In recent years, there’s been rising interest in peer-to-peer (P2P) lending. A report from Research and Markets estimates that P2P lending could grow by 53.06% between 2016 and 2020, while Transparency Market Research projects that the global P2P market will be worth $897.85 billion by 2024.
Two well-known players in the P2P lending space are LendingClub and Prosper. How do these two companies compare for borrowers who are looking for personal loans?
Figuring out what works best for you can help you get the best deal. Here’s what you need to know about LendingClub versus Prosper.
How P2P lending works
Here’s how P2P lending works typically:
- You fill out an application on the lender’s website.
- Your credit and other information are used to assign you a “grade.”
- Investors on the site (regular people, or your “peers”) will decide whether to fund your loan, usually in $25 increments.
- If enough investors commit funds to your loan, and it’s fully funded, you receive the money.
According to Joseph Hogue, a chartered financial analyst and P2P lending expert at financial education website PeerFinance101, the LendingClub-versus-Prosper cage match isn’t a thrilling one.
“In many ways, these companies are a lot alike,” Hogue said. “They both work essentially the same way to get loans to borrowers.”
The process is similar on both websites, though there are slight differences in how you apply for your loan, said Hogue.
“No matter which website you go through, you’ll rely on other people to fund your loan,” said Hogue. “You’ll have a chance to make a statement, so share your story so potential lenders know you’re sincere and likely to repay the loan.”
LendingClub vs. Prosper: What’s different?
The differences between LendingClub and Prosper are in the small details, Hogue said.
|Loan amount||$1,000 – $40,000||$2,000 – $35,000|
|APR range||6.16% – 35.89%||5.99% – 35.99%|
|Term length||3 – 5 years||3 – 5 years|
|Origination fees||1% – 6%||1% – 5%|
|Minimum credit score||640||640|
|Maximum debt-to-income (DTI) ratio||40%||50%|
|Good for debt consolidation?||Yes||Yes|
There’s not much difference between the interest rates offered by the two companies. Hogue said that, in his experience, LendingClub personal loans often offer lower rates than Prosper.
“It’s also slightly easier to get a loan with LendingClub,” Hogue said. “Even though the minimum credit scores are similar, in my experience, LendingClub is a little more flexible about credit requirements overall. On the other hand, though, Prosper accepts borrowers with a higher debt-to-income ratio.”
Plus, LendingClub allows you to borrow up to $40,000, while the limit with Prosper is $35,000.
LendingClub lets you have a co-borrower, while Prosper requires you to carry the loan entirely on your own. “If you aren’t sure that you can cut it without someone else’s help, LendingClub can be a good choice,” said Hogue.
Hogue recommended getting a rate quote from both LendingClub and Prosper to compare rates and terms. Since both companies use soft credit pulls to determine your rate, you don’t have to worry about it negatively impacting your credit as you comparison shop.
How to apply for a LendingClub loan
LendingClub takes you through a simple, step-by-step process to find a rate quote. You answer questions about the amount you want to borrow, your credit score range, and how you plan to use the money.
You also inform whether you’re borrowing on your own or with a co-borrower. Then you answer basic questions about your:
- Annual income
Finally, you enter your email address, set up a password, and get your rate. Each item is on its own page, but it gets you through the process quickly. I was able to fill in my information and receive a quote in less than three minutes.
If your credit doesn’t match LendingClub’s requirements, you have the option to find a co-borrower and add that person’s information, thereby increasing your chances of getting a loan.
Once you have a rate quote, you’ll be asked to provide documentation and the terms will be finalized. Then your loan request goes live on the LendingClub website and lenders can decide if they will help fund your loan.
How to apply for a Prosper loan
Like LendingClub, Prosper makes it simple to get a rate check. However, rather than going through multiple pages on Prosper’s website, you fill out all the required information on one page, although Prosper asks for a little more initially than LendingClub.
You need to enter some basic information:
- Amount of the loan you’re requesting
- Monthly housing payment
- Employment status
You’re required to provide an email address and password to set up an account. Again, the whole process of filling the form and getting a rate quote took me less than three minutes.
If you don’t qualify for a Prosper personal loan offer, the company refers you to AmOne, which specializes in debt consolidation and personal loans for people with fair to poor credit.
When LendingClub might be a good choice for you
A loan from LendingClub might be a better choice if:
- You have a lower DTI ratio.
- You need a co-borrower to help you qualify for a loan.
- You want a business loan.
“Yes, you can use your money from Prosper to fund a small business and do most of the things you can do with LendingClub,” said Hogue. “However, in my experience, LendingClub is better at catering to people who have more diverse needs beyond debt consolidation, like starting a business or refinancing an auto loan.”
LendingClub requires that you have at least three years of credit history. However, if you don’t meet the minimum credit requirements due to a low score or thin credit file, a co-borrower can help. The DTI requirement is slightly more stringent for a loan with a co-borrower — your combined DTI needs to be less than 35%.
When Prosper might be a good choice for you
A loan from Prosper might be a better choice if:
- You carry a higher debt balance.
Even though Prosper’s borrowing limit is lower than that of LendingClub and the minimum scores required by both companies are the same, you might be able to get a better deal with Prosper if you a higher debt balance, Hogue said.
LendingClub will consider your application if your total debt payments amount to less than 40% of your income, while Prosper will do it as long as your monthly obligations don’t take up more than 50% of your income.
LendingClub vs. Prosper: Shop for the best personal loan
Do your research to see what works best for your situation. Hogue suggested applying on both lender websites to compare rates.
It’s not just about LendingClub versus Prosper when it comes to personal loans. P2P lending can be a great way to find borrowing opportunities not offered by banks, but it’s not the only option. Hogue recommended getting quotes from other personal lenders, as well as from P2P lenders.
“Just like anything else, you’re going to get a better deal when you shop around,” said Hogue. “Check out Prosper, LendingClub, and more traditional lenders to see where you get the lowest rate and the terms that best fit your situation.”
Note: Student Loan Hero has independently collected the above information related to rates and terms for unsecured personal loans. None of the companies mentioned have provided or reviewed the information shared in this review.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|