Peer-to-peer (P2P) lending sites allow you to get a loan directly from other individuals. They offer a popular alternative to bank loans for those looking for a simplified application or options for fair credit scores.
The best peer-to-peer lending sites offer low interest rates, low origination fees, a wide range of loan amounts and a fast turnaround time compared to other platforms. We also considered factors like the types of loans available and eligibility requirements when selecting the best peer lending platforms.
However, the pool of peer-to-peer lenders is relatively small. You may also want to consider alternatives like direct online lenders before you apply for a loan using one of these platforms.
In 2010 a group of Wall Street executives founded Peerform to give more borrowers access to low-cost personal loans. Thanks to low operating costs, Peerform offers some of the lowest interest rates and fees you'll find on a P2P lending platform — and it only requires a credit score of 600. If cost is your top priority, this provider might be your best option. But it only offers personal loans up to $4,000 — half what some other P2P lenders offer. Plus, it can take several days to get your funds.
Not available in: Connecticut, Hawaii, Idaho, Iowa, Maine, North Dakota, Vermont, Washington, West Virginia, Wyoming
Prosper is the peer lender that started it all when it launched its US platform in 2005. While its rates are higher than Peerform, it offers a wider range of loan amounts and it has a high debt-to-income (DTI) ratio cap of 50% make it particularly great for debt consolidation. But it might get expensive for borrowers who just meet the minimum requirements — it charges higher interest rates for lower credit scores than other P2P lending websites. It can also take up to five business days to get your funds, and its origination fee falls on the high side, even compared to other peer lending platforms.
Not available in: Iowa, North Dakota, West Virginia
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
The second P2P lender to the scene, LendingClub might be the most recognizable peer lending site. It offers a wide range of different types of financing, including personal loans, business loans and car loan refinancing. It has a relatively high starting interest rates and origination fees compared to other peer-lending platforms. But you may be able to score a lower rate and fee with this platform if you have less-than-perfect credit, compared to other peer lending websites.
SoLo Fund founder Travis Holloway created the platform as an inexpensive alternative to payday loans for people living paycheck-to-paycheck. Members of the SoLo Funds community fund small loans up to $500, in exchange for an optional tip instead of interest or fees. And you can receive your funds within one to two days of making a request. But it's best saved for situations where you can pay back the loan within a couple weeks — like paying an electric bill to avoid steep fees to restore service. Terms only last 15 days, with no option to roll over. Otherwise SoLo Funds charges a late fee of 15% of the loan, plus $5.
Optional tip capped at 10%
Loans as low as
Short turnaround time for a P2P platform
Bad credit OK
Short maximum term of Up to 15 days
Steep late fees compared to other short-term loans
Funding Circle is one of the only peer lending platforms that specializes in business loans. Founded in 2010, Funding Circle aims to bring 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 $5,000, making this a better option for large, one-time expenses.
Low starting APR of 4.99%
Loans as high as $500,000
Accepts fair credit
High starting loan of $5,000
Requires at least two years in business
High origination fee of 3.49% to 6.99%
$5,000 – $500,000
4.99% to 38.43%
Min. Credit Score
3 to 120 months
660+ personal credit score, 2+ years in business, for-profit business in an approved industry, not located in Nevada
Kiva is a nonprofit microlender that specializes in funding entrepreneurs and startups. 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 peer-to-peer 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
$25 – $15,000
1 to 3 years
Have at least five friends and family members willing to contribute to your loan, live in the US, ages 18+, not in bankruptcy or foreclosure, not under any liens not engaged in: multi-level marketing, direct sales, pure financial investing or illegal activities.
Peer-to-peer lending connects borrowers with individual investors
Peer-to-peer lending — sometimes called "social lending" or "crowd lending" — allows borrowers to get a loan directly from other individuals. This type of lending replaces financial institutions with peer-to-peer platforms as the middle man.
Generally, peer-to-peer platforms aim to offer low rates to borrowers with fair credit scores as low as 600, who can have trouble qualifying for a bank loan. Platforms do this by cutting down on operating costs. They use algorithms to underwrite loans, have few physical offices and rely on investors to provide the funds.
Peer-to-peer sites work like moderators, not lenders
Peer lending platforms are relatively hands-off compared to a financial institution. Here's how peer-to-peer lending generally works.
The peer lending site sets the range of loan amounts, terms, rates and fees available for borrowers.
As a borrower, you can check your rate, by filling out a quick application. Typically this takes a few minutes and is based on a soft credit pull that doesn't affect your credit score.
If you decide to fully apply, the site uses an algorithm to underwrite each application.
Once approved, you'll receive a letter grade that determines your rates and fees.The loan amount and term can also affect your rates and fees — longer terms typically come with higher rates.
Investors select loans to fund based on the letter grade. Most prefer to build a portfolio with a variety of letter grades. Lower letter grades have a higher risk but higher returns.
Once an investor funds your loan, the platform transfers the funds to your bank account.Typically, this takes one to five business days.
After receiving the funds, you'll repay the loan in monthly installments and the investor collects on interest.
The platform makes money by charging borrowers an origination fee of around 1% to 6% of the loan and investors a service fee of around 1% per year.
3 main P2P loan eligibility requirements
While each platform has its own requirements, you can typically qualify for a peer-to-peer loan if you meet the following criteria:
Personal credit score of 600 or higher
Annual income of at least $25,000
US citizen or permanent resident
Some platforms aren't licensed to lend in all 50 states, so make sure you live in an eligible state before you apply.
Most P2P sites offer unsecured personal loans — but that's not the only option
Peer-to-peer lending sites can offer the following types of financing.
Unsecured personal loans for debt consolidation, a home improvement project or other large, one-time expenses — without collateral.
Unsecured business loans for one-time business expenses without collateral. These are typically geared toward small businesses.
Medical loans to pay for dental and healthcare procedures that your insurance doesn't cover. These are sometimes available directly through your healthcare provider.
It's also possible to find short-term loans, car loan refinancing and student loans on peer-to-peer lending sites. But these options are less common.
Peer-to-peer lending is relatively new
Peer-or-peer lending has only recently become available, thanks to the rise of the Internet. Prosper was the first peer-to-peer lending platform available in the US, which launched in 2005.
Since, it's become a widely accepted alternative to bank loans and direct online lenders. A 2015 Small Business Administration brief found that "peer-to-peer lending may be a viable financing alternative for small businesses" — especially those that couldn't find low-cost financing from traditional marketplaces.
Direct lenders can offer a less-expensive alternative
Peer-to-peer lending may have many advantages compared to traditional bank loans. But direct online lenders offer personal loans a wider range of loan amounts with lower APRs — and often, no origination fee. Some direct online lenders like SoFi and Upstart originally started as peer-to-peer lending sites, before partnering with banks to fund the loan.
Cryptocurrency lenders also offer personal loans with fewer requirements and fees, compared to your typical peer-to-peer lender. Crypto loans use your cryptocurrency as collateral, allowing you to access the value of that asset you already own without paying a capital gains tax. But because the value of crypto is so volatile, there's a higher risk of defaulting than you would face on a P2P loan.
Frequently asked questions
Here are answers to questions borrowers often ask about peer-to-peer lending.
Is peer-to-peer lending safe?
Peer-to-peer lending 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?
In most cases, however, you will have a few lenders funding your peer-to-peer loan. 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.
How often do I have to make payments?
As with many other types of loans, you typically have to make monthly payments on a peer-to-peer loan. The main exception is a short-term personal or business loans. These can come with weekly or daily payments.
What kind of returns can I expect from peer-to-peer lending?
The average return for investors hovers around 5% on most peer-to-peer lending 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?
You don't have to pay taxes on a peer-to-peer loan as a borrower. However, the IRS considers any on peer-to-peer lending returns as income, so you’ll have to pay taxes as an investor. Some platforms like LendingClub offer a way to get around taxes by sending your returns to an IRA. But you won't be able to touch the funds until you're almost 60 years old.
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.
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