Is a Prosper Personal Loan the Right Loan for You?
Prosper is a leading personal loan lender. Prosper uses a different approach to offering personal loans, called peer-to-peer lending. Their use an online platform to match borrowers seeking personal loans at attractive rates with individual investors looking for a good return on their money. Borrowers and investors are both served at the Prosper.com website.
Since opening in 2005, Prosper has had over 900,000 consumers take out a personal loan for over $15 billion in total value.
Prosper targets consumers with good credit or better, recommending (not requiring) a minimum credit score of 640. As with all personal loan lenders, excellent credit is required to receive the lowest rates advertised.
Prosper's website makes it easy to check your rates, choose the loan you want, apply for your loan, and receive the funds. It takes one minute for you to receive a rate quote, though your rate is not officially offered until you submit an application and it is reviewed. Prosper pulls your credit to provide you with an interest rate quote, using a "soft pull" that has no effect on your credit score.
What is a Prosper Rating?
Prosper offers unsecured personal loans with competitive, fixed interest rates to qualified borrowers. To determine your interest rate, Prosper assigns you a "Prosper Rating." They use a propietary analysis that takes into account your credit score, the data on your credit report, and the information on your application. Your Prosper Rating estimates how risky a borrower you are. TThere are 7 Prosper Ratings, ranging from "AA," the best, lowest risk borrower, to "HR," the highest risk borrower.
In addition to determining your interest rate, your Prosper Rating informs investors the risk they take in lending to you, and the rate of return the investors receive.
Prosper Rates, Terms, and Fees
As of May 2019, Prsoper offers personal loans with:
- Loan amounts from $2,000 to $40,000
- Fixed-rate loans, with interest rates from 6.95% to 35.99% APR
- Origination fees of 2.41% to 5.00%, depending on your Prosper Rating, loan size, and repayment term
- Repayment terms of 3 years or 5 years
The interest rate Prosper.com offers you is based on the size of the loan you seek, the length of the repayment term you select, the loan purpose you choose, and your Prosper score.
Whatever interest rate Prosper.com offers you, shop around. Comparison shopping is the only way to see if other lenders will offer you better terms.
You can use the Personal Loan Rate Table, immediately below, to see offers from a number of lenders. It takes only a minute to see results. All you need to do is put in your desired loan amount, estimated credit score, the reason you want a loan, and your Zip Code. This process has no effect on your credit.
Prosper Personal Loan Eligibility Requirements
After you submit your loan application, Prosper does a "hard pull" of your credit report and evaluates your loan application. Prosper checks that you meet some basic eligibility requirements, including that you have:
- A debt-to-income ratio of less than 50% (not counting your mortgage or rent payment)
- Not filed for bankruptcy in the past year
- 4 or fewer credit inquiries ("hard pulls')in the past 6 months
- At least three active trade-lines in good standing on your credit report
- Not had a loan with Prosper previously that was charged off
- Not been turned down by Prosper in the past 4 months due to delinquency
- An active bank account in good standing.
- A Social Security Number
- Proof you are a US citizen or a legal resident of the US
- Live in any state other than Iowa and West Virginia
Prosper "does not verify all information provided by borrowers in listings" to determine you're eligibility. Prospe verifies your identity and your bank account. Interestingly, Prosper doesn't necessarily verify your income and employment, key factors regarding your ability to make your monthly loan payments. Some borrowers are required to submit recent paychecks, tax records, or bank statements. Others will be approved without them.
If you are asked to submit documents, you must do so in a timely manner. You can monitor requests for documents in your online account. Prosper's underwriting and verification process usually takes 7 business days or less to complete.
Getting a Peer-to-Peer Loan from Prosper
Meeting all the eligiblity requirements and receiving approval for your loan from Prosper.com's underwriting are necessary steps to receive loan funds in your bank account. They are not final hurdle, though.
Prosper's peer-to-peer loans are funded by individual investors, not by Prosper. That means your loan needs to receive enough interest from investors to fund it. Investors can put as little as $25 into your loan. If not enough investors commit to put money into your loan within 14 days, your approved loan will no longer be listed.
If you don't get a loan because not enough investors committed to it, it's not the same as being turned down for a loan, though, you don't have the money in either case. If you were approved for a loan, Prosper judged you to be a creditworthy borrower. You are welcome to re-apply, even immediately. If you are turned down, you are not eligible to apply again for 120 days.
Pros and Cons of a Prosper Personal Loan
Prosper is a well-established lender, with an easy to use website. They offer competitive interest rates and are worth considering when you are comparison shopping for a personal loan. Here are some specific Prosper pros and cons.
- Low minimums - Their $2,000 minimum loan amount is lower than many lenders offer, making it a good option for a low-dollar personal loan.
- Non-traditional underwriting - Relaxed lending requirements can be a double-edged sword. The good side is that you may qualify or receive a lower rate with Prosper, due to Prosper not being as strict as a traditional lender. For example, some Prosper loans don't require income verification.
- Soft credit pull - You can shop for a rate quote from Prosper without affecting your credit score.
- Origination fee - Prosper charges a fee of 2.41% to 5%. Not all personal loan lenders charge fees.
- Less strict underwriting - The bad side of less strict underwriting is that you may be approved for a loan that is not affordable to repay. Peer-to-peer loans have a higher default rate than other personal loans, so be careful that you aren't taking on a payment you can't afford.
- Limited repayment terms - The only two repayment lengths Prosper offers are a 3-year and a 5-year option.
- Time to receive money - The average time it takes to fund a loan with Prosper is longer than many online lenders.