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In recent years, there’s been rising interest in peer-to-peer (P2P) lending. A report from Allied Market Research estimated that P2P lending would grow by 30% between 2020 and 2027, reaching nearly $560 billion in value.
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 your best deal. After a review of how P2P lending works, consider what you need to know about LendingClub versus Prosper.
- LendingClub vs. Prosper: What’s different?
- How to apply for a LendingClub loan
- How to apply for a Prosper loan
- When LendingClub might be a good choice for you
- When Prosper might be a good choice for you
- LendingClub vs. Prosper: Shop for your best personal loan
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.”
|Loans funded||$50 billion-plus||$17 billion|
|Loan customers||3 million-plus||1.03 million|
The differences between LendingClub and Prosper are in the small details, Hogue said.
See the chart below for a comparison of some details of the unsecured personal loans from the two companies. (The minimum credit score and DTI were current as of Sept. 11, 2020.)
|Loan amount||$1,000 – $40,000||$2,000 – $40,000|
|APR range||8.05% – 35.89%||7.95% – 35.99%|
|Term length||36 or 60||36 or 60|
|Origination fees||3.00% - 6.00%||2.41% - 5.00%|
|Minimum credit score||600*||640|
|Maximum debt-to-income (DTI) ratio||40%*||50%|
|Good for debt consolidation?||Yes||Yes|
*LendingClub doesn’t outwardly state these minimum requirements, but they’ve been widely reported. On its website, LendingClub simply says it will review your credit reports, credit score and “other information that predicts the likelihood that you’ll make on-time payments until your loan is fully repaid.”
“Even though the minimum credit scores are similar, in my experience, LendingClub is a little more flexible about credit requirements overall,” Hogue said. “On the other hand, though, Prosper accepts borrowers with a higher debt-to-income ratio.”
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.
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
- How you plan to use the money
- Whether you’re applying solo or with a co-borrower
- Your total income
Then you answer basic questions about your:
- Street address
- Phone number
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-applicant 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.
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
- Purpose of borrowing
- Street address
- Monthly housing payment
- Employment status
- Telephone number
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 may refer you to its partner, AmOne, which specializes in debt consolidation and personal loans for people with fair to poor credit.
A loan from LendingClub might be a better choice if:
“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%.
A loan from Prosper might be a better choice if:
- You carry a higher debt balance
- You’re creditworthiness unlocks single-digit interest rates
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.
Also, if you’re especially creditworthy (with or without a co-borrower), you could access single-digit APRs that LendingClub can’t match.
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 loan 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.”
You might also compare SoFi vs. LendingClub, for example.
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.
Andrew Pentis contributed to this report.