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Your Guide to Peer-to-Peer Lending

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A peer-to-peer loan is a personal loan funded by a group of individuals or institutions. If you’ve had trouble qualifying for a loan through a bank or a credit union, this type of alternative lending — often called a P2P loan — might be a good source of financing. It may also offer a lower interest rate.

To find a P2P loan, you’ll need to go online to a P2P lending marketplace that connects individuals who need to borrow with investors willing to lend. Take a look below at exactly how this product works, and what you need to know before you apply.

What is peer-to-peer lending?

A peer-to-peer loan is an unsecured personal loan, which means you won’t need collateral like a home or car to qualify. As with a personal loan, expect a P2P loan to come with a fixed interest rate, predictable monthly payments and a set repayment term.

A P2P marketplace makes money on its loans by charging borrowers both fees and interest at a percentage of what is borrowed. However, because P2P lenders make loans without using a bank as an intermediary, they have fewer overhead costs and none of the capital reserve requirements that drive up costs for traditional banks.

You can use a P2P loan the same way you use a personal loan, to cover a broad variety of costs, such as:

  • Debt consolidation
  • Emergency expenses
  • Home improvements
  • Medical bills
  • Small business costs
  • Wedding expenses

P2P loan pros and cons

P2P lenders and those who fund the loans tend to be more forgiving than traditional lenders offering personal loans. This means borrowers with a less-than-ideal credit score or who have a short credit history may be approved for funds. However, even if you’re approved, your loan will likely come with a higher interest rate than if you had good and established credit. Further, borrowing criteria is stricter with P2P loans than with secured loans, like a car loan.

With a P2P loan, it may take extra time to have your loan funded than with a traditional lender, although you’ll likely receive your funds within a few days after your loan has been approved. Further, there’s a chance your loan won’t be funded even if you’re approved.

Here’s what you need to consider before applying for a P2P loan:

Pros:

Cons:

  • May offer better rates than brick-and-mortar lenders due to less overhead costs
  • More accessible to borrowers with weak credit history who are otherwise good loan candidates
  • Offers flexible use of funds
  • No prepayment penalties
  • Application process may take longer
  • May come with higher fees and interest rates than secured loans
  • Loan amounts are generally capped at $35,000-$40,000
  • Bad-credit borrowers may still struggle to qualify

How to apply for a peer-to-peer loan

Prequalify

As with any loan, peer-to-peer lending marketplaces will consider your credit, income, outstanding debt and payment history. Before submitting a formal application for a loan, however, you should try prequalifying. Prequalifying allows you to see which lenders would likely approve you for a loan and for what potential terms.

To see if you prequalify, visit a P2P lending website and fill out a preliminary application. You’ll be asked for basic information like: your name, address, birthdate, phone number and email address. You’ll also likely need to provide details on how you plan to use the loan, your salary and employment history and any outstanding debts you may have, like mortgage payments.

P2P lenders usually send out preliminary loan offers within a few minutes of hearing from a potential borrower. You can evaluate these options online without worrying whether it will ding your credit score.

Submit a formal application

If you would like to commit to an offer, you’ll need to complete a formal application online. This stage of the application process will trigger a hard credit check, which may cause your credit score to dip slightly, an effect that’s usually temporary.

A P2P lender may ask you to verify some of the information you’ve already provided, such as your income. Plan on having the following documents on hand:

  • A government-issued photo ID
  • Pay stubs
  • Tax forms such as W-2s and 1099s
  • IRS Form 4506-T, which is used to request a copy of your tax forms or returns directly from the IRS
  • Utility bills
  • Recent bank statements
  • Proof of income from alimony or child support, pension or annuity income, disability insurance or workers’ compensation benefits, if applicable

Once your application is in — along with all necessary documents — a P2P platform will review your application and try to match you with potential investors. If your loan is approved and funded, your money will be deposited into your bank account, often within one to four business days.

3 peer-to-peer lending marketplaces

Some P2P marketplaces are open only to certain types of borrowers, like those who have a high income or net worth. The following three platforms, however, are open to all borrowers as long as they meet certain criteria.

 

APR

Borrowing amount

Repayment period

Minimum credit score

LendingClub10.68% to 35.89%$1,000-$40,00036 or 60 monthsNot specified on lender website
Prosper7.95% to 35.99%$2,000-$40,00036 or 60 monthsMinimum FICO score of 640
Upstart8.69% to 35.99%$1,000-$50,00036 or 60 monthsGenerally 600, although you may still qualify if you lack a credit score because of a short credit history

LendingClub

Most borrowers who are approved for a loan through this P2P marketplace receive their funds within four days. LendingClub doesn’t charge a prepayment fee if you pay off either all or part of your loan early — an important consideration if you’re looking to shave interest costs over the life of your loan. However, like the other two marketplaces listed above, it charges an origination fee to cover the cost of processing a loan.

At LendingClub, the origination fee is based on 2.00% - 6.00% of the entire loan amount. Residents of Iowa and the U.S. territories are not eligible for a loan.

LendingClub assigns the most competitive interest rates to borrowers based on three key factors:

  • A borrower’s credit rating
  • The amount borrowed
  • A borrower’s debt-to-income ratio (DTI), or how much is owed to other creditors compared to income

Prosper

Like LendingClub, Prosper also doesn’t charge borrowers a prepayment penalty. Its origination rates vary from 2.41% - 5.00%. Borrowers can generally expect to receive their funds within three business days of accepting an offer.

This P2P marketplace might be an appropriate choice for a borrower with a low credit score. For example, if you have a credit score of at least 600 and no bankruptcies on file, Prosper will let you apply for a co-borrower loan as long as the second borrower has a credit score of at least 640. In general, to qualify for a Prosper loan, you’ll need the following:

  • A minimum 640 FICO Score
  • Less than five hard credit inquiries within the last six months
  • Annual income greater than $0
  • A debt-to-income ratio of no more than 50%
  • At least three open credit accounts
  • No bankruptcy filings over the past 12 months

Upstart

Compared with the other platforms described above, Upstart offers the lowest APR rates and the largest loan amount, up to $50,000. It also claims to provide next-day funding, by depositing loans into most borrower accounts in one business day. Depending on the state where you live, minimum loan amounts will vary, from $3,100 to $7,000. Upstart charges origination fees Up to 8.00%, as well as a fee if a borrower is more than 10 days late with a loan payment.

Upstart looks for borrowers with the following qualifications:

  • A minimum FICO Score of 600 (you may still qualify if you don’t have enough credit history to produce a FICO Score)
  • Low debt-to-income ratio
  • No bankruptcies or public records
  • No accounts currently delinquent or in collections
  • Less than six hard credit inquiries over the past six months (other than inquiries for student loans, vehicle loans, or mortgages)

What if your loan isn’t funded?

If your application to a P2P lender is denied, you’ll receive a notice that provides the specific reason (or reasons) for the denial. For example, many P2P marketplaces require a minimum FICO Score in the low-600 range just to be considered for a loan.

Even if you have a good credit score — generally anything over 670 — your application might still be denied if you have any of these issues:

  • Problems verifying employment: A stable job and income are strong signs that you’ll most likely be able to pay your lender back. If a lender has trouble verifying your employment history, your application may get declined.
  • Not enough income: Lenders typically check to make sure you have enough income to pay back both existing debt and any new loan. If your debt heavily outweighs your income, your lender will most likely deny you any new credit.
  • Bankruptcy: Lenders are often wary of approving a loan after an individual has filed for bankruptcy. A bankruptcy may stay on your credit report for up to seven or 10 years, depending on the type filed.
  • Credit card utilization: If you are using a large percentage of the credit that’s made available to you, you may be seen as a potential risk to lenders.

If a P2P marketplace does deny your loan application, check your credit report to make sure no inaccuracies are dragging down your credit score. You can check your credit report for free every week for the next year at AnnualCreditReport.com, a government-mandated website that collects scores from the three major credit reporting agencies, Equifax, Experian and TransUnion.

Also consider reviewing your loan application to ensure you filled it out completely and accurately. If you do find errors in either your credit report or application, correct them and apply again. Otherwise, take a look at your denial notice and see if there is anything you might be able to do to turn yourself into a desirable loan candidate.

It might be a matter of paying back enough existing debt — like high credit card balances — or steering clear of opening new credit accounts. Or it might simply mean setting up a better budget and paying bills on time. After all, your payment history accounts for as much as 35% of your FICO Score, so consider setting up payment reminders to avoid missed payments.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Need a Career Development Loan? Start Your Search Here

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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In truth, there is no such thing as a career development loan. The term typically refers to a personal loan that can be used to pay for educational courses or tools that can help you advance your career.

Read on to learn more about how this kind of loan works, how to get one and other ways to cover expenses that can push your career to a new level.

What is a career development loan?

A career development loan isn’t its own product. It’s often just a personal loan you use to pay for educational costs, like a coding bootcamp. Personal loans are funds you borrow from a bank, credit union or online lender. They’re also unsecured debts, which means you don’t have to put up an asset, like your home or vehicle, as collateral in case you can’t make payments on the loan.

Here’s how career development loans work: If a lender approves your personal loan application, you can expect to receive your funds in one lump sum that you would then pay down every month. You’d also be responsible for paying interest and any additional fees incurred during the life of your loan.

Some lenders offer perks, like grace periods, flexible repayment options and unemployment protection. But the specifics ultimately depend on the lender.

However, you might be able to use these loans to cover the cost of the following:

  • Training courses or private coaching
  • Certifications for specialized skills, like UX design or project management
  • Conferences and seminars in your industry
  • Tools to move your career forward, like learning how to use a new laptop or software program

It’s worth noting that both federal student loans and private student loans may let you cover the cost of certain certificate programs and continuing education sources. But if you’re looking for help covering a very specific training need — like paying for an online copywriting course — you might be better off turning to a personal loan.

How much do career development programs cost?

Career development programs cover a vast array of offerings, so costs will vary accordingly. In general, short-term programs like seminars or workshops will be much more affordable than time-intensive ones like bootcamps and trade school programs that often straddle weeks or months.

Here’s what some popular career development courses now cost:

Career development program type2020 Estimated cost
Microsoft Office Specialist certification$100 - $160
Coding bootcamp$4,500 - $48,000
Project management certification$400 - $550
Sales training program$600 - $3,000
UX designer course$4,000 - $17,000

As you can see from many of the costs above, it’s key to make sure a career development course will actually benefit your career before committing to it.

Explore these personal loans options for career development

3 personal loans to consider
APRLoan amountLoan terms
LightStream4.99% - 19.99%* $5,000 - $100,00024 to 144 months
SoFi5.99% - 18.53%*$5,000 - $100,00024 to 84 months
Upstart8.69% - 35.99%*$1,000 - $50,00036 or 60 months
*Rate quoted includes autopay discount

LightStream

Online lender LightStream says so this might be a worthwhile option if you’re interested in pursuing professional development courses.

This lender’s low interest rates are attractive and the loans come without fees like origination and prepayment costs — but you’ll need great credit to qualify. The lender also offers a Rate Beat program that guarantees a lower rate than any of its competitors. If you are approved for a lower rate elsewhere, it promises to drop that rate by 0.10% points.

SoFi

Like LightStream, SoFi also offers personal loans that can be used for a wide variety of purposes.

You’ll find no origination, prepayment or late fees with Sofi’s loan product, and you can expect to receive the funds in your bank account in a matter of days after filling out an online application. The company also offers an unemployment protection program and job placement assistance if you find yourself in between jobs with no means to pay down your debt.

One of the biggest benefits of working with SoFi might well be its complimentary career coaching service. The company also offers free job search assistance, personal branding tips, online workshops, virtual networking events, and customized support from a career coach.

Upstart

Upstart personal loans generally come with higher APRs than the other options mentioned here for career development use. But the company offers a quick and easy application process that may allow you to receive funds in as little as one business day after signing. It will also consider factors like education and employment history, so it might be a better option if your credit score is less than ideal.

Still, keep in mind potential fees. Upstart doesn’t charge a prepayment penalty if you pay off your loan sooner than expected, but you may find yourself paying up to 8% of your loan amount in origination fees. Also, if you miss a monthly payment by 10 calendar days or more, you can expect a late payment fee that might be up to 5% of what you owe.

Scholarships and grants can help reduce costs

Another way to reduce the cost of your continued education is to make use of professional scholarships and grants offered by nonprofits, universities and trade organizations.

For example, if you have strong project management experience — but would like to further your skills even more — the PMI Educational Foundation offers scholarships that may help you.

To get started, try an internet search by typing in the name of your profession and the term “professional development scholarships.” In most cases, scholarships and grants require applicants to meet certain criteria in order to be considered. To find out what’s required, go to each scholarship’s website.

The following resources may also help you find the career development financial help you need:

Other ways to pay for your career development

Maybe you’ve decided you don’t want to take out a loan for the full amount of your course or certification program. Or perhaps you’re not eligible for a career development loan because of bad credit. If either scenario applies to you, you still have options.

One option, of course, is to save up the money for your course yourself. The amount you’d save in fees and interest payments could then be put to other uses, like buying updated hardware for your new programming career.

Here are a few alternatives to consider as well:

Your employer may be willing to pay for a course or seminar that might boost your career. Take care with this option, though, as some companies have contingencies for this type of deal. For example, you may need to complete your course within a given time frame, receive a satisfactory grade on your coursework, or stay with the company for several years afterward. If you don’t meet these requirements at some employers, you might be on the hook for the entire cost of the course.

If you have good or excellent credit, a credit card with an introductory 0% APR offer can help you pay your way through a career-advancing program without the fees associated with a loan. Just make sure you are able to pay off the entire balance on your card before the introductory period ends, or you may find yourself owing more than you can afford in deferred interest. Also look for cards that have the longest payback period (like a year or more) before the introductory rate ends.

Unlike traditional personal loans, secured personal loans require you to put up assets like a savings account or car as collateral. If you’re having trouble getting a career development loan because of bad credit, you may have better luck with this type of loan.

If you own a home, you may be able to tap into the equity you have in it, which is basically the difference between what your home is worth and the amount owed on your mortgage. Just like a traditional loan, a home equity loan lets you withdraw money in one lump sum and pay it back in monthly installments. Now, however, you’re borrowing against your home rather than from a lender. Take extra care to stay on top of your payments, because if you default, you could lose your home.

Before you borrow money for career purposes — whether it’s from a lender or against the value of your home — make sure to have a solid repayment plan in place. Know how much you are expected to pay every month and whether you can afford to do so.

With any kind of career development training, it’s easy to assume you’ll be making more money immediately after you’re finished. But there’s no guarantee you’ll land a new job offer right away. Instead, play it safe and base your repayment plan off your current financial situation. This way, you can rest assured knowing your finances are secure — no matter what happens.

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Marcus by Goldman Sachs Review: GS Bank Takes on Online Savings, CDs, and Personal Loans

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Marcus by Goldman Sachs savings account

Its interest rate and no fees make this a competitive savings account.

APY

Minimum Balance Amount

0.60%

None

  • Minimum opening deposit: None. However, you’ll need to deposit at least $1.00 if you want to earn any interest
  • Monthly account maintenance fee: None
  • ATM fee: N/A
  • ATM fee refund: N/A
  • Overdraft fee: None

This is a great account for almost anyone. However, before you click that “Learn More” button below, there are a couple of things to know.

No ATMs. First, Marcus by Goldman Sachs doesn’t offer ATM access to your savings account. You’ll either need to deposit or withdraw money by sending in a physical check, setting up direct deposits, or by moving the money to and from your other bank accounts via ACH or wire transfer.

No checking account. Second, Marcus does’t offer a corresponding checking account. That means you can only use this account as an external place to park your cash from your everyday money flow.

Keeping a separate savings account does have its benefits. For example, it’s harder to tempt yourself to withdraw the cash if you’re a chronic over-spender. But, it also means that there might be a delay of a few days if you need to transfer the money out of your Goldman Sachs online savings account and into your other checking account.

How to open a Goldman Sachs online savings account

It’s really easy to open an online savings account with Marcus by Goldman Sachs. You can do it online or over the phone as long as you’re 18 years or older, have a physical street address, and a Social Security Number or Individual Taxpayer Identification Number.

You’ll be required to sign a form which you can do online, or by mail if you’re opening the account over the phone.

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How their online savings account compares

Marcus’ online savings account can easily be described with one word: outstanding.

You’ll get a relatively high interest rate with this account, which is among the best online savings account rates you’ll find today. In fact, these rates are currently over seven times higher than the average savings account interest rate.

Even better, this account won’t charge you any fees for the privilege of keeping your money stashed there. It’s a tall order to find another bank that offers these high interest rates with terms this good.

Marcus by Goldman Sachs CD rates

Competitive CD rates, but watch out for early withdrawal limitations.

Term

APY

Minimum Deposit Amount

6 months

0.45%

$500

9 months

0.55%

$500

12 months

0.85%

$500

18 months

0.85%

$500

24 months

0.85%

$500

3 years

0.85%

$500

4 years

0.85%

$500

5 years

0.90%

$500

6 years

0.90%

$500

  • Minimum opening deposit: $500
  • Minimum balance amount to earn APY: $500
  • Early withdrawal penalty:
    • For CDs under 12 months, 90 days’ worth of interest
    • For CDs of 12 months to 5 years, 270 days’ worth of interest
    • For CDs of 5 years or over, 365 days’ worth of interest

Marcus’ CDs work a little differently from other CDs. Rather than having to set up and fund your account all at once, Goldman Sachs will give you 30 days to fully fund your account.

Once open, your interest will be tallied up and credited to your CD account each month. You can withdraw the interest earned at any time without paying an early withdrawal penalty, but heads up: If you withdraw the interest, your returns will be lower than the stated APY when you opened your account.

If you need to withdraw the money from your CD, you can only do so by pulling out the entire CD balance and paying the required early withdrawal penalty. There is no option for partial withdrawals of your cash.

Finally, once your CD has fully matured, you’ll have a 10-day grace period to withdraw the money, add more funds, and/or switch to a different CD term. If you don’t do anything, Marcus will automatically roll over your CD into another one of the same type, but with the current interest rate of the day.

How to open a Goldman Sachs CD

Marcus has made it super simple to open up a CD. First, you’ll need to be at least 18 years old, and have either a Social Security Number or an Individual Taxpayer Identification Number.

You can open an account easily online, or call them up by phone. You’ll need to sign an account opening form, which you can do online or via a hard-copy mailed form. Then, simply fund your CD account within 30 days, and you’re all set.

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How their CDs compare

The interest rates that Marcus offers on their CDs are top-notch. In fact, a few of their CD terms are among the current contenders for the best CD rates.

If you’re interested in pursuing a CD ladder approach, Marcus is one of our top picks because each of their CD terms offer above-average rates. This means you can rest easy that you’ll get the best rates for your CD ladder without having to complicate things by spreading out all of your CDs among a handful of different banks.

The only downside to these CDs compared with many other banks is that you can’t withdraw a portion of your cash if you need it. It’s either all-in, or all-out. However, once out, you’re still free to open a new CD with the surplus cash, as long as it’s at least the $500 minimum deposit size.

Marcus by Goldman Sachs personal loan

Personal loans offered by Marcus have low APRs, flexible terms, and no fees.

Terms

APR

Credit Required

Fees

Max Loan Amount

36 to 72 months

6.99%-19.99%

Not specified

None

$40,000

Marcus by Goldman Sachs® personal loans can be used for just about anything, from consolidating debt to financing a large home improvement project. They offer some of the best rates available, with APRs as low as 6.99%, and you’ll not only be able to choose between a range of loan terms, but you can also choose the specific day of the month when you want to make your loan payments.

While there are no specific credit requirements to get a loan through Marcus, the company does try to target those that have “prime” credit, which is usually those with a FICO score higher than 660. Even with a less than excellent credit score, you may be able to qualify for a personal loan from Marcus, though, those that have recent, negative marks on their credit report, such as missed payments, will likely be rejected.

Applicants must be over 18 (19 in Alabama and Nebraska, 21 in Mississippi and Puerto Rico) and have a valid U.S. bank account. You are also required to have a Social Security or Individual Tax I.D. Number.

No fees. Marcus charges no extra fees for their personal loans. There is No origination fee associated with getting a loan, but there are also no late fees associated with missing payments. Those missed payments simply accrue more interest and your loan will be extended.

Defer payments. Once you have made on-time payments for a full year, you will have the ability to defer a payment. This means that if an unexpected expense or lost job hurts your budget one month, you can push that payment back by a month without negatively impacting your credit report.

How to apply for a Marcus personal loan

Marcus by Goldman Sachs offers a process that is completely online, allowing you to apply, choose the loan you want, submit all of your documents, and get approved without having to leave home. Here are the steps that you will complete to get a personal loan from Marcus:

  1. Fill out the information that is required in the online application, including your basic personal and financial information, as well as how much you would like to borrow and what you will use the money for.
  2. After a soft pull on your credit, and if you qualify, you will be presented a list of different loan options that may include different rates and terms.
  3. Once you have chosen the loan you want, you will need to provide additional information to verify your identity. You may also be asked for information that can be used to verify your income and you will need to provide your bank account information so that the money can be distributed.
  4. Many Marcus customers receive funds in as little as 5 days.

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How their personal loans compare

Marcus offers low APRs and flexible terms with their personal loans, but their main feature is that they have no fees. If you are looking for a straightforward lending experience with no hidden fees or costs, Marcus will be perfect for you since you won’t even have to worry about late fees if you happen to miss a payment.

While Marcus offers some great perks, you may be able to get a lower rate if you choose to go with another lender, such as LightStream or SoFi. Both of these lenders offer lower APR ranges and they don’t charge origination fees, though, LightStream will do a hard pull on your credit to preapprove you.

LendingClub and Peerform both have lower credit requirements than Marcus, but they also charge origination fees and, being P2P lending platforms, you will need to wait for your loan to be funded and you run the risk that other users might not fund your loan.

Overall review of Marcus by Goldman Sachs‘ products

Marcus has really hit it out of the park with their personal loans, online savings, and CD accounts. Each of these accounts offers some of the best features available on the market, while shrinking the fees down to a minuscule, or even nonexistent, amount. Their website is also slick and easy to use for online-savvy people.

The only thing we can find to complain about with Marcus is that they don’t offer an equally-awesome checking account to accompany their other deposit products. Indeed, it seems like Marcus has turned their former hoity-toity image around: Today, they’re a bank that we’d recommend to anyone, even blue-collar folks.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.