Growth And Risk: A Comparative Analysis Of Upstart And SoFi's Credit Models

Both Upstart and SoFi are building on technology-driven lending platforms to expand their market share, but their growth engines and current performance reveal different strengths and potential risks.

Upstart delivered impressive momentum in 2024. The company originated $5.9 billion in loans, marking a 28% year-over-year increase. According to the company's Q4 results, this growth was fueled by a sharp improvement in conversion rate, rising from 11.6% in 2023 to 19.3% in Q4 2024. Revenue also climbed 24% to $637 million for the year, supported by stronger operational efficiency. However, the absence of disclosed default rates or cost-per-loan metrics raises concerns about underlying credit quality and scalability, which could impact long-term sustainability.

SoFi's lending activities showed explosive expansion. In Q4 2024, student loan originations surged 71% year-over-year to $1.3 billion, while home loan originations jumped 87% to $577 million. According to the Q4 earnings release, by Q3 2025, loan volume had grown further to $9.9 billion, highlighting the company's ability to scale quickly. SoFi's Q3 2025 report showed product penetration accelerated significantly, with a 36% year-over-year increase to 18.6 million products. Fee-based revenue rose 50% in Q3 2025 to $409 million, reflecting higher-margin business segments. Credit performance improved, with charge-off rates declining over 20 basis points quarter-over-quarter. Despite these gains, delinquency rates for personal loans stood at 0.55% for 90 days in Q4 2024, indicating ongoing credit risk that could worsen in economic downturns.

These trajectories underscore robust growth potential, but investors must weigh rapid expansion against credit risks and incomplete operational transparency.

Credit Quality And Default Risk Analysis

Upstart's Q4 2024 performance reveals a pronounced risk gradient across its loan grades. Default rates climb sharply from 1.6% for top-tier (A+) borrowers to 9.6% for the lowest-rated (E-) segment. Crucially, the company achieved a 13% year-over-year improvement in delinquency-to-charge-off roll rates, indicating better collection outcomes or earlier loss recognition. This reduction comes alongside significant operational scaling: Upstart originated $2.1 billion in loans-a 68% YoY surge-driven by a 19.3% conversion rate (up 66% YoY) and 91% automated underwriting. However, expansion into 34 new HELOC states and seven additional auto loan markets pushed the cost per loan to $180, creating margin pressure despite maintaining a 61% contribution margin and $496 lifetime value per loan.

SoFi presents a contrasting profile with more favorable aggregate credit metrics. Its annualized charge-off rate sits at 3.37%, while 90-day delinquencies remain remarkably low at 0.55%. This strength supports SoFi's rapid loan growth, with student originations jumping 71% YoY to $1.3 billion and home loans surging 87% to $577 million. The company's diversified platform further amplified fee-based revenue by 63% to $289 million, driven by higher-margin segments. While SoFi's individual loan-grade breakdown isn't provided, its overall delinquency and charge-off rates appear significantly lower than Upstart's worst-performing segment (E- loans at 9.6%).

The higher default rates for Upstart's riskier borrowers align with its extensive AI-driven underwriting model, which approved 101% more applicants at 38% lower average interest rates than traditional lenders. This aggressive approval strategy inherently elevates risk but also fuels growth. SoFi's tighter credit metrics suggest a more selective approach, though its rapid expansion into student and home lending warrants monitoring. Both firms show low delinquency levels, yet Upstart's cost per loan rising to $180 signals operational frictions as it scales-potentially impacting long-term profitability if not offset by loan volume growth or pricing adjustments. Investors should weigh Upstart's high-risk/high-reward dynamic against SoFi's comparatively stable credit profile and diversified revenue streams.

Growth Quality And Market Penetration

Both Upstart and SoFi demonstrate compelling growth metrics, but with distinct risk profiles and operational efficiencies. Upstart's Q4 2024 results show a 19.3% conversion rate-up 66% year-over-year-driven by AI-powered risk models that approve 38% more borrowers at lower interest rates. This efficiency boosted lifetime value per loan to $496, though expansion into new loan markets pushed costs to $180 per loan. Critically, default rates remain tiered (1.6% for top-tier borrowers to 9.6% for high-risk loans), with delinquency-to-charge-off ratios improving 13% annually. Yet, the widening default gap between credit grades highlights vulnerability to economic shocks, particularly if lower-tier borrowers face income volatility.

SoFi's Q3 2025 growth hinges on product penetration and brand momentum. The company added 1.4 million new products in a year, reaching 18.6 million total products-a 36% surge fueled by cross-selling to existing members. Unaided brand awareness climbed 170 basis points to 7%, signaling stronger market recognition. Fee-based revenue jumped 63% YoY to $289 million, underpinned by higher-margin segments like student and home loans.

Yet, SoFi's 3.37% annualized charge-off rate for personal loans, while improved quarter-over-quarter, remains elevated compared to historical norms, raising questions about long-term credit quality as loan volumes accelerate.

Despite divergent risk profiles, both companies sustain growth through operational discipline. Upstart's 61% contribution margin reflects scalable AI-driven lending, while SoFi's fee revenue growth underscores diversification beyond core lending. However, Upstart's reliance on expanding into riskier markets could strain margins if defaults rise, and SoFi's aggressive cross-selling may dilute customer satisfaction. Both metrics-conversion rate, lifetime value, and fee growth-signal strength, but credit risk differentials require vigilant monitoring as economic conditions evolve.

Growth-Risk Tradeoff

After reviewing growth drivers and operational metrics, the risk-reward balance becomes clearer. SoFi shows strong momentum: its fee-based revenue jumped 63% YoY to $289 million in Q4 2024, driven by higher-margin student ($1.3B, +71% YoY) and home loans ($577M, +87% YoY). This growth is broadening, with total products reaching 18.6 million in Q3 2025-a 36% YoY surge-where 40% came from existing customers. According to SoFi's Q3 2025 report. Yet its 3.37% annualized charge-off rate remains a watchpoint, especially if economic stress emerges.

Upstart's expansion is more aggressive but riskier. Loan originations grew 28% YoY to $5.9 billion, with Q4 volume surging 68% YoY to $2.1 billion. According to Upstart's Q4 results, automation handled 91% of loans, and conversion rates nearly doubled to 19.3% as AI models approved 101% more borrowers at 38% lower rates. According to Cobalt Intelligence, however, default rates vary wildly from 1.6% (A+ grades) to 9.6% (E- grades), and costs rose to $180 per loan due to market expansion. Though a 61% contribution margin and $496 lifetime value per loan sustain profitability, this model faces pressure if default rates spike.

In short: SoFi's diversified growth comes with moderate credit risk, while Upstart's high-growth strategy carries amplified default and scaling risks. Investors should align choices with their risk appetite-SoFi for steadier growth, Upstart for higher upside potential in controlled conditions.