LendUp bills itself as an alternative to payday loans, but it uses a similar model. It gives cash-strapped borrowers funds in exchange for full repayment plus interest with the borrower’s next paycheck.
These short-term loans can lead to big-time charges.
For example, a 30-day, $100 loan in the state of California can accrue a fee of $17.60, which is an annual percentage rate of just over 210 percent.
The company uses its LendUp Ladder system to determine lending rates. A repeat borrower who pays on time can earn points to “climb” the ladder, with each ascending rung allowing you to apply for a loan at better rates. The ladder starts at Silver and progresses to Gold, Platinum, and then Prime, the top level that gets you the best rates.
You can also earn additional points through customer referrals and by taking LendUp’s free online education courses. The lower you are on the ladder, the higher your interest rates will be.
Those at the Platinum and Prime levels in some states have their payments reported to the three major credit bureaus, so you might also be able to improve your credit score. This is a subtle, but potentially significant difference from a traditional payday lender where the loans and repayments don’t appear on your credit report.
Because LendUp’s interest rates can be significantly higher than other lenders, if you have good credit, you should comparison-shop for your personal loan before making a choice.
What is a personal loan?
An unsecured personal loan is one in which a borrower does not put up collateral. Collateral-based loans, known as secured loans, include car loans and mortgages. An unsecured loan is often based on an individual’s credit history and credit score. A personal loan is offered for a fixed term with loan repayment on a strict payment schedule. This type of loan is frequently sought to provide funds for an immediate need such as an emergency.
Who is a LendUp personal loan good for?
- Those with poor credit. Someone with a thin credit file or damaged credit might qualify for a loan from LendUp. Customers new to LendUp have an average VantageScore (that’s a type of credit score) of 550. This might be a slightly less costly alternative to storefront payday loan stores.
- Anyone who needs a short-term loan quickly. LendUp loans are intended for customers who need quick cash before their next paycheck.
- Repeat borrowers looking to improve their credit score. LendUp reports to the three major credit bureaus for those at the highest levels of its lending Ladder.
- Anyone looking to improve their knowledge about building credit and getting out of debt. LendUp offers free online courses that teach consumers how to understand and manage their debt. Those who take one of the video courses and pass the quiz at the end can earn points to help them move up LendUp’s credit ladder.
- Borrowers who may have significant damage to their house from a storm or fire and need to finance the repairs, but may not be able to put all the charges on their credit card.
- A family that incurs a medical emergency that requires immediate attention and results in a financial burden.
Who should not accept a loan
- Anyone with decent credit. If your credit history is good enough to qualify for a traditional personal loan, you should shop for a better choice as you’ll encounter double-digit annual percentage rates that are likely to beat whatever LendUp can offer. Those who need a short-term loan should consider other options first like a secured credit card or a credit-builder loan with a community bank, as both can help rebuild your credit and will charge far less in interest fees.
LendUp offers short-term fixed-rate loans that range roughly from $100 to $250, payable in seven to 30 days, depending on the laws of the state in which you reside. In many states, LendUp also offers credit-reporting installment loans from about $500 to $1,000 and payable in six to 12 months where available. LendUp operates in 24 states: Alabama, California, Florida, Hawaii, Idaho, Illinois, Indiana, Kansas, Louisiana, Maine, Minnesota, Mississippi, Missouri, New Mexico, Ohio, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Utah, Washington, Wisconsin, and Wyoming.
You’ll repay your loan in the form of a fee, but if that fee were applied as an annual percentage rate, the cost of your loan is quite high. For example, if you received $100 from LendUp that had to be repaid in 14 days, the fee would be $17.60 for a total payment of $117.60. The $17.60 fee, however, equates to a 458.86 percent APR, according to LendUp’s web site.
While the fee seems reasonable when you’re in desperate need of fast cash, the APR itself is astronomical. For example, the APR on a 14-day, $100 loan ranges from 235.42 percent to 625.71 percent, depending on the state in which you reside. The company’s ladder structure, however, allows you to work your way down to a 29 percent APY loan over time.
LendUp borrower snapshot
|Loan size||$100 to $1,000|
|Time to funding||Next business day|
|Payment options||Flexible. You choose final date|
|Special features||Free credit counseling|
LendUp charges an origination fee, which is added onto the total amount you will owe. For example, if you are approved to borrow $100 with an origination fee of 17.25%, that’s an extra $17.25 you’ll pay on top of the $100 you’re borrowing.
You should factor the origination charge when determining your total cost to borrow. Think of it like an application fee or a processing fee — a sunk cost that may or may not seem reasonable, but it’s non-negotiable. Some, but not all lenders, charge this fee.
Once approved, qualified borrowers can receive the funds in as little as the next business day.
A bank checking account that accepts ACH transfers and proof of employment, as well as your address, income and social security number, are the bare minimum requirements, according to the LendUp website.
“While we don’t impose a minimum threshold on yearly income or FICO score for our short-term loans, some states may impose certain restrictions beyond our control,” according to a LendUp spokesman. “With that said, we have worked with customers with income from Social Security, disability, retirement and more.”
Fees and penalties
LendUp charges an origination fee that varies by state, plus a verification fee of up to $5.
You’ll be charged a non-sufficient funds fee of $15 if you’re set up for automatic loan repayment and you don’t have enough funds to cover the transaction.
If you repay your loan early with a debit card or if you repay your loan with a MoneyGram, an extra charge will apply.
You can extend your single payment loan of $100 to $250 for up to 30 days without penalty if you cannot repay your loan on time. However, extensions on installment loans, or loans up to $1,000 that must be paid back within 12 months, are not available, according to LendUp’s web site.
Pros of LendUp loans
- Security and privacy. The LendUp online system is secure. All of your personal and financial information is protected, and no information is sold to other sources.
- Transparency. There are no hidden fees or rollovers. All credit terms and conditions are clearly stated.
- Convenience. All necessary information is readily available through a customized dashboard, including loan amounts and interest rates. Loan repayment can easily be done using the same checking account in which the loan was deposited.
- Rewards. Credit education is offered online for free for you to earn LendUp Ladder points.
- Customizable. You can choose your loan amount and repayment date.
Cons of LendUp loans
- Acceptance rate. Not all applications are accepted. Only 10 percent to 20 percent of applications are accepted.
- Terms vary. Some customers can qualify for a loan at a lower interest rate while some will incur a higher rate, depending on their credit score.
- Loan amount varies. If you are just starting with LendUp, the amount you are able to borrow will be lower at first before beginning the climb up the Ladder.
Advantages of LendUp over other competitors
- Loan application process. An online loan application can be completed in as little as five minutes with instant approval results.
- Credit education. Customers can complete readily available financial education to provide knowledge for a path to improved financial health.
- Ladder points system. Customers can earn points by paying back loans in a timely manner, increasing their credit score.
- Security. All personal financial information is kept private and not sold to other online vendors.
- Building your credit score. Borrowers from LendUp have a higher chance of improving their credit score than someone using other online lenders.
Disadvantages of LendUp vs. other competitors
- Availability. LendUp is only available in certain states unlike many other lenders.
- Loan level availability. The amount of the loan available depends on what state in which you reside.
- Loan amount limits. For first-time borrowers, the amount of the loan which is available may be more limited, and as low as $100.
How to apply
The application process is simple. Just fill out the online form with your name, address, Social Security number and bank checking account routing number for direct deposit. In several states, you’ll also have to upload a copy of your most recent pay stub to verify your income. LendUp, like most payday lenders, doesn’t perform a credit check, so it won’t adversely affect your score to apply.
You’re also getting the money directly from LendUp without any middleman involved or other financial institutions having your information.
You’ll get a decision almost instantly, and, in most cases, LendUp offers rapid delivery of funds into your account by the next business day. You can set up an automatic repayment from your checking account, or pay by MoneyGram, personal check or debit card.
But if your credit is strong enough, you should consider other borrowing alternatives, particularly if a short-term cash infusion isn’t necessary. If your credit is strong enough you can apply for a loan with Avant or OneMain Financial. If your credit is damaged, a secured credit card is another option, which can help you rebuild your credit without the huge interest charges.
Editorial disclosure: All reviews are prepared by Bankrate.com staff. Opinions expressed therein are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in the review is accurate as of the date of the review. Check the data at the top of this page and the lender’s website for the most current information.