Prosper loan amounts range from $2,000 up to $35,000. Peer-to-peer lending is attractive to borrowers because of the low interest rates and low fees. The loan process is completed online and is quick and hassle free. All loans are unsecured which means no collateral such as real property or personal property is required.
Prosper Loan Process
The way Prosper works is based on an auction type model similar to Ebay. Prospective borrowers create a simple loan listing. The borrower chooses the amount of the loan desired and Prosper supplements the borrower’s profile with a credit score, prior Prosper loan performance, if it exists, and other financial details. Prosper loans can be deposited into your account in as little as 4 days.
Once the borrower’s profile is complete with financial information, lenders use the information in order to bid on the loan in a competitive auction. This is where the auction model comes into place.
Lenders compete with each other to loan money to the borrower. A borrower may have more than one lender however, Prosper handles all paperwork and wraps the total amount the borrower requested into one loan.
How to Apply for a Loan
Borrowers must create a loan listing on Prosper.com detailing their loan request and choose the amount of the loan from $2000 to $35,000. Loans are available for debt consolidation, personal loan, home improvement, business, repairs, auto loan, weddings and more.
Qualifying for a Prosper Loan
Borrowers can check what interest rate you can qualify for without affecting your credit score. Once a borrower officially creates a listing Prosper will gather all financial information including a full credit report. Generally, a minimum credit score of 640 is needed however, if your credit is less than perfect credit you may still apply. Prosper gives borrowers the opportunity to sell themselves to investors based on criteria other than financial history and credit score.
Prosper determines a borrower’s risk and sets a cost for the loan and assigns borrowers a “Prosper Rating” between AA and E; this corresponds to an interest rate currently ranging between 6.73% and 35.64%.
Interest Rates and Terms
The Annual Percentage Rate (APR) ranges from 6.59% (AA) to 35.84% (E) for first time borrowers. Repeat borrowers may qualify for discounted rates. All borrower loans are fixed rate, unsecured, 4-year, fully amortizing with simple interest. Prosper handles the loan administration tasks including loan repayment and collections on behalf of the matched borrower and lenders.
Borrowers repay the loan directly through Prosper. There are no pre-payment penalties and the loan can be paid off at any time during term of the loan.
Lenders on Prosper
Prosper loans can come from a variety of sources. Many of the lenders spread their risk by offering small loans to multiple borrowers. The individual investor or institutional investor can bid as little as $35.00 on any loan request. Prosper handles the funding and servicing of the loan once the auction ends.
Borrowers may never know who their lender is because they will have little to no interaction. Individual and institutional investors bid on the loan request. Prosper takes the bids with the lowest interest rates and turns them into one loan.
Lenders can diversify their investment by spreading money over multiple borrower loans. Lenders get higher returns without the overhead and hidden fees.
Investors willing to loan to riskier borrowers will enjoy higher rates of return. Sign up to be a lender on Prosper and earn 10.69% on your investments.
History of Prosper
Prior to 2008, Prosper operated without any oversight. The SEC considered Prosper a seller of securities and thereby should be regulated by the SEC even though Prosper is not lending any money itself.
After operations were shut-down by the SEC for several months, Prosper returned in 2009 having settled and come into compliance with the SEC. Prosper now securitizes their offerings.
Prosper has become the largest peer-to-peer lending marketplace in America, originating $359MM in loans for 2013 to thousands of consumers. By directly connecting borrowers and lenders, Prosper helps borrowers avoid the agonizing loan process presented by traditional banks while providing lenders higher returns for their investments. Prosper makes getting a loan online easy.