Peer-to-peer (P2P) lending lets you skip the bank by connecting you with investors, who fund your loan. It’s a good option if you can’t qualify for a bank loan or prefer a nontraditional lender.
P2P loans are available through online platforms — not lenders — which set the rates and terms and underwrite the loans. Our team reviewed over 130 personal loan providers, including several P2P platforms, before selecting the lenders that appear on this page.
We looked at factors like rates, terms, fees and turnaround time and how they stood up to other peer-to-peer lenders. We also considered the specific types of loans offered and the eligibility requirements to decide who the platform is best for.
The pool of peer-to-peer lenders is relatively small. This means you might not find the best deal here. If you don’t mind working with a direct lender or connection service, read about our picks for the best personal loans to find an even more competitive deal.
We expanded our focus to include more business lenders, such as Street Shares, Funding Circle and Kiva. We also felt that LendingClub was a better pick for car loan refinancing, rather than business loans.
And we added more background about each platform to give you a better idea of what type of borrower can benefit from each lender the most.
Prosper is the P2P platform that started it all when it opened its doors in 2005 — in the US, that is. Its personal loans can be a good P2P choice for most uses, but its high debt-to-income (DTI) ratio cap of 50% make it particularly great for debt consolidation. And you can check what rates you might qualify for without affecting your credit score. But it can take up to five business days to get your funds, and its origination fee falls on the high side, even compared to other P2P lenders.
Accepts DTI rates of up to 50%
Fair credit OK
No hard credit check for preapproval
High maximum APR of 35.99%
Origination fee of 2.4% to 5%
Turnaround may be up to five business days
You must have at least three open credit accounts to qualify
A group of former Google employees created this platform in 2012 to tap into the market of highly-educated, career-oriented borrowers that are just starting to build credit. Its underwriting algorithm puts weight on your level of education and work experience to help you get you better rates and terms. And it's fast compared to other P2P lenders — you can get your money in as soon as the next business day. But its origination fees are higher than average, and its tight DTI requirements make it less-than-ideal for debt consolidation.
In 2010, a group of Wall Street executives founded Peerform to give more borrowers access to low-cost financing — even without excellent credit. The platform is designed to cut back on operating expenses, so it can afford to offer a low maximum APR and origination fee while only requiring a credit score of 600 credit score. But its range of loan amounts is small, and it caps out at half what some other P2P lenders offer. Plus it can take several days to get your funds.
The second P2P lender to the scene, LendingClub might be the most recognizable P2P lender. It offers a wide range of financing, from healthcare to business loans. But car loan refinancing is where it really shines — even compared to other types of lenders. It claims that customers lower their car loan repayments by an average of $80 per month. And it accepts cars that are up to 10 years old with 120,000 miles.
Funding Circle was founded in 2010 with the aim of bringing more financing options to growing businesses and high returns for investors. Since, investors have poured some $11.7 billion into over 81,000 small businesses. Its rates are low for a business lender, starting at 4.99%. And you can qualify with fair credit. But it doesn't offer loans under $25,000.
Founded in 2013 by two veterans, StreetShares is one of the few business lenders that specializes in funding business owners who have served in the military. Its Patriot Express line of credit is arguably the closest thing you'll find to the now-defunct SBA Patriot Express loan program. And it offers a wide range of other types of financing. It only requires one year in business and doesn't have any hard credit score minimum. But its rates can run as high as 75% for some borrowers.
Kiva is a nonprofit microlender that specializes in funding entrepreneurs. It offers both peer-funded and direct loans. Its direct loans are interest-free — though you'll have to crowdfund part of it yourself through your own social network. Its P2P loans are funded with $25 investments from the public. While anyone can invest, you won't make a profit — and might not get all of your money back. The main reward is supporting a cause that you believe in.
No minimum credit score
Available to entrepreneurs
Direct and P2P options
P2P loans can come with interest, unlike direct loans
No return for investors
Potentially long turnaround
Min. Loan Amount
$25
Max. Loan Amount
$15,000
APR
0%
Interest Rate Type
N/A
Minimum Loan Term
1 months
Maximum Loan Term
3 months
What is peer-to-peer lending?
Peer-to-peer lending is a new type of online financing that connects borrowers with investors, who fund the business loan. From the borrower’s perspective, it’s a lot like applying for a loan from a direct online lender.
Rates, terms and loan amounts similar to what you’ll find elsewhere online and slightly higher than what you’d find at a bank. P2P loans also typically don’t require collateral and have more flexible credit requirements than banks. But they still look at your credit score, income and debts. And you still might have trouble qualifying if your credit score is below 670 or have a debt-to-income ratio above 40%.
The main difference between a P2P loan and one from an online lender is that P2P platforms often charge an origination fee, which can be as high as 8%. These are uncommon with other types of online personal loans. It can also take about five more days to get your loan than your typical online lender.
How does peer-to-peer lending work?
Peer-to-peer lending works by connecting borrowers and business owners directly with investors using an online platform, also called a marketplace. The platform sets rates, terms, fees and loan amounts. It also often underwrites the loan — usually using an algorithm.
After underwriting, investors review borrower applications and fully or partially fund the loan. When the borrower repays it, the investor collects on interest and the platform earns money from interest and the origination fee.
How to get a peer-to-peer loan
Here are the steps you need to take to get a peer-to-peer loan:
Compare platforms. Read reviews on platforms to find the one that best fits your needs.
Prequalify. If it’s offered, see if you prequalify to avoid an unnecessary hit to your credit.
Apply. Fill out an online application and submit any required documents through the P2P platform.
Get graded. Platforms typically give you a letter grade, which determines the rates and fees you’re eligible for.
Wait for investors to fund your loan. Investors review your application and your grade and decide to either partially or fully fund your loan. This step can take up to a week.
Get your money. The platform sends the funds directly to your bank account when your loan is fully funded.
Pay back the loan. Typically, you’ll make repayments to the platform, or its servicer. The platform then distributes the repayment and interest to the investors.
6 features of peer-to-peer lending
Here’s what sets P2P loans apart from other types of financing:
Available to fair-credit borrowers. Most peer-to-peer lenders have lower cutoff credit scores than banks — and often look at factors that traditional lenders don’t consider.
Fast approval. It can take a matter of seconds for a platform’s algorithm to process your application and give you a decision.
Risk-free rate check. You can often get an estimate of the rates and terms you’d qualify for based on a soft credit check that doesn’t hurt your credit.
Origination fee. Almost all P2P loans come with an origination fee — which is not always the case with other types of online lenders.
Long turnaround. It can take as long as a week to have a P2P loan funded, while other lenders can take as little as a day.
Not the most competitive rates. You can often find lower starting rates with direct lenders if you have good to excellent credit.
P2P lending for investors
Peer-to-peer lending offers slightly higher returns than you’d get with a CD or high-yield savings account, and is friendly for beginners. You don’t need to be an accredited investor to qualify — you can sometimes even use a retirement account to invest.
To get started, apply to open an investing account. If you’re accepted, review the platform’s grading system, which is how it rates the level of risk and returns. A low letter rating means a riskier but potentially more lucrative investment. High letter ratings are less risky but have a lower return.
Once you’re familiar, you’re ready build your portfolio by investing in some loans. You should receive part of your investment back plus returns as borrowers repay the loan. You can either withdraw them or reinvest the funds to build your earnings.
P2P alternatives
Borrowers who can’t qualify or want to skip the relatively high rates and fees might want to consider these alternatives.
Direct online lenders. Direct online lenders work a lot like P2P lending platforms — but with lower rates, fewer fees and a faster turnaround. Some might also have more forgiving credit and income requirements.
Community bank loans. Community banks often offer low-cost loans to borrowers who have less-than-perfect credit. If you’re unable to meet the requirements for a P2P lender, this could be a better option.
Credit union loans. Credit unions have a similar philosophy as P2P lenders — they’re owned by their members, rather than a board of directors. And this allows them to offer loans to a wider credit range at lower rates than your typical big bank.
Bottom line
Peer-to-peer lending can be a great opportunity for borrowers, business owners and investors who are new to the game. It’s easier to qualify with a limited credit history, and you don’t need to be a seasoned investor to get returns. But it might not offer as good of a deal as other options.
Here are answers to questions borrowers often ask about peer-to-peer lending.
Is peer-to-peer lending safe?
Generally, yes as long as your lender uses SSL security on its online application. Look for the lock feature to make sure the site is secure — and scroll down to the bottom of the page to look for other security badges.
You can make sure the lender you’re working with is legit by reading online reviews and looking out for lawsuits against the lender.
Will my loan have multiple investors?
It depends. Most investors attempt to spread out their funds to limit losses, but if you’re only requesting a small loan amount, you may end up with a single investor interested in funding the entirety of your loan. In most cases, however, you will likely have a few lenders funding you.
How often do I have to make payments?
As with many other types of loans, you typically have to make monthly payments.
What kind of returns can I expect from peer-to-peer lending?
The average return for investors hovers around 5% for most of these types of platforms — like LendingClub and Prosper. But others can work differently. For example, anyone can invest in a Kiva loan — but you won’t get any returns.
Do I pay taxes on peer-to-peer lending?
Not as a borrower. However, the IRS considers any returns as income and you’ll have to pay taxes as an investor.
Anna Serio is a trusted lending expert and certified Commercial Loan Officer who's published more than 1,000 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like Business Insider, CNBC and the Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
Looking for investment options that offer fixed-interest payments? Compare platforms to start investing in bonds, mutual funds, ETFs, REITs, hybrid securities, P2P lending and more.
The best-performing exchange-traded funds over the past year, three years or five years can help inform your decision on what to invest in for the future.
I am in desperate need of a loan up to 5,000 for debit consolidation. I have tried every where my credit score isn’t the best and I know that’s what is hurting me. I just need someone to look past that an give me a chance. So I can get back on my feet.
Sorry to hear you are going through difficult times. Debt consolidation is one way to manage repayments and reduce debt if you have more than one account on which you pay interest. By moving all the separate balances into one account, you can start to reduce your liability by paying one monthly repayment instead of several. While many lenders require you to have a positive credit history to take out these loans, there are some who approve debt consolidation loans for those with bad credit.
I’m in desperate need of $4000 to buy a car.. I had a credit score of around 630 6 months ago but it’s 454 now because I have lived with a man for 4 years that WILL NOT work.. I’m on Disability.. I am sick..they think I have celiac disease..my mom got a loan for me but as always she never follows through..my husband is abusive.. I just need a break.. Is there someone who can help me??
Hi Candice,
Thanks for leaving a comment on finder.com. You may still be eligible for a loan while on a disability pension. Please note that laws that apply to loans may vary from state to state so make sure you choose your state from the dropdown.
If you need further help, please send us a message anytime.
Hello! I would like to start rebuilding my credit..my score is right at 590 to 600. Exp even had me at a 623. So, I did get a capital one journey card, 300.00 limit. Can I get a personal loan anywhere with this score? Or should I give up until I have established better history with this new card?
An Experian credit score that falls within the range 580 to 669, it is considered Fair.
Applicants with Fair credit score are usually seen by lenders as having unfavorable credit and may decline their credit applications. However, there are lenders that offer bad credit personal loans that may be suitable for you.
If you do not need have an urgent need for a loan, you can improve your credit score first so you will have access to loans with flexible options and better interest rates and terms.
I have low credit score defaults and I’m on fixed income monthly I would like to and need to take a loan however these facts of plow credit score and defaults have not been approved and I do not have a bank account so how can I or will I qualify for a loan
Thankfully, we do have a list of business loans you may consider. Please see that list to learn more about your options and how to go about applying for a loan.
How likely would you be to recommend finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Advertiser Disclosure
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
I am in desperate need of a loan up to 5,000 for debit consolidation. I have tried every where my credit score isn’t the best and I know that’s what is hurting me. I just need someone to look past that an give me a chance. So I can get back on my feet.
Hi Amy,
Thanks for leaving a question on finder.
Sorry to hear you are going through difficult times. Debt consolidation is one way to manage repayments and reduce debt if you have more than one account on which you pay interest. By moving all the separate balances into one account, you can start to reduce your liability by paying one monthly repayment instead of several. While many lenders require you to have a positive credit history to take out these loans, there are some who approve debt consolidation loans for those with bad credit.
Cheers,
Joel
I’m in desperate need of $4000 to buy a car.. I had a credit score of around 630 6 months ago but it’s 454 now because I have lived with a man for 4 years that WILL NOT work.. I’m on Disability.. I am sick..they think I have celiac disease..my mom got a loan for me but as always she never follows through..my husband is abusive.. I just need a break.. Is there someone who can help me??
Hi Candice,
Thanks for leaving a comment on finder.com. You may still be eligible for a loan while on a disability pension. Please note that laws that apply to loans may vary from state to state so make sure you choose your state from the dropdown.
If you need further help, please send us a message anytime.
Cheers,
Joel
Hello! I would like to start rebuilding my credit..my score is right at 590 to 600. Exp even had me at a 623. So, I did get a capital one journey card, 300.00 limit. Can I get a personal loan anywhere with this score? Or should I give up until I have established better history with this new card?
Hi,
Thanks for your inquiry.
An Experian credit score that falls within the range 580 to 669, it is considered Fair.
Applicants with Fair credit score are usually seen by lenders as having unfavorable credit and may decline their credit applications. However, there are lenders that offer bad credit personal loans that may be suitable for you.
If you do not need have an urgent need for a loan, you can improve your credit score first so you will have access to loans with flexible options and better interest rates and terms.
Best regards,
Rench
I have low credit score defaults and I’m on fixed income monthly I would like to and need to take a loan however these facts of plow credit score and defaults have not been approved and I do not have a bank account so how can I or will I qualify for a loan
Hi Benita,
Thank you for reaching out to us.
You can refer to these pages to compare your options for Personal Loans and Cash Loans.
Before applying, kindly make sure that you have met the eligibility requirements of the Lender and have reviewed the details of the loan.
I hope this information helps.
Let us know if there is anything else that we may assist you with.
Cheers,
Ash
How can I borrow a loan for a small business?
Hi Chydike,
Thank you for your inquiry.
Thankfully, we do have a list of business loans you may consider. Please see that list to learn more about your options and how to go about applying for a loan.
I hope this information has helped.
Cheers,
Harold