Prosper is one of the pioneers of peer-to-peer, or marketplace, lending, connecting good-credit borrowers with investors who can choose to fund their loans.
Prosper is a good fit for those who:
- Have good to excellent credit scores. Prosper’s minimum score is 640, but its customers average 703.
- Have substantial annual income; the average for Prosper borrowers is $76,000. There is no minimum requirement, but borrowers generally have high incomes and experience with multiple lines of credit.
- Want a loan from an online lender that’s been around for a long time. San Francisco-based Prosper was founded in 2006 and has originated more than $7 billion in loans since its inception.
- Want an app to manage money. Prosper owns personal finance management app BillGuard. Now known as Prosper Daily, the app lets borrowers track their loan payments and spending habits. It also offers free monthly credit score monitoring and features to stay on top of your credit card payments.
Detailed Prosper personal loan review
To review Prosper, NerdWallet collected more than 30 data points from the lender, interviewed company executives, completed the online loan application process with sample data, and compared the lender with others that seek the same customer or offer a similar product.
Prosper doesn’t fund loans with its own money like some online lenders do. The company underwrites applicants and charges a fee to match investors with approved borrowers. It also services all loans originated through its platform. Lending Club, another big marketplace lender, uses the same model. Other online lenders, such as SoFi, typically use their own capital to fund loans.
The lender assigns all borrowers a grade by analyzing internal data about past borrower behavior and combining it with traditional credit data such as credit scores and debt-to-income ratios. Your grade (which you can see) determines the interest rate you receive and lets investors decide whether to fund your loan.
Prosper loans aren’t as flexible as some other online lenders’; borrowers cannot adjust their payment schedule, and they will be charged a late fee if they fail to make a payment. Lending Club, the other big marketplace lender, has slightly more flexible loan terms and a lower minimum loan amount, and it allows joint loan applications to select borrowers.
The Prosper Daily app has useful features for those who want to stay on top of their spending. It alerts you if you have subscriptions you don’t pay attention to and also when the prices of those subscriptions increase.
How to apply for a Prosper loan
The application process for Prosper is more involved than other online lenders’. The entire process — from application to funding — typically takes three to five days, but it can take longer depending on how quickly you provide your documents:
- To get started, you fill out a brief personal loan application on Prosper’s website for the desired loan amount. When you submit the form, Prosper performs a soft credit check from credit bureau Experian, which won’t affect your credit score. This allows Prosper to give you loan options with specific interest rates, fees and loan terms.
2. After reviewing your loan offers, you can pick the one that’s best suited to your needs. Then you’ll fill out a more detailed application and agree to the site’s lending terms and disclosures. Prosper will then put your loan up on its site for investors to fund. Investors won’t see any of your personal information.
3. While your loan is up for funding, Prosper will conduct a three-stage verification check of your income, identity and other data, which may require you to provide additional documents. Your listing will indicate how much of your information still needs to be verified. The more you have verified, the more credible your listing appears to investors.
4. If investors fund 70% or more of your loan, you can borrow the funded amount. If you don’t make it across the 70% threshold, you can set up a new listing. (Listings stay on Prosper’s marketplace for a maximum of 14 days.)
5. Once your loan is fully funded and you’ve been verified, Prosper initiates a hard credit check (this could affect your credit scores).
6. The money is transferred to your account, minus the origination fee.
7. You can track your spending and loan payments through the Prosper Daily app.
Minimum requirements for a Prosper loan
- Minimum credit score required: 640.
- Minimum gross income required: None, but generally high.
- Minimum credit history: None, but generally several years.
- Limitations: Aimed at good-credit borrowers.
- Maximum debt-to-income ratio: 50% (excluding mortgage).
Prosper’s lending terms
- APR range: 5.99% to 36%.
- Minimum loan amount: $2,000.
- Maximum loan amount: $35,000.
- Loan duration: Three or five years.
- Time to receive funds: Typically three to five business days.
Prosper’s fees and penalties
- Origination fee: 1% to 5% of the loan amount, depending on the borrower’s Prosper grade.
- Prepayment fee: None.
- Late fees: The greater of $15 or 5% of the payment amount.
- Personal-check processing fees: None.
Before you take a personal loan
Amrita Jayakumar is a staff writer at NerdWallet, a personal finance website. Email: firstname.lastname@example.org. Twitter: @ajbombay.
This article was updated October 14, 2016. It was originally published Nov. 24, 2015.