Upstart Personal Loans: Overview, Products, and History
Upstart is an online lending platform specializing in personal loans for individuals with varying credit scores. Compared to regular bank loans, Upstart gives access to loans for those who may not match the qualifying criteria for bank loans. Since its founding, Upstart has assisted over 2.7 million borrowers and funded over $34 billion in loans. Upstart’s cutting-edge underwriting process, which goes beyond traditional credit scores and considers factors such as education, employment history, and other unconventional data points to evaluate a borrower’s creditworthiness, is one of its distinguishing features.
Upstart provides access to fixed-rate personal loans through an innovative underwriting approach. Instead of relying solely on credit history and credit score, they evaluate non-traditional factors such as educational background, grades, and earning potential to assess a borrower’s creditworthiness. The unique underwriting approach has enabled Upstart to lend loans to individuals who regular banks would have denied.
Upstart was founded in 2012 by four ex-Google employees: Dave Girouard, Anna Counselman, Paul Gu, and Michael Kitchen. Upstart, headquartered in Palo Alto, California, was formed because traditional banks relied on outdated metrics such as credit scores and other variables, preventing a significant percentage of borrowers from obtaining loans. The team created a platform that used artificial intelligence and machine learning algorithms to assess borrowers’ creditworthiness based on non-traditional factors such as job history and education.
Google Ventures, Third Point Ventures, KPCB, Khosla Ventures, Founders Fund, First Round Capital, Eric Schmidt, and Mark Cuban are among the banks and investors who have backed Upstart since its inception. In 2019, the platform went public, raising $240 million in an initial public offering (IPO). Upstart has a market capitalization of roughly $9 billion as of 2021.
Upstart’s partnership with banks allows it to offer personal loans ranging from $1,000 to $50,000 for a range of purposes, such as home improvement, medical expenses, and debt consolidation. Once approved, borrowers can expect to receive their funds in as little as one business day.
Upstart has taken advantage of the latest technology advancements, particularly in artificial intelligence and machine learning, to create a sophisticated income and default prediction model. This model is used to assess the creditworthiness of potential borrowers. Unlike traditional lenders, who rely primarily on FICO scores, income, and credit reports, Upstart’s model considers additional factors such as academic performance and work history to create a complete statistical picture of borrowers’ financial strength and the likelihood of repaying their loans. By incorporating these non-traditional criteria, Upstart can provide more accurate assessments of a borrower’s creditworthiness and offer loans to a broader spectrum of individuals, including those who may not fulfill the tight qualifying restrictions of traditional lenders.