Founded in 2006, Prosper is one of the first peer-to-peer lending sites. Peer lending means that instead of the company itself issuing loans, it puts loan requests up as listings. Investors choose the listings they want to fund and make money through the interest charges.
Prosper’s Borrower Requirements
The only things Prosper requires for borrowers is a credit score of at least 640 and a debt-to-income ratio of 50 percent or less. That debt to income ratio excludes mortgages. The site focuses on borrowers who have good credit. While it doesn’t have minimum requirements in terms of gross income or your credit history, the average annual income for borrowers is $76,000. Most also have used multiple lines of credit in the past.
Loan Options with Prosper
Prosper issues loans ranging from $2,000 to $35,000, with APRs between 5.99 and 36 percent. You can get a loan with either a 3 or 5-year term, and it usually takes about 3 to 5 business days to receive your money after going through the application process.
There’s no fee for prepaying or paying with a personal check. If you’re late with your payment, there’s a fee of either $15 or 5 percent of the payment, whichever is greater. Prosper charges an origination fee between 1 and 5 percent of the total loan amount, and it determines that fee based on the grade it assigns you.
The Prosper Loan Application Process
Prosper has a lengthier application process that most other online lenders. You start by filling out a loan application which includes your personal information and the amount you’re requesting. When you submit this application, Prosper runs a soft credit check on you. Since it’s a soft check, it doesn’t impact your credit score. After this credit check, the lender is able to provide you with info on your loan options, including term lengths, fees and interest rates.
You will then select a loan option, complete a more thorough application and agree to Prosper’s terms. Once you finish this, your loan request goes up on Prosper’s site for investors to see. The request doesn’t have your personal information. During this time, Prosper also verifies your identity, income and other information, and will let you know if it needs any additional documentation from you. Your listing includes what information Prosper has verified, so you’re more likely to get investors by providing anything Prosper needs to verify you.
Prosper keeps listings on its marketplace for up to 14 days, and you’re able to borrow the funded amount of your loan provided investors fund at least 70 percent of the requested amount. Otherwise, you can put up a new loan request. When Prosper verifies you and the loan has reached the required funding, the lender then performs a hard credit check, which can impact your credit score. Finally, you receive your loan after Prosper takes its origination fee from the total.
How Prosper Compares to Other Peer-to-Peer Lenders
Like other online lenders, Prosper determines your interest rate and origination fee based on the grade it assigns you. It bases that grade on several factors, but your credit history and income are the most significant.
Prosper’s interest rates and origination fees tend to be about the same as those offered through other online lenders, including Lending Club, another one of the largest online lenders. One area where Prosper falls short is its flexibility, as other lenders offer more loan options. Lending Club, for example, provides more term length options and a lower minimum loan amount of $1,000. It has joint loan applications available for certain borrowers, which Prosper does not. Prosper also doesn’t let borrowers make changes to their payment schedule.
One highlight of using Prosper is its Prosper Daily mobile app. This app allows you to keep track of your loan payments and your spending, helping you stay on top of your payments and avoid missing any. You can also use it for free monthly credit score monitoring and credit card payment monitoring. It can track subscription services that you use and let you know if the prices for any of those subscription services go up.
There’s a reason that Prosper has been around as long as it has and has paid out over $7 billion in loans. It’s a high-quality online lender with competitive interest rates and origination fees, even if it lacks certain options you’ll find with other lenders.
Since each online lender uses its own grading system, it’s smart to get loan quotes through multiple lenders and choose the one that gives you the best rate. That may be Prosper, or it may be another lender. Your loan’s interest rate is the most important factor, since a lower interest rate could save you hundreds or thousands of dollars.