Which One Is Best For You? – Forbes Advisor

Upstart and SoFi are both online lenders that provide streamlined application processes and fast funding speeds. While both lenders offer accessible alternatives to traditional financial institutions, each has advantages and disadvantages, and one may be better for your needs.

When comparing Upstart versus SoFi, consider each lender’s qualification requirements, available loan amounts, interest rates and other terms to determine the best fit for your financial situation. While Upstart may be a good choice for borrowers with fair credit scores, SoFi offers more competitive interest rates and lower fees, making it a better choice for more qualified applicants.

How Upstart Personal Loans Work

Upstart is an AI-based lending platform that offers personal loans between $1,000 and $50,000. The lender specializes in less-qualified borrowers and makes it easier to get a personal loan by considering non-traditional variables like education, employment and location when making lending decisions. As with other options, like SoFi, prospective borrowers can see what interest rate they will likely qualify for without impacting their credit score.

However, flexible lending standards come with some tradeoffs. Repayment terms are limited to three or five years, and annual percentage rates (APRs) range from 6.7% to 36%. The lender does not offer an autopay discount, and borrowers are charged origination fees between 0% and 10% of the loan amount.

Borrowers who make late payments incur fees equal to 5% of the past due amount or $15, whichever is greater. Upstart does not charge prepayment penalties, but borrowers incur fees for unsuccessful payments and physical document requests.

Upstart Personal Loans Pros and Cons

Pros

• Accessible qualification requirements. To qualify for a personal loan, Upstart requires consumers to have a minimum credit score of 600. In addition to being lower than SoFi’s requirement, Upstart also considers other variables—like college education, job history and location—when evaluating applications. It also uses AI to assess metrics like the borrower’s debt-to-income (DTI) ratio, whether the borrower has a history of bankruptcies or delinquent accounts and credit inquiries over the previous six months.
• Prequalify with a soft credit check. Consumers can check their rate in five minutes without undergoing a hard credit inquiry until they accept an offer and submit a formal application.
• Loans start at $1,000. Because Upstart personal loans start at just $1,000, consumers are less likely to borrow more than they need. This means borrowers don’t have to make monthly payments and accumulate interest on a larger loan than necessary. That said, Upstart personal loans max out at $50,000, lower than the $100,000 available from SoFi.
• Hardship program. Upstart offers eligible borrowers a relief program if they face financial hardship, such as job loss. Borrowers can apply to have payments temporarily suspended, but interest still accrues. SoFi offers a similar perk known as Unemployment Protection.

Cons

• Limited repayment terms. Upstart borrowers only have access to 36- or 60-month repayment terms—which are much less flexible than those available through SoFi.
• High maximum interest rates. While Upstart’s interest rates start around 7%—lower than SoFi—maximum rates reach just about 36%. This is high for personal loans and much higher than SoFi’s maximum interest rate of about 24% (with 0.5% in possible discounts).
• No autopay discount. In contrast to several top personal lenders, Upstart does not provide borrowers a rate discount for signing up for automatic payments.
• Origination fees. Upstart borrowers pay an origination fee between 0% and 10% of the total loan amount. The fee is deducted from the loan proceeds prior to disbursement, so consider this when requesting a loan amount. In contrast, SoFi’s origination fees max out at 6% of the loan amount.

When to Consider Upstart Personal Loans

Upstart may be a good option for borrowers with fair credit who struggle to qualify for lower interest rates and more flexible repayment terms elsewhere. Not only does the lender offer prequalification with a soft credit inquiry, it only requires consumers to have a minimum credit score of 600 to qualify. The lender also considers several non-conventional factors when making credit decisions, and borrowers with insufficient credit history may still qualify.

It may also be worth considering Upstart if you want to borrow a small amount. Upstart’s minimum loan amount is just $1,000 in most states—lower than the $5,000 minimum SoFi offers. Note, however, that Upstart’s minimum loan amounts are higher in some states such as Georgia ($3,100), Hawaii ($2,100) and Massachusetts ($7,000).

How SoFi Personal Loans Work

SoFi is an online personal finance company and bank that offers a range of financial products, including personal loans, credit cards and checking accounts. Personal loans are available from $5,000 to $100,000 with repayment terms ranging from 24 to 84 months—or two to seven years.

Prospective borrowers can prequalify without a hard credit inquiry and see the rate they will likely qualify for in 60 seconds. APRs start around 9% and go up to about 24%, including two discounts—0.25% for automatic payments and 0.25% for setting up direct deposit with a SoFi checking and savings account.

There are no prepayment penalties, but borrowers may be charged an origination fee between 0% and 6% of the loan amount that’s built into the APR. The lender also does not charge late fees; however, late payments result in higher interest accrual. Late payments are only reported to the three major credit bureaus—Experian, Equifax and TransUnion—once the payment has been past due for more than 30 days.

In addition to the lender’s fee-free structure, SoFi borrowers can change their payment dates once per year. This can make it easier to manage your budget around your employer’s payroll cycle. SoFi also has an Unemployment Protection program that assists borrowers who lose their jobs and struggle to make monthly loan payments.

SoFi Personal Loans Pros and Cons

Pros

• Prequalify with a soft credit check. Like Upstart, SoFi lets consumers see what rate they will likely qualify for without a hard credit inquiry. The lender conducts a hard credit pull only when you choose a loan offer and continue with the application process. This makes shopping around for the best interest rate easier without negatively impacting your credit score.
• Fast funding speeds. SoFi personal loan funds are available as soon as the same day a loan application is approved. According to SoFi, 86% of typical SoFi personal loan applications signed before 7 p.m. EST on a business day were funded the same day between January 1 and December 1, 2021.
• High maximum loan amounts. SoFi borrowers can get personal loans up to $100,000—twice as much as Upstart’s highest loan amount.
• Lower origination fees. Consumers can access lower borrowing costs because SoFi charges slightly lower origination fees than Upstart. SoFi’s origination fees range from 0% to 6% and are reflected in available APRs, while Upstart charges up to 10% of the loan amount.

Cons

• May be difficult to qualify. SoFi’s minimum qualification requirements are more rigorous than those imposed by Upstart. Borrowers should have a credit score of at least 650 to qualify and the lender does not review non-conventional variables like Upstart.
• High minimum loan amount. In contrast to Upstart, which offers loans as low as $1,000, SoFi borrowers must borrow at least $5,000. While high borrowing limits are advantageous for some consumers, others are better served by small loans that are less likely to lead to a cycle of borrowing.
• High minimum interest rate. SoFi’s lowest interest rate is around 9%, which is about 3% higher than Upstart.
• Co-signers are not permitted. Consumers cannot apply for a SoFi personal loan with a co-signer. However, co-applicants are allowed and can be added during the prequalification process.

When to Consider SoFi Personal Loans

SoFi personal loans are among the best personal loans—especially for borrowers who have good or excellent credit and a low DTI ratio. While the lender imposes a higher credit score requirement than Upstart, it also considers an applicant’s income and professional experience.

SoFi’s personal loans may also be a good option for consumers who quickly need access to a large amount of cash. Loans are available up to $100,000 (twice the available amount for Upstart loans), and the lender reports that many borrowers receive funds the same day their application is approved.

Upstart vs. SoFi: Which Should You Choose?