When it comes to securing personal loans, especially for those with less-than-ideal credit scores, the financial landscape can be daunting. Thankfully, there are lenders like Prosper that specialize in providing loans to individuals with various credit backgrounds.
Prosper is a P2P lending platform that started operations in 2005 and has a history of 18 years. Although Prosper’s products include credit cards, home equity lines of credit (HELOCS), and home equity loans (HELoans), Prosper is perhaps best known for providing personal loans for people with poor credit.
Prosper offers some of the best personal loans for people with credit scores above 600, with lower minimum credit score requirements than most other lenders. Even for those with lower credit, Prosper offers good loan repayment terms and interest rates.
- You can check your rates online without hurting your credit score.
- Loans available from $2,000 to $50,000.
- Joint personal loans are available.
- Prosper charges an origination fee on all loans.
- There are no physical branches.
- Co-signers are not accepted.
Prosper Loan Information Overview
|Minimum credit score||560|
|Loan Amounts||$2,000 – $50,000|
|APR||6.99% – 35.99%|
|Loan Terms||2 or 5 years|
|Fees||* Origination fee: 1% to 5%|
* Late fee: $15 or 5% of the unpaid amount, whichever is greater
* Insufficient funds fee: $15
|Funding Time||As soon as 1-3 business days|
|Loan Availability||Loans not available in IA, WV or U.S. territories|
Highlights of Prosper Personal Loans
Loans for Low Credit Scores: Prosper stands out by offering personal loans to individuals with varying credit scores. While they do consider credit history, they also take into account other factors to assess your creditworthiness, making it more accessible to those with less-than-perfect credit.
No Credit Check Loans: Prosper doesn’t conduct a hard credit inquiry during the initial application process, which means your credit score won’t be negatively impacted by simply checking your eligibility.
Competitive Personal Loan Rates: Prosper provides competitive APRs starting at 6.99%, which is often lower than what you might find with traditional lenders or credit cards. Your actual rate will depend on your creditworthiness.
Flexible Loan Terms: Borrowers can choose between 2-year and 5-year loan terms, allowing you to tailor your loan to your specific financial goals and repayment ability.
Online Application Process: Applying for a Prosper loan is a breeze thanks to their user-friendly online platform. You can complete the entire application from the comfort of your home.
Peer-to-Peer Lending: Prosper operates as a peer-to-peer lending platform, which means you’re borrowing money from individual investors rather than a traditional bank. This can lead to more flexible terms and competitive rates.
Disadvantages of Prosper Personal Loans
Origination Fees: Prosper charges an origination fee that can range from 1% to 5% of the loan amount. While this fee is deducted from your loan proceeds, it’s important to factor it into your overall cost when considering a Prosper loan.
Late Fees: Prosper does impose late fees if you miss a payment, so it’s crucial to make your payments on time to avoid extra costs.
Credit Score Matters: While Prosper does cater to individuals with lower credit scores, having a better credit history will increase your chances of securing a loan with a lower APR.
Now that we’ve covered the highlights and drawbacks, let’s explore what qualifications you’ll need to meet to get a Prosper loan and what steps you should take before applying.
What Qualifications Are Needed to Get a Prosper Loan?
Prosper has relatively flexible qualification criteria compared to many traditional lenders. To be eligible for a Prosper personal loan, you should generally meet the following requirements:
– Age Requirement: You must be at least 18 years old.
– U.S. Residency: You must be a U.S. citizen or a permanent resident.
– No Recent Bankruptcies: You should not have filed for bankruptcy in the past 12 months.
– Low Debt-to-Income Ratio: Prosper prefers borrowers with a debt-to-income ratio of 50% or less. This ratio is calculated by dividing your total monthly debt payments by your monthly income.
– Minimum Income: You should have a steady source of income to demonstrate your ability to repay the loan.
– Minimum Credit Score: While Prosper considers borrowers with various credit scores, having a credit score of at least 560 is advisable for better loan terms.
What You Need to Do Before Applying
Before you apply for a Prosper loan, here are some essential steps to take to improve your chances of approval and secure the best possible terms:
- Check Your Credit Report: Obtain a copy of your credit report and review it for any errors. Dispute any inaccuracies to ensure your credit score is as high as possible.
- Reduce Debt: Pay down existing debts to lower your debt-to-income ratio.
- Improve Credit Score: If your credit score is low, consider taking steps to improve it, such as paying bills on time and reducing credit card balances.
- Determine Loan Amount: Calculate how much you need to borrow and how it fits into your budget.
- Gather Documentation: Prepare necessary documents, including proof of income and identification.
How to Apply for a Prosper Loan
Create an Account: If you receive an offer that meets your needs, you’ll be prompted to create an account. This account will be used for the loan application and communication with Prosper.
Check Your Rate: Click on the “Check Your Rate” button. This initial step involves providing some basic information, including the loan amount you’re seeking, your purpose for the loan, and your credit score range.
Complete the Application: Fill out the online application form, providing detailed information about your personal and financial situation. Be prepared to provide documentation to verify your income.
Loan Listing: Once your application is submitted, Prosper will review it and assign you a credit rating. Your loan will then be listed on the platform for investors to fund.
Accept Your Loan: If your loan is fully funded by investors, you’ll receive the loan details, including the APR and monthly payment. Review the terms carefully and accept the loan offer if you agree.
Funding: After accepting the loan, Prosper will typically deposit the funds into your bank account within 2-5 business days.
Compare Prosper to Other Lenders
Prosper vs. LendingClub
Prosper and LendingClub are both prominent players in the peer-to-peer lending industry, offering borrowers access to personal loans and investors the opportunity to fund those loans. They share similarities in their core business model, where individuals can apply for loans and receive funding from a pool of investors. Both platforms provide unsecured personal loans with varying terms and amounts, making them suitable for debt consolidation, home improvement, and other financial needs. Interest rates on these loans are typically based on borrowers’ creditworthiness, with lower rates offered to those with better credit scores. Investors can diversify their portfolios across multiple loans.
– Related Reading: LendingClub Reviews
Prosper vs. SoFi
Prosper and SoFi represent two distinct approaches to online lending. Prosper primarily focuses on personal loans, connecting borrowers with individual investors. This P2P lending model allows for a wide range of loan purposes and borrower profiles. In contrast, SoFi, offers a broader spectrum of financial services beyond personal loans. In addition to personal loans, SoFi provides student loan refinancing, mortgages, investment accounts, and insurance, positioning itself as a comprehensive financial wellness platform. While Prosper excels at connecting borrowers with investors for personal loans, SoFi’s diverse offerings include career coaching, member events, and networking opportunities, creating a more holistic financial ecosystem. Borrowers seeking a single-source solution for various financial needs may find SoFi’s approach appealing, while Prosper offers specialized personal lending with an investor-backed twist.
– Related Reading: Sofi Personal Loans Review
Prosper offers an appealing option for individuals in need of personal loans, especially if you have a lower credit score. The platform’s peer-to-peer lending model allows for competitive rates and flexible terms, while the online application process simplifies the borrowing experience. However, it’s crucial to be aware of the origination fees and late payment charges associated with Prosper loans. Additionally, improving your credit score and financial profile before applying can help you secure a more favorable loan offer.
Frequently Asked Questions
Are Prosper loans suitable for people with low credit scores?
Yes, Prosper does consider borrowers with low credit scores, making it a viable option for those with less-than-perfect credit histories. However, lower credit scores may result in higher APRs.
What is the difference between Prosper and traditional banks?
Prosper operates as a peer-to-peer lending platform, connecting borrowers with individual investors, while traditional banks use depositors’ funds to provide loans. This often results in more competitive rates and flexible terms through Prosper.
What is the maximum loan amount I can get from Prosper?
Prosper offers personal loans ranging from $2,000 to $50,000, allowing you to borrow an amount that aligns with your specific financial needs.
How long does it take to receive funds from Prosper once approved?
Typically, Prosper disburses approved loan funds to your bank account within 1-3 business days after accepting the loan offer. The timing may vary slightly depending on your bank.
Can I pay off my Prosper loan early without incurring a penalty?
Yes, Prosper does not impose prepayment penalties. You can pay off your loan ahead of schedule without facing any additional fees, potentially saving on interest costs.
Is Prosper a safe and legitimate lending platform?
Yes, Prosper is a legitimate peer-to-peer lending platform that has been in operation since 2005. It is regulated by the U.S. Securities and Exchange Commission (SEC) and follows industry-standard security practices to protect your personal and financial information.
Can I use a Prosper loan for any purpose?
Yes, Prosper personal loans can be used for a wide range of purposes, including debt consolidation, home improvement, medical expenses, and more. You are not required to specify the exact purpose when applying.
What happens if I miss a payment on my Prosper loan?
If you miss a payment, Prosper may charge you a late fee, and it could negatively impact your credit score. It’s essential to make payments on time to avoid these consequences.