Upstart is a popular online lender that touts itself as a lending platform powered by artificial intelligence designed to make affordable credit more accessible to borrowers through the power of technology. Founded by former Google employees, Upstart has originated $10.8 billion in loans, with 71% of them fully automated. Upstart says its personal loan interest rates are 10% lower than traditional lenders. Plus, the lender says it accepts 26% more applicants because it can evaluate nontraditional data when reviewing an application. That means borrowers who are new to credit could have a better chance at qualifying compared to other lenders.
What to Know Before Getting a Personal Loan
Personal loans can be a quick way to access cash, but it’s important to use them wisely. Before applying, you should know how you’ll use the money and create a plan for repaying the loan. Then, you should compare multiple lenders to find the best interest rate and loan terms.
When shopping for lenders, keep in mind your interest rate may differ slightly from the advertised rates. That’s because rates and loan terms are based on factors like your credit score, income, and loan amount. Some lenders will let you pre-qualify for a loan or check your rate with only a soft credit inquiry, which won’t affect your credit score. You should also check out the fees you’ll pay (like origination fees and prepayment penalties) and the length of the loan term, which can influence the cost of the loan.
Most lenders offer unsecured personal loans, which means you won’t need to put down collateral to secure the loan. Secured loans may offer lower interest rates, but they come with more risk because you could lose your collateral if you fall behind on payments.
Alternatives to Personal Loans
Although a personal loan could be a good way to cover expenses, it’s not the only option. Some alternatives to personal loans include:
- Cash-out refinance,home equity loan, orhome equity line of credit (HELOC): If you qualify for one of today’s low refinance rates, you could use a cash-out refinance to access some extra cash. Or, if your home value has recently increased, you might decide to take out a home equity loan or a home equity line of credit. But make sure you understand the pros and cons of a HELOC before moving forward.
- Balance transfer credit card: A balance transfer credit card allows you to move unpaid debt to a credit card. These usually come with a 0% introductory ount of time, around 15 to 18 months. This could be a good option for consolidating multiple debts, such as credit card balances and personal loans. But make sure you check for any fees involved and create a plan to pay off the debt advance america payday loans before the promotional period ends; otherwise, you’ll pay a high APR on the balance.
- Savings strategy: You can also save money for a big upcoming expense instead of taking out debt. This could be a good option if your money needs aren’t urgent, you don’t want to pay interest on a loan, and you don’t want your credit to be impacted. Once you’re done saving for the purchase, consider saving for an emergency fund. Having three to six months’ worth of expenses in savings can help you avoid debt in the future because you’ll have money to cover emergencies.
- Credit counseling: Credit counseling may help if you’re struggling with debt or need help creating a realistic budget. When you meet with a credit counselor, they can provide financial advice and direct you to available resources in your area. Some services are free, while others are low-cost. They won’t provide you with money directly, but they can help you find long-term solutions for debt management.