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Home / Loan Reviews / Lending Club vs Prosper – We Answer EXACTLY Which Is for YOU!

Lending Club vs Prosper – We Answer EXACTLY Which Is for YOU!

Prosper and Lending Club are two of the largest peer to peer (P2P) lending platforms on the web today.  Peer to peer lending is a platform that connects individuals and facilitates borrowing and lending without the use of a bank.  These types of platforms have only been around for a few years now, but have become a very popular way of attaining funding due to the low interest rates.

The basics of how this works:

  1. Borrower applies for a loan
  2. Lenders view the borrowers loan request and credit worthiness
  3. A variety of lenders provide funding to the borrower

There is obviously a lot more to this process, but you get the idea.  Below are some features that apply to both Prosper as well as Lending Club:

  • Minimum loan amounts
  • Maximum loan amounts
  • Origination fees
  • Late fees

 

Lending Club

LC

Lending Club Qualifications

Minimum credit score – 600

Debt to income ratio – 40% or less

Maximum number of credit inquiries – 5

Minimum number of open accounts – 2

Lending Club Pros and Cons

Pros:

  • Loans can be used for just about anything
  • Easy to use application process
  • Only a soft credit check is used for applications
  • Interest rates as low as 2-5%
  • Loans up to $40,000
  • Funding in 10 days or less

Cons:

  • Origination fees equate to 1-5%
  • If you need more than $40,000 you will need to look elsewhere

Read more about Lending Club

 

Prosper

prosper

Prosper Qualifications

Minimum credit score – 640

Debt to income ratio – 50% or less

Maximum number of credit inquiries – 6

Minimum number of open accounts – 2

Prosper Pros and Cons

Pros:

  • Loans can be used for just about anything
  • Easy to use application process
  • Only a soft credit check is used for applications
  • Interest rates as low as 2-5%
  • Loans up to $35,000

Cons:

  • Origination fees equate to 1-5%
  • If you need more than $35,000 you will need to look elsewhere

Read more about Prosper

The Application Process

The application process for both companies is quite similar, but we will break down both application processes for you in order to give you all of the information you might need in leaning towards one platform over the other.

Prosper application process

  1. Fill out the basic information and get a custom rate quote within a couple of minutes. The form will ask for basic information such as name, address and yearly salary.
  2. If you get approved, you will be given the choice of various dollar amounts, interest rates and term periods. You then proceed to fill out the rest of the application and submit it.
  3. You will need to verify your identity and wait for approval.
  4. Wait for funding.
  5. Get your money!

Lending Club application process

  1. Fill out the form and receive a rate quote within minutes.
  2. If you get approved, you will receive multiple loan offers and you simply choose the offer that you like the best.
  3. Complete the full application, answering questions about income and employment.
  4. Verify your identity and wait for approval.
  5. Wait for funding.
  6. Get your money!

P2P for Business Loans

Both companies also offer loans to small businesses, but the process is a little bit different than it is for individuals.

Prosper does not offer loans that are specifically designed for businesses, they are just personal loans like any others so nothing changes in that process.

Lending Club on the other hand claims to offer loans up to $300,000 for small businesses.  Any small business loan requires a personal guarantee, which means that the individual must commit to the loan if the business cannot repay it.  Also, any loan over $100,000 requires some form of collateral.

Lending Club requires small businesses to have:

  • Been in business two years or more
  • Have $75,000 or more in annual revenue
  • Own at least 20% of the business
  • Have fair personal credit or better

If you have an established business in need of funding, Lending Club may be a very good option for you to consider.  Their rates are often lower than that of many banks and you get your funding very quickly.

However, if you do not have an established business or are in a startup phase, you would have to apply to Prosper instead of Lending Club.  Prosper only offers personal loans, which would give you the funds as an individual.

P2P as an Investor

Wall Street is now investing heavily on Lending Club and Prosper, so this certainly validates the concept for individual investors.  Getting returns of 5-10% is fairly normal on these platforms.  Those interest rates are better than what most investors can get with bonds or index funds.

When accepting an application, both platforms take into account the following:

  • Credit score
  • Number of credit inquiries
  • Length of credit history
  • Total number of open accounts
  • Credit card utilization
  • Late payments and delinquencies

Both platforms allow investors to contribute as little as $25 per loan, while also allowing lenders to fully fund a loan if they so choose.

The general consensus is that it is smarter to hold many small investments across many loans rather than any sizeable ones.  This allows for ultimate diversification, which is key if you want to lower your risk of losing money on P2P investing.

For example, let’s say you hold 10 loans and you contributed $1,000 to each.  If one person defaults on their loan, you could easily lose any profits you may have made on the other 9.

However, if you hold 400 loans and you contributed $25 to each, it is much less likely that a few defaulted loans will significantly affect your returns.

Investing on either of these two platforms can be quite lucrative.  It can also be time consuming at tax-time so be sure to document properly and route the cash flows to the appropriate places.

In Conclusion

Both platforms are an excellent way for borrowers to access funds that they couldn’t otherwise find at lower interest rates, as well as an excellent way for lenders to get nice returns on their investments.  Both platforms are very similar all around, so it is difficult to pick one over the other.

If you are a small business owner, you should apply to Lending Club.

If you are a startup, you should apply to Prosper.

If you are an individual, you should probably apply to both platforms and go with whichever one provides you with a better rate!

About The Fastest Growing Personal Finance Blog in 2017

The Fastest Growing Personal Finance Blog in 2017

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