Upstart Loans Versus Lending Club

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.

Lending Club was once the darling of the online loan world, offering a ground-breaking idea with peer-to-peer lending, where average people could invest in other people’s loans. Since then, several other companies have popped up that utilize the same type of lending, some with new, fresh spins on the practice. This has left Lending Club a little bit behind, however, it is still a great online loan service for those looking for good rates and good service.

How Does Lending Club Work

Lending club is a peer-to-peer lending service, which basically means that ordinary people (who are approved by Lending Club) can invest money to fund your loan. They make money off of the interest you are charged, so it ends up being a win-win.

The first step in getting your loan is filling out an application. Then Lending Club will rank you based on that information so it can determine your interest rate. It also shares that ranking (not your personal information) with its investors when it sends out your loan to be funded. Lending Club will then give you a list of loan offers, and you choose the one that best fits your needs.

Once you’ve selected a loan offer, Lending Club will send the offer details and your ranking to its investors, who can then decide if they want to fully or partially fund your loan. Investors have one to two weeks to decide on funding your loan, so the process can take a while. Once the time is up (or if your loan gets fully funded before the deadline), you will then be presented with the full loan or a partial loan. You then decide to accept or not. If you do, you will see your money deposited in your bank within four business days.

Lending Club offers both three- and five-year loans, and will go over a payment plan with you before you accept the loan.

What Makes Lending Club Stand Out?

The biggest thing is Lending Club’s peer-to-peer lending model. If offers a two-tier business model, in that it can cater to both borrowers and investors. It also keeps Lending Club from having to have a ton of its own cash on hand to fund the loans. It’s also a plus for borrowers because some investors may be more willing to take a risk on people whose credit background is not stellar.

The other thing that makes Lending Club stand out is its option for partial loans. This is generally something only peer-to-peer lenders do, since there may be more than one investor funding a loan. So, if your loan is 60 percent funded or more, you have the option of taking the partial loan, which is better than just being turned down and ending up with nothing.

Common Lending Club Reviews

Lending Club is pretty well-received in the online loans world, so it’s not much of a surprise that it ranks pretty well among consumer product review sites. For example, NerdWallet gives Lending Club 4.5 out of five stars.

Customers of Lending Club tend to agree. Online customer reviews of Lending Club are generally five stars, with few exceptions. Most of the reviews focus on how quick and easy Lending Club is, since everything is online and accessible with just a click of the mouse. Many customers talked about Lending Club giving them the ability to consolidate their credit card debt, which is a common use of loans from Lending Club.

Negative reviews seem to focus on people who weren’t aware of the origination fee, or felt the interest rates were too high or the process took too long.

Is Lending Club Right For You?

Lending Club does have some unique features that set it apart from other online loan services, which means it can cater to certain needs better than other services. Here are the questions you need to ask yourself when considering Lending Club:

  • Do I need money quickly?
  • Is my credit score not the best?
  • Would I be OK with not getting the full loan?

If you are having a financial emergency and need a loan quickly, Lending Club is probably not the best place to look. Since it is a peer-to-peer lending service, it relies on individual investors to fund each loan. Once you finish your loan application, Lending Club has to send your loan details to all its investors and wait for people to fund your loan, which can take up to a week.

If, however, you can wait and you don’t have the best credit score, Lending Club is a good choice. Since it offers loans to individual investors, it is up to the investors to decide if they want to take a risk on someone with lower credit. There are investors who are willing to take that risk, meaning it might be easier to get a loan through Lending Club than traditional loan services.

Another thing to consider is the fact that Lending Club offers partial loans. If you don’t need the full loan amount, and your credit is not the best, getting approved for a partial loan is better than being turned down altogether. If, however, you have really strong credit, you will probably end up getting approved for the full amount anyway. If you aren’t, you can probably easily get a loan through another online loan service.