Prosper or Lending Club: Which Is Better for Peer-to-Peer Loans?

Written By Jeff Hindenach
Last updated November 24, 2019

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August 6, 2016

Simple. Thrifty. Living.

One of the most popular crowdfunding products right now is peer-t0-peer loans. Basically, these online companies allow you to apply for a loan online and then allow individual investors — everyday people — to fund a part or all of your loan. The website takes a fee and then the investors get the rest of the interest that is paid on the loan. This is not only a benefit for everyday people who want to invest in lending, but it also makes loans more accessible to people who don’t want to go through a traditional bank.

The two top peer-to-peer lending services are Prosper and Lending Club. Both have seen great success in the peer-to-peer lending space, with Prosper getting millions in funding from venture capitalists and funding more than $1 billion in online loans. Lending Club, the more popular of the two, is already getting ready to go public. So both come with strong backing and great reputations, but which peer-to-peer loan service works better? It depends on what you are looking for. Here is a breakdown of the two services to help you choose one:

How it works: You fill out an online application that asks you for personal details as well as how much you want to borrow and what you are going to be using the loan for. (There are certain things that you can’t use the loan for, like student loans.) You will then go into the Prosper system and your loan will be pitched out to their pool of investors. Investors then have 14 days to help fund your loan.

Credit needed: Prosper will lend out to people with good to excellent credit.

Loan amounts: You can borrow between $4,000 and $35,000 with Prosper.

Paying back your loan: Loan lengths range from 36 to 60 months.

Partial loans?: Unlike traditional banks, you can get a partial loan from Prosper. If investors only fund 70% or more of your loan, you can choose to accept that amount as your loan, or you can cancel the loan and start again.

How it works: Lending Club works very much the same way that Prosper does. You fill out an online application and then your loan is assigned a grade, which informs what your interest rate will be. Once your loan is posted, investors can fund a portion or all of your loan. Just like Prosper, investors have 14 days to decide to fund your loan.

Credit needed: The benefit of lending club is that even people with average credit can get approved for loans. Of course, not all loans will get approved. People with good and excellent credit can also apply.

Loan amounts: Another benefit of Lending Club is that you can get a loan for as low as $1,000 and as high as $35,000.

Paying back your loan: The loan lengths range from 36 to 60 months, just as with Prosper.

Partial loans?: Another benefit of Lending Club over Prosper is that they will allow you to accept a loan that is only 60% funded, if you choose to. You can also cancel the loan and start again if it is not fully funded.


About the Author

Jeff Hindenach

Jeff Hindenach is the co-founder of Simple. Thrifty. Living. He graduated from Bowling Green State University with a Bachelor's Degree in Journalism. He has a long history of financial journalism, with a background writing for newspapers such as the San Jose Mercury News and San Francisco Examiner, as well as writing on personal finance for The Huffington Post, New York Times, Business Insider, CNBC, Newsday and The Street. He believes in giving readers the tools they need to get out of debt.

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