Before You Borrow at Prosper.com

Learn how it works and if it's right for you

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Prosper.com was founded in 2006 as one of the original online peer-to-peer (P2P) lenders, and it’s still a large provider of personal loans. If you're looking for a personal loan for needs such as debt consolidation, it’s wise to include at least one online lender in your search, and Prosper is a decent option.

The original vision for Prosper.com was "an eBay for loans" where individuals with money could lend to individuals who need money. Instead of borrowing from traditional banks and credit unions, you can borrow from a larger group of lenders. Prosper acts as the loan underwriter but doesn't lend you the money itself. Instead, the company matches potential borrowers with investors who want to fund loans. Prosper makes money by charging fees for this service.  

Loans from Prosper.com are personal loans and can be used for almost anything you want. You do not need to pledge collateral to get approved. Instead, you'll get approved based on your credit and your income. You can repay the loan over three or five years.

The Cost

Borrowing from Prosper.com is often less expensive than using credit cards. This makes it a good option for consolidating high-interest rate debt. That said, a credit card promotion might beat Prosper.com, at least for a year or so, so it’s always worth comparing rates.

To borrow money from Prosper.com, you’ll pay an interest rate just like with any other loan, and you’ll pay an origination fee, called the “closing fee.” Interest rates and fees are based on your credit score. The better your credit, the less you’ll pay, and Prosper has a minimum credit score requirement of 640.

The annual percentage rate (APR) on Prosper.com loans ranges from a 5.99 percent to 35.99 percent. This rate includes fees, but the bulk of that cost is your interest expense. Generally, the interest rate is still lower than what you’d pay on credit cards.

Prosper.com charges a closing fee, which comes out of your loan. As a result, you won’t get the full amount you applied for, so factor that in when deciding how much to borrow. The closing fee starts at 0.50 percent for borrowers with great credit and increases to 4.95 percent for lower credit scores. You'll pay additional fees if you miss payments. There is no prepayment penalty, so you can pay off your debt as quickly as you'd like.

Getting Approved

Some borrowers find that they have better luck getting approved by an online lender than they do with traditional lenders. Especially when it comes to big banks, getting a loan can be difficult if you have less-than-perfect credit. However, you still need to meet certain criteria at Prosper.com.

Prosper checks your credit at Experian. The higher your score, the less you’ll pay for your loan. Prosper.com has stated that borrowers with good credit are preferred, and the average credit score for approved borrowers is just higher than 700.

Lenders look at how much of your monthly income is available to repay loans by calculating a debt-to-income ratio. Prosper.com looks for a number below 50 percent for your new loan.

You need to have income, but Prosper.com specifically says that retirees can borrow, so it doesn’t necessarily have to be income from employment.

In addition, your credit report needs to be free of recent bankruptcies and excessive inquiries. If your credit report is thin because you’ve never borrowed before, you’ll need to build up your credit before applying with Prosper.com. If you’ve defaulted on a Prosper.com loan before, you’re unlikely to get approved.

The Process

To borrow money, visit www.Prosper.com and submit an application. You’ll need to provide basic information about yourself, like your address and Social Security number, and you’ll also need to provide information about your income.

Prosper.com may require that you submit proof of income, which might mean sending in a copy of pay stubs or tax returns. Be sure to report your income accurately when you apply because you might need to provide documentation for the income you've stated on your application.

To receive funds, you’ll provide information about your bank account so that Prosper.com can send the funds directly to your checking account. Make sure you know where to find your account and routing numbers.

The entire process—from the time you apply to the time the funds hit your account—can be completed in about three days, assuming everything goes smoothly.

Is it safe?

Prosper.com is a legitimate online lender that works with several million members. As long as you’re on the real Prosper.com site and you have a secure connection, it is safe to apply for a loan.

Borrowing money is always risky, so make sure it really makes sense to take on debt. Evaluate all of the alternatives, including how you'll pay down your debt over time and how much you’re paying to borrow, so that you can make an informed decision.