April 13, 2021 4:00 PM PT

Prosper Personal Loan Review

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Prosper offers peer-to-peer personal loans at fairly low APRs. Before applying, find out if you'll qualify and who Prosper loans are best for.

Prosper Promotions
Personal Loans

Overall Score

3.3

Eligibility

4.0

Fees

3.0

Interest Rates

3.0
5-point scale (the higher, the better)

Pros and Cons

  • Online application
  • No prepayment penalties
  • Better approval chances
  • High APR for "fair credit"
  • Only two terms offered
  • Won't pay creditors directly

Bottom Line

Low APRs for "good credit" borrowers who need a small loan

Getting denied by traditional lenders? A peer-to-peer lender like Prosper may be worth a look.

You have a better chance of getting funded, but is it a safe option? Review Prosper below before sending in your application.

What Is Prosper?

Prosper is a peer-to-peer lending platform that brings together borrowers and investors.

Instead of a bank lending you money, its individual investors that fund your loan. You may have a better chance of getting funded, and investors earn from the interest charged on your loan.

Prosper offers unsecured personal loans and home equity lines of credit (in certain states).

They provide loan amounts from $2,000 - $40,000 in terms of 3 or 5 years. And you can repay the loan early without worrying about a prepayment penalty.

How Prosper Works

Prosper brings together borrowers and investors by evaluating your application, including your credit score, income, and debt. Prosper assigns you a 'Prosper Score,' which potential investors use to decide if they want to invest in your loan.

Applications stay open for 14 days. If your loan is at least 70% funded within that time, it closes, and you receive your money.

If not enough investors invest in your loan, your loan doesn't go through.

According to Prosper, most loans fund and close within three business days. However, they recently started offering next-day funding for borrowers who qualify.

Is Prosper a legit company? Prosper Funding, LLC is a legitimate company and was founded in 2005. They've since facilitated $18+ billion in personal loans to more than 1 million people. They work with WebBank, an FDIC-insured, state-chartered bank to extend their loans. Prosper is also backed by leading investors like Sequoia Capital, Francisco Partners, Institutional Venture Partners, and Credit Suisse NEXT Fund.

Who Is Prosper Good For?

Prosper is best for borrowers with average to good credit (630 - 720 score) or borrowers who need a joint applicant, as not all personal loan lenders allow co-applicants.

Because Prosper charges high origination fees (2.41% - 5.99%), it's best for borrowers who need only a small loan amount to keep their fees low.

If you're consolidating high-interest credit card debt or need money for a home improvement, Prosper is a good option, but there are plenty of reasons it's not a good option too.

Who Isn't Prosper Good For?

If you have bad credit or even mediocre credit, Prosper's APRs could be too high for your budget or that you should be willing to pay.

Prosper also doesn't fund loans used for educational purposes, and if you need the money for healthcare expenses, Prosper has another division to help with your loan.

If you need to borrow a large amount (over $40,000) or you need a high loan amount and have a low credit score, the origination fee will be more than you should pay.

How to Apply for a Prosper Personal Loan

Like most online personal loan lenders, it's easy to secure a loan with Prosper using the following application process:

  1. Provide basic information, including your name, birthdate, address, loan amount, and purpose of the loan (consolidate debt, home improvement, big purchase, medical expenses, etc.).

  2. If you use a co-signer, you'll do the same thing for him/her.

  3. Prosper then asks about your income, housing payment, and your contact information.

  4. Prosper will run a soft credit check and send you offers.

  5. If you choose an offer, you'll register for an account that creates a 'listing' for potential investors.

  6. Prosper may ask for some documentation to prove the details you provided.

  7. Once investors invest in your loan and it's funded, Prosper sends the funds to your bank account.

Who Is Eligible for a Prosper Personal Loan?

Like any personal loan, you must meet Prosper's personal loan requirements including:

  • At least 18-years old with a Social Security number
  • Minimum 640 credit score, but higher credit scores are better to keep the APR and origination fee down
  • At least a 2-year credit history
  • At least three open and active tradelines
  • Max 50% debt-to-income ratio
  • Max 5 credit inquiries in the six months

Because Prosper is a peer-to-peer lender, these are their basic guidelines, but they score borrowers based on where they rate on these factors. Investors then decide if they want to invest in your loan based on your Prosper Rating.

What Are the Fees and Penalties?

Prosper charges interest like any other personal loan lender. How much you pay depends on your credit score, debt ratio, and overall risk. On average, Prosper offers interest rates from 6.95% - 35.99% and charges origination fees from 2.41% - 5%.

Prosper also charges a $15 late fee if you miss your due date by more than 15 days.

Prosper does not charge a fee if you pay your loan off early.

Pros & Cons

Like any personal loan lender, Prosper has its pros and cons. Understanding the good and bad can help you make an informed decision.

Pros

  • May have a higher chance of approval since individual investors choose to fund your loan.
  • No pre-payment/early payment penalties.
  • The entire process takes place online, so it's easy to get done fast.
  • You can secure a home equity line of credit using your home as collateral to get lower rates if you live in Alabama, Arizona, Colorado, Florida, New Mexico, or Texas.

Cons

  • Most Prosper personal loans have an origination fee, starting at 2.41%.
  • Interest rates are high on Prosper loans, especially if you have poor to average credit.
  • There are only two terms to choose from, three or 5-year terms.
  • Prosper won't pay your creditors directly. If you consolidate debt, you must do it yourself.

How Does Prosper Compare to Other Personal Loans?

Online personal loans are more common than many people realize today. You have many options when you don't want to go to a bank for your personal loan, but how does Prosper compare?

SoFi
SoFi is an unusual option in the personal loan department as they allow personal loans up to $100,000 versus Prosper's max $40,000 loan.

SoFi reserves its loan for good credit borrowers, but they offer longer terms than Prosper with options between 2 and 7 years. SoFi rewards good credit borrowers with lower APRs too, with rates starting at 5.99% up to 21%. SoFi doesn't charge any fees, but you can have a consigner if you need one like Prosper.

Upstart
If you have less than perfect credit but other great qualifying factors, such as great earning potential or low debts, Upstart is a good option.

They look at the big picture, not just your credit score, making it easier to get personal loans from $1,000 - $50,000. Like Prosper, they only offer a three or 5-year term. Upstart's APRs are higher than Prospers, as they start at 7.86% and go up to 35.99%.

Lending Club
Lending Club is also suitable for less-than-perfect credit borrowers. You can have a credit score as low as 600 and still qualify.

Like Prosper, borrowers have two term options - 3 or 5 years, and APRs start at 8.05% and go up to 35.89%. Lending Club also allows co-signers, and unlike Prosper, they will pay your creditors directly upon your request.

Bottom Line

Prosper is suitable for borrowers who need a small loan amount and don't have excellent credit. While the APRs are higher, you have a better chance of getting funded than you would with a traditional lender.

Watch the fees, and if you can afford it, choose the 3-year term to keep your APR down and your origination fees to a minimum.

Write to Sam Hawrylack at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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