LendingClub and Upstart are personal loan lenders — not traditional auto lenders. Using a personal loan to buy a car is a legitimate strategy in specific situations, but it comes with tradeoffs. Personal loans from LendingClub and Upstart typically carry higher interest rates than dedicated auto loans because no collateral (the car) backs them. However, they offer flexibility that traditional auto loans don’t.
LendingClub vs. Upstart: At a Glance
| Feature | LendingClub | Upstart |
|---|---|---|
| Loan type | Unsecured personal loan | Unsecured personal loan |
| APR range | 8.98%–35.99% | 7.8%–35.99% |
| Minimum credit score | ~600 | ~300 (AI-based model) |
| Loan amounts | $1,000–$40,000 | $1,000–$50,000 |
| Loan terms | 24–60 months | 24–84 months |
| Origination fee | 3%–8% of loan amount | 0%–12% of loan amount |
| Funding speed | 1–4 business days | 1–3 business days |
| Soft pull pre-check | Yes | Yes |
| Best for | Fair-to-good credit; consolidation | Thin/no credit; considers education/income |
When Does a Personal Loan Make Sense for a Car Purchase?
Use a personal loan from LendingClub or Upstart for a car when:
- Buying from a private seller who needs cash quickly (traditional auto loans take longer to fund and require lien documentation)
- Buying an older vehicle (10+ years, 150,000+ miles) that traditional auto lenders won’t finance
- Purchasing a specialty or non-standard vehicle (kit cars, older classics) that doesn’t fit auto loan requirements
- The amount is small ($5,000–$10,000) and rates are comparable to auto loan rates
Don’t use a personal loan for a car when:
- You qualify for a traditional auto loan at a competitive rate — personal loan rates are almost always higher
- The purchase price is above $30,000 — the origination fee and higher APR become very costly
- A 0% APR manufacturer financing offer is available — always take 0% first
About LendingClub
LendingClub is one of the original peer-to-peer lending platforms, now operating as a full bank (LendingClub Bank). It offers personal loans that can be used for any purpose.
LendingClub loan features:
- Fixed-rate loans, 24–60 months
- Loan amounts $1,000–$40,000
- Origination fee of 3%–8% deducted from loan proceeds
- Check-to-check funding (funds sent directly to your bank)
- No prepayment penalty
LendingClub strengths:
- Established lender with strong reputation
- Competitive for fair-credit borrowers (600–680 range) compared to alternatives
- Clear terms; no hidden fees beyond origination
LendingClub limitations:
- Origination fee of 3%–8% is charged upfront — on a $20,000 loan, that’s $600–$1,600 out of pocket
- Terms max at 60 months — longer terms require looking elsewhere
- Not competitive for borrowers with 720+ credit (credit unions win at that tier)
About Upstart
Upstart uses an AI-driven underwriting model that goes beyond credit score to consider education level, area of study, work history, and debt-to-income ratio. This makes it more accessible to borrowers with thin credit files or non-traditional financial backgrounds.
Upstart loan features:
- Fixed-rate loans, 24–84 months (longer maximum than LendingClub)
- Loan amounts $1,000–$50,000
- Origination fee 0%–12% (highly variable)
- Funds typically within 1–3 business days
- Soft credit check for rate pre-qualification
Upstart strengths:
- Can approve borrowers with very limited credit history or a score as low as 300
- Higher maximum loan amount ($50,000) and longer maximum term (84 months)
- AI model may offer better rates to recent graduates with good income prospects
Upstart limitations:
- Origination fee can be as high as 12% — on a $20,000 loan that’s $2,400 in fees
- High APRs for lower credit tiers (25%–36%) make this expensive
- Less predictable underwriting model — some borrowers with similar profiles get very different rates
Comparing Total Cost: Personal Loan vs. Auto Loan
Buying a $18,000 car:
| Option | APR | Term | Origination Fee | Monthly Payment | Total Cost |
|---|---|---|---|---|---|
| Credit union auto loan | 5.5% | 60 mo | $0 | $345 | $20,700 |
| LendingClub personal loan | 14% | 60 mo | 5% ($900) | $419 | $26,040 |
| Upstart personal loan | 12% | 60 mo | 6% ($1,080) | $400 | $25,080 |
The difference in total cost between a personal loan and a traditional auto loan is substantial — often $3,000–$6,000 on a typical vehicle purchase. Only use a personal loan when a traditional auto loan genuinely isn’t available.
Who Should Consider LendingClub vs. Upstart?
LendingClub is better for:
- Borrowers with established credit (600–680) looking for predictable terms
- Smaller loan amounts where the origination fee is manageable
- Borrowers who value dealing with an established bank-regulated lender
Upstart is better for:
- Recent graduates with thin credit files but strong income potential
- Borrowers with credit scores below 600 who can’t access traditional lenders
- Anyone needing a longer loan term (up to 84 months) or higher amount (up to $50,000)
Before Using Either: Try These First
- Your bank or credit union — direct auto loan at a lower rate
- LightStream — unsecured personal loans for excellent-credit borrowers at rates starting around 6.99%
- Capital One Auto Navigator — pre-qualification for traditional auto financing with no hard pull
- Dealer financing — even dealer indirect financing often beats personal loan rates for mid-range credit
The Bottom Line
LendingClub and Upstart offer personal loans that can work for buying a car when traditional auto financing isn’t available. LendingClub suits established-credit borrowers with predictable needs; Upstart is more accessible to thin-credit borrowers. In either case, compare against traditional auto loan options first — the rate and fee structure almost always favors a dedicated auto loan for anyone who qualifies.
Related reading:
- Direct Auto Financing Explained
- Upstart vs. Caribou Auto Refinancing
- First-Time Car Buyer Loan Guide
- Auto Financing Before the Dealership
The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy