviews

Upstart may handle online lending in an unconventional way, but its users tend to love the service. Customer service reviews on sites like Credit Karma and TrustPilot give mostly five out of five star ratings to Upstart, with glowing reviews on everything from Upstart’s quick and easy online process to its exemplary customer service.

Most of the negative reviews on these sites seem to be from people who didn’t understand the process, wanted to cancel the loan after it was approved or were upset about being charged late fees. As with any financial service, always read the fine print before agreeing to anything, although Upstart is pretty upfront about all of their fees and rates.

From a consumer product review standpoint, Upstart is generally ranked near the top of the reviews because of its ability to lend to people who might not normally qualify.

Is Upstart Right For You?

There are hundreds of loan providers available now, so how do you know if Upstart is the right one for you? It really comes down to a few simple questions:

  • Do you have excellent credit?
  • Do you have average credit?
  • If so, have you graduated in the past four years?
  • Do you have a good job history?
  • Are you looking for student loans that are different than traditional lending?

If you have excellent credit, the world is your oyster when it comes to loans, so you can really choose any lender and be approved for a loan. The issue for people with excellent credit isn’t whether they can get approved or not, but rather what the interest rate is going to be. With Upstart, a good academic record coupled with excellent credit could score you a very low interest rate. If that’s not the case, you might be able to find a lower interest rate elsewhere.

If you have average credit, Upstart might be a good place to start. People with average credit or very little credit history can often have issues securing a loan, so lenders like Upstart that look at outside factors when approving you can only help.

The caveat to this is that if you haven’t graduated in the past four years, Upstart generally won’t look at your academics as a factor, which leaves you back where you started. In addition, if your grades were poor, you might also have issues getting approved. Luckily, Upstart also looks at your job history, so if you have had a steady job for many years with good standing, you might also have a good chance of being approved.

The point is that there are many different factors that Upstart uses when approving candidates, so if you’ve been turned down for other loans, you should take a look at Upstart.

Everyone tells you that you should have a rainy day fund in case of emergencies, right? Well, having one is easier said than done, especially if you are living paycheck to paycheck. Sometimes, we all need that emergency cash to deal with … well … emergencies. Many people who don’t have good credit turn to high-interest credit cards or payday loans when they find themselves in this situation.

This is where Avant Loans likes to jump in. Avant will lend to people who don’t have the best credit history without charging them the crazy high interest rates that payday loans charge. This not only keeps people from going into massive debt, but it allows them to borrow more money if they need to.

Almost half the people who use Avant take out a loan for debt settlement purposes. So if they are drowning in credit card debt and have high interest rates on the credit cards, they can take out a loan with Avant to pay the credit cards off, and then they only have to pay down the loan with the lower interest rate.

How Does Avant Work?

Now, while Avant doesn’t charge the crazy interest rates of payday loans, its rates are still higher than normal online lenders. Lenders who take on borrowers with poor credit generally charge higher interest rates, not to take advantage (well, most of them don’t try to take advantage), but because more often than not, the lenders aren’t paid back or have to take a settlement to get only a part of the money back it lent out. The higher interest rates are basically to offset the risk.

That said, you only need a 580 credit score to be approved, and there are no minimum requirements for your income or your debt-to-income ratio. You also don’t need much of a credit history to be approved.

The loan process for Avant, however, is pretty much the same as other online lenders. You fill out an application, get pre-approved, pick a loan, send some more financial information and sign for your loan. Loan length can go anywhere from two years to five years for repayment.

Is Avant Legit?

Avant is a legitimate lender, founded in 2012, which has raised more than $650 million in capital in the nearly five years it has been operating. Avant funds its loans through WebBank, which is a member of FDIC, which is always good peace of mind.

Avant has given $3.5 billion in loans to more than 500,000 customers in the past 5 years. It is up front about its rates and fees, and it provides all the details of each loan in writing to customers before the loan is signed.

Avant also gets an A+ from the Better Business Bureau.

Common Avant Reviews

Overall, Avant seems to get good ratings from professional review services. The Better Business Bureau rates Avant at 4 out of 5 stars, as does consumer finance sites like NerdWallet, and on sites that include consumer reviews, like Credit Karma.

Avant has a total of 2,500 reviews on the business review site TrustPilot, and those reviewers’ scores average a 4 out of 5 as well. Some of the reviews on TrustPilot, which vets its reviewers, include, “I believe Avant is perfect for those who wish to improve their credit rating,” and, “The quickest response and easiest site to navigate. It was a blessing to help me at a time when other lenders did not.”

Of course, Avant doesn’t have a perfect record, and there are a number of legitimate negative reviews and complaints against the site from people who either didn’t like the service, thought the interest rates were too high or had an issue with timing. These are all legitimate concerns, but the majority of people reviewing Avant seem to have a favorable view of it.

Is Avant Right For You?

Avant is not for everyone. Even if you have excellent credit, Avant’s interest rates might just be too high compared to other lenders. Here are the questions you need to ask before you apply for an Avant loan:

  • Do I have high-interest credit card debt?
  • Do I have a financial emergency I need to pay for?
  • Is my credit not the best?

Really, it’s the last question that’s the most important. If you have poor or even average credit, and you can’t get a loan with any other lender, Avant is a good next step. Its interest rates are higher, but not as high as other finance options like payday loans. If you are in a financial emergency, Avant is a much better option.

Even if you don’t need money right away and just want to pay off your high-interest credit card debt, Avant is a great option. If you have a lot of credit card debt, chances are your credit score is not ideal. This gives you an option to consolidate your credit card debt at, hopefully, a lower interest rate, making it easier to pay off.