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Updated on Friday, April 3, 2015
Peer-to-peer lending websites, like Prosper, offer borrowers a unique way to secure loans funded by everyday people. It’s a highly convenient loan option to consider if you’re looking to quickly borrow a large sum of money with a competitive, fixed interest rate.
Prosper APR currently ranges from 7.95% to 35.99%, fixed depending on factors like your creditworthiness and loan term. In this article, we’ll show you how to apply for Prosper loan, explain the loan conditions and discuss its pros and cons.
How Can You Get Approved for a Prosper Loan?
To qualify you must live in a U.S. state other than Iowa, Maine or North Dakota. The application process takes a few minutes, however Prosper’s criteria for an approval is selective. According to the Prosper Prospectus, these are the conditions used to evaluate applicants:
- Credit score –
- Credit inquiries – You can’t have more than seven inquiries on your credit report within the last six months.
- Income – You must have some form of regular income that proves you can repay the loan you apply for.
- Debt-to-income ratio – Your debt-to-income ratio must be below 50%.
- Open accounts – You must have at least three open credit accounts.
- Bankruptcy – You must not have filed for bankruptcy within the last year.
Not sure if you qualify? No worries! Prosper does a “soft pull” of your credit history when you apply, so you can head on over to the site* and shop for rates without worrying about it affecting your credit score.
How to Apply and Receive Loan Funding
You’ll find the application process for a Prosper loan is very straightforward.
Step 1: Check Your Rate
As soon as you get to the Prosper homepage, you’ll be greeted with a form to input your desired loan amount, the purpose of your loan and the quality of your credit.
*For reference only – rate may differ.
Once you fill in the form and click “Check Your Rate”, you’re taken to another page to input more information about yourself, so Prosper can perform a quick credit check to determine your rate. Be honest here because this is only the preliminary check. Later in the process, Prosper may ask you to provide documents such as pay stubs and a driver’s license to verify the data you enter.
Step 2: Choose your loan amount and accept the offer
Next you’ll arrive at the loans and rates you qualify for if your application is accepted. I put in $2,000 for an example and below is the information it spit out. First, you’ll see the loan offer for $2,000 and below you’ll see additional loan options they offer based on the information I provided.
Step 3: Finish application forms
After you settle with a loan option, Prosper will ask about your occupation, details of your employment and social security number. Then the final step on the application is entering the bank account where you want the loan money to be transferred when it’s funded by your peers.
Funding Your Prosper Loan
To receive loan funding, you create a loan listing which includes the reason you need a loan and the loan terms you qualify for among other details. A loan listing is similar to an advertisement and is shown in the Prosper marketplace where investors shop for loans to invest in.
Loan listings stay active for 14 days. When a loan is funded the money is deposited into the bank account you provide. If your loan listing does not receive the minimum amount of funding it’s cancelled and you must start the application process over again.
Terms of the Loan
Prosper offers loans from $2,000 – $40,000 and loan terms from 36 or 60 months. The interest rate you receive for a loan depends on factors like the economy, your loan term and Prosper Rating. The Prosper Rating is a proprietary grading system they use to rate applicants from AA (low-risk) to HR (high-risk).
Applicants closest to grade AA pay the lowest interest rates and can borrow the most money. On the other hand, applicants closest to HR receive higher interest rates and are eligible for less funding. Prosper calculates your risk rating by considering your credit report, credit score and other internal scoring metrics its developed by researching the payment history of other Prosper borrowers.
There’s no fee for creating a loan listing on Prosper, however if your loan is funded you must pay an origination fee which is a percentage of the amount that you borrow depending on your Prosper Rating. Here’s the current Prosper origination fee table.
Like any other loan, Prosper does have additional fees for specific circumstances. For instance, a bounced payment costs $15 and late fees are charged when payments are over 15 days late. (Its entire late payment and fee schedule can be found here).
There isn’t a prepayment penalty, but you must factor the origination fee into the overall APR when you determine how much this loan costs you. SoFi* is one of the only personal loans without an origination fee, so you should always check to see if your APR would actually be lower with SoFi before committing to another lender.
Pros and Cons of a Prosper Loan
Now that you’ve got an understanding of how the Prosper loan process works, let’s weigh both the good and the bad of taking out a loan with this peer-to-peer lending site.
- There’s a very quick turnaround for loans if you meet all the requirements in a timely manner.
- It does a “Soft Pull” when you initially apply to offer you rates without harming your credit score. A hard pull will be performed when you accept a loan.
- You can pay your loan off early without penalty.
- Interest rates are fixed.
- The interest rate you receive may be steep if your credit isn’t stellar or you don’t meet some of Prosper’s other minimum requirements.
- The origination fee is based on the rating Prosper assigns you, so if you’re deemed high-risk it may be pricey.
- Prosper considers self-employed people high-risk, so you may have trouble securing a loan if you work for yourself.
A Strong Option for a Personal Loan
Depending on your loan needs and credit history, a peer-to-peer loan from Prosper may be a better option than other debt vehicles like credit cards because of lower and fixed interest. But remember, it’s important to weigh all of your options in order to locate the best loan for your unique situation and credit profile. Go to our personal loan marketplace and be sure to check your rate options with every provider that offers a soft pull (any provider with an A score) and won’t hurt your credit score. Your goal should always be to get the lowest rates, so be sure to explore all your options.
*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.