Upstart vs. Discover: Which Personal Loan Is Right for You?

Taking a modern approach to personal loans, Upstart uses artificial intelligence (AI) to help different borrower profiles, including those with bad credit, fund their personal needs. Similarly, Discover is a digital bank that makes borrowing fast, easy and convenient, releasing nearly a billion dollars in banking loans as of 2019.

MoneyGeek’s in-depth comparison of Upstart and Discover personal loans gives the average borrower a chance to explore the similarities and differences between these two lenders. You can learn all the essential information to make an informed decision, including interest rates and credit requirements.

Getting approved for a personal loan can be time-consuming, requiring you to compare factors such as APRs, repayment terms, loan amounts and more. MoneyGeek evaluated two personal loan lenders, Upstart and Discover, to see how they stack up against one another with regard to what makes them stand out.

Upstart is known for providing personal loans for borrowers with low credit scores. On the flip side, Discover requires borrowers to have an excellent credit history. Upstart also has more comprehensive APR ranges and loan amounts, while Discover can provide borrowers with longer repayment periods.

The APR, also known as the annual percentage rate, is the annual cost of borrowing money. It is expressed as a percentage.

You can find APRs on credit cards and personal loans from banks, credit unions and online lenders. The higher the APR, the more expensive your loan will be over time. However, there are ways to make sure you don't pay too much for your loan, such as having an excellent credit score. Some factors that may further affect your APR include your loan term, size and type.

Upstart offers personal loans at APRs ranging from 3.22% to 35.99%. Conversely, Discover has APRs ranging from 5.99% to 24.99%. This gives Upstart personal loan borrowers a wider range of APRs, but Discover offers a lower maximum APR to those whose credit scores are less-than-ideal.

Upstart accepts applicants with a low credit score of 300 (subject to unique terms), making it less stringent than most lenders. Discover, on the other hand, requires its applicant to have a credit score of 720, which is higher than other lenders’ requirements. This 420-point difference is something that cannot be ignored if you have not built a good credit history.

Your credit score is a three-digit number that represents your creditworthiness. It is determined by the major credit bureaus and is based on information found in your credit report. Lending institutions use it to set your APR, loan terms and ultimately decide whether to give you a loan.

Your credit score can be impacted by a number of factors, including your credit history, current and outstanding balances, types of credit accounts (credit cards, mortgages, loans) and recent applications for credit.

A lender's loan amount range is the minimum and maximum amount the lender will make available to a borrower. Lenders determine their loan amount range based on factors like the purpose of the loan and the lender's capacity to lend that much money.

Upstart offers personal loan amounts starting from $1,000 and going up to $50,000. Meanwhile, Discover personal loans have a higher minimum but lower maximum limits, ranging from $2,500 to $35,000. Both lenders can be used for minor expenses, but Upstart can lend $15,000 more than Discover. This is something to consider if you're funding or purchasing something that costs more than $35,000.

You can apply for any loan amount from either lender, but it’s best to assess your financial situation first so that you don’t end up with a loan amount that is too large or too small.

A loan's repayment term is the length of time it takes to pay off your debt. Most loans have terms ranging from two to four years based on your needs and financial situation. The longer you have before you need to pay back the loan, the higher your interest rate will be. Variables such as your credit score, debt-to-income ratio and what you are planning to use the money for also affect the repayment term you can get.

Upstart and Discover have similar minimum repayment terms of 36 months, but the latter has a longer maximum period of up to 84 months. Compared to Upstart’s maximum period of 60 months, that’s 24 months longer.

There are many factors to consider when choosing the length of your loan, such as your personal needs. However, if you'd like to save on interest rates, securing a short-term loan may be best for you.

Upstart and Discover provide funding much more quickly than most lenders. Both have a turnaround time of 24 hours, meaning you can receive your funds as soon as the next day after signing an agreement. However, this depends on factors such as the amount you intend to borrow, your repayment period and your credit score.

Applying for a personal online is usually the quickest way to secure your funds since most companies allow you to prequalify via their websites or mobile apps. This can be faster than applying in person or over the phone.

Upstart and Discover both offer quick disbursement of funds, but Upstart still comes out on top as the better personal loan lender of the two. The lending platform offers a lower starting APR, accepts borrowers with less-than-ideal credit histories and has a wider range of loan amounts. Upstart is a good fit for people who are just starting out a credit line for the first time.

Discover redeems itself through a longer repayment period of up to 84 months and next-day funding (similar to Upstart). This can be ideal for people who need some leeway in terms of paying their loans back.

Overall, your decision comes down to your individual circumstances, as they determine what aspect of taking out a loan matters to you the most. This includes how much you need, when you need it and how you plan on paying it back.

MoneyGeek answered some of the most common questions that a borrower might find themselves asking, including required documents and personal loan fees.