Peer-to-Peer lending guide

Find a better way to borrow or invest with peer-to-peer lending.

If you’re looking for a personal loan to pay for a wedding or renovate your home, a peer-to-peer loan could offer you a unique way to get the funds you need, at reasonable rates. Investors will fund peer-to-peer loans to see a return on their money, while helping others accomplish financial goals. Read this guide to learn more about peer-to-peer lending.

Prosper Personal Loan

Prosper Personal Loans

You could borrow up to $35,000 for a variety of purposes, with rates starting from 5.99%.

  • Recommended Credit Score: 640 or higher
  • Minimum Loan Amount: $2,000
  • Maximum Loan Amount: $35,000
  • Loan Term: 3 or 5 years
  • Turnaround Time: 1-3 business days
  • Simple online application process
  • No prepayment penalties

    How does peer-to-peer lending work?

    Peer-to-peer lending takes place in an online marketplace facilitated by a third-party lender. If you’re looking to borrow, you submit an online application just like you would with any other loan. You provide details regarding your financial circumstances, including income, employment, assets, debts and credit score, and then wait to be approved. Investors can review your application (no personal details) and choose whether to finance your loan wholly or partially.

    Compare peer-to-peer lenders

    Rates last updated July 25th, 2017
    Name Product Minimum Credit Score Max. Loan Amount APR Product Description
    Prosper Personal Loan
    640
    $35,000
    From 5.99% (fixed)
    Borrow only what you need for debt consolidation, home improvements, special occasions and more — with APRs based on your credit score.
    Lending Club Personal Loan
    660
    $40,000
    From 5.99% (fixed)
    Borrow up to $40,000 with rates from 5.99% to 35.89% APR based on your credit score.
    Upstart Personal Loans
    620
    $50,000
    From 7.16% (fixed)
    This newer service looks beyond your credit score to match you with accredited investors for low-rate personal loans.

    Compare up to 4 providers

    Why a peer-to-peer loan might work for you

    Peer-to-peer lending has been a growing part of the American credit sector since its inception in 2006. Here are a few reasons why borrowers choose to take out P2P loans:

    • Lower rates. You’ll be offered an annual percentage rate (APR) based on your credit history, and this is typically lower than what is offered by a bank. Rates vary between 5.3% to 30% APR depending on what you’re looking to finance and what your credit score is like.
    • Check your rate. You can get an interest rate quote without it affecting your credit score, which is usually not possible with a bank.
    • Flexible eligibility criteria. Peer-to-peer lenders base your rate on your credit history. You can apply with less-than-perfect credit, but your rate will be higher.
    • Fast turnaround for funding. The application process is fast, and you can expect your funds relatively quickly depending on the amount you apply for and the details provided on your application.
    • Less fees. You will only pay one loan origination fee rather than the several fees that other lenders may charge. You will generally not be charged prepayment penalties.

    What loan options are available?

    • Unsecured personal loans. This is a common type of loan available from P2P lenders, and you can use it to finance anything from a holiday to furniture purchases. You can usually borrow between $1,000 and $35,000.
    • Secured personal loans. If you have security, such as a car or property, you can take out a secured personal loan through a marketplace lender. If you have bad credit, you may have a better chance of being approved if you can provide collateral.
    • Debt consolidation loans. Another common reason people take out P2P loans is to consolidate debt. You can bring together debt from separate accounts such as credit cards or personal loans and pay it off at a lower rate with a debt consolidation loan.
    • Business loans. A newer type of financing is personal loans for business or P2P business loans. These business loans can help grow your business or get it up and running.

    “I’m an investor. What are my benefits?”

    If you’re looking to get involved in P2P financing as an investor, here are the features you can look forward to:

    • Lucrative returns. Investors can look forward to returns of between 5% and 9%.
    • Diversify your investments. You choose how much to fund per loan and you can spread your risk among multiple borrowers. This lessens the impact of negative results from late payments or defaults from riskier loans.
    • Easy for first-time investors. Playing the stock market may be difficult and time-consuming for first-time investors, but P2P lending is a much simpler way to invest. You choose where to put your money based on multiple loan factors and then receive monthly cash flow.
    • Different accounts available. You have multiple account options with some providers, including retirement accounts or standard investment accounts.

    How can you find the right marketplace lender?

    There are a few peer-to-peer or marketplace lenders available in the US right now. Here’s how you can compare and find the right one for you:

    • How much will you be charged? This is an important aspect to consider for borrowers and investors. When it comes to borrowing, you need to consider what your rate will be and how much the loan origination fee is. You can generally check your rate without it affecting your credit file. For investors, you’ll want to find out what the provider will charge you in fees.
    • Are you eligible? This is an important consideration for borrowers. Check the minimum criteria and make sure you meet it before applying.
    • What happens if borrowers default? If you want to invest, see what the marketplace lender has in place in terms of collection services for late or defaulted payments. Some lenders will take on the responsibility of collecting payments and some will charge a fee for this service.

    Bottom line

    Peer-to-peer lending is a great alternative form of credit to consider – whether you’re a lender or a borrower. Remember that not every form of credit or investment opportunity is going to be right for you, so compare P2P loans to other options before making a decision.

    Frequently asked questions about peer-to-peer lending


    If you need a loan for your business, you’ll need the following information to apply: copies of recent business tax returns, business bank statements, details of existing loans as well as a detailed balance sheet. Check out our article on peer-to-peer business loans.

    This depends on your requirement as well as probable investors. While investors try to spread their money to limit their losses, you may end up finding a single investor interested in funding your loan.

    As with other kinds of loans, you typically have to make monthly repayments.

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    2 Responses

    1. Default Gravatar
      ChydikeMarch 24, 2017

      How can I borrow a loan for a small business?

      • Staff
        HaroldJuly 12, 2017Staff

        Hi Chydike,

        Thank you for your inquiry.

        Should you need a business loan for you may want to consider the options here.

        I hope this information has helped.

        Cheers,
        Harold

    US Personal Loans Offers

    Learn about our information service
    Lending Club Personal Loan

    Borrow up to $40,000 with rates from 5.99% to 35.89% APR based on your credit score.

    Prosper Personal Loan

    Borrow only what you need for debt consolidation, home improvements, special occasions and more — with APRs based on your credit score.

    Upstart Personal Loans

    This newer service looks beyond your credit score to match you with accredited investors for low-rate personal loans.

    PersonalLoans.com

    Get matched with providers from a large network of banks, peer-to-peer marketplaces and direct lenders.

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