Prosper is an online peer-to-peer (p2p) lending platform that offers loans to individuals at a fairly low-interest rate. Established in 2006, Prosper became the first firm to enter the p2p lending market. It provides loans to individuals with average to excellent credit score. Any individual with a minimum of 640 credit score is considered eligible for a Prosper loan.

How Does Prosper Work?

It must be usual for people to wonder, how Prosper manages to lend money at an interest rate far lower than the industry. The answer is simple. Unlike banks & other financial institution, Prosper doesn’t have branches, operating online helps Prosper saves on the expenses other financial institutes have to bear.

When an individual applies for a loan on Prosper’s website, they request necessary information of the applicant after which Prosper makes a soft credit check of the borrower’s credit history. This soft credit inquiry doesn’t affect the credit score as it doesn’t reflect on the public credit report. This soft credit check helps Prosper determines whether the individual is eligible for a Prosper loan. Once the applicant has succeeded in the soft credit check, Prosper makes a hard credit check to confirm his eligibility for the loan. This hard credit check reflects on the credit report for the next two years.

On completion of credit check, the applicant receives a confirmation noting the loan has been processed and that the amount will be transferred in 1-4 business days (to eligible applicants). The applicant gets the amount in their provided bank account within the said duration.

What are the charges of Prosper?

Please note that the amount received will not be equivalent to the loan amount applied for, as an origination fee ranging from 2.4% to 5% will be deducted from the amount borrowed. An origination fee is a fee charged by Prosper to process the loan. The origination fee rate depends on the applicant’s credit score, individuals with the excellent score being charged 2.4% while an average scorer would be charged 5%. The better the credit score one has, the lesser the origination fee he has to pay. If you are in need of a particular amount, be sure to calculate the origination fee in advance and add it to the borrowing amount to get the desired amount. For example, if you are in need of $2,000 be sure to request a loan of $2105, as 5% of $2105 is $105, which will give an amount of $2000 after the deduction of origination fee.

How to Apply for a Prosper Loan?

Prosper loan applications are quick and easy. The entire process is done online on Prosper’s official website. Follow the below mentioned steps to apply for a Prosper Loan:

• Log in to Prosper’s official website.
• Prosper requests some of your personal information – name, address, date of birth, monthly housing expenses and loan requirements as a part of the loan application.
• Once you have filled these details, you will be asked to create a password for your account with Prosper.
• Prosper will run a soft inquiry of your credit report & provide you with a confirmation of whether or not you are considered eligible for a loan on the next screen. Here, it will display the rate of interest you will be charged for the loan. Along with the rate of interest, it will show the ARP. ARP or Annual Percentage Rate is more important than the interest rate as it is a sum of origination fee and interest rate.
• Prosper offers you a fixed payback term of 3 or 5 years, which will be shown along with their respective interest rate. It will also display the maximum amount you can borrow from Prosper, i.e., if you want to borrow a bigger amount than what you initially applied for, you can make the changes here.
• Once you have selected the amount and the payback term, you will be taken to the next screen, where, additional details about the applicant is requested.

Details requested would be:

• Personal Phone Number
• Employment Details
• Social Security Number

Since sensitive information like Social Security Number is requested on their site, Prosper has secured their website with encryption to process information securely.

• Once you have filled in the additional personal details, the next screen would display all the loan terms, i.e., ARP, Origination Fees, Loan Amount, Total Payments, etc. Make sure you read everything carefully to be well informed of the loan terms before borrowing from Prosper.

• Once you have accepted terms of the loan, you can complete your application with Prosper by doing the following:
  • Add Bank Account Details: There are two ways to provide your bank account details to prosper, the first and the quickest way to do this, is to provide your bank account login and password to prosper so that they can verify your bank details the fastest.  If you are not comfortable sharing your bank login, you could opt for the second way, i.e., provide your bank account number and routing number, which Prosper will use to verify with your bank by depositing a small amount, usually less than 10¢. This second method is a long process and might take some time for the verification to be completed.
  • Upload / Fax Additional Documents: Prosper might want you to upload few supporting documents like a bank statement or tax document in PDF format or fax it to them. These documents are used to verify your information before processing the loan.

Once you have completed the above mentioned steps, Prosper will display a confirmation stating –

In Image: Prosper confirms application receipt. It also mentions that they are reviewing your application and will send you an email regarding your application in an hour.

• After this, Prosper runs a hard inquiry that will remain on your public credit report for at least two years.

Benefits of Prosper Loans

Prosper is not only the quickest and easiest way to apply for a loan, but also have additional benefits:

• Individuals with a credit score as low as 640 are considered eligible for a Prosper Loan. This low score consideration is a great relief to people with a poor credit history.
• Prosper loan is processed in as low as one day in some cases. Their quick process helps in easy access to money during emergencies.
• Due to Prosper’s soft credit checks, there will be no effect on the credit report if you are only looking to check your interest rates .
• Prosper loans are lent on a fixed interest rate, irrespective of market changes or payment delays, Prosper loans’ interest rate stays unchanged throughout the repayment term.
• Prosper offers one of the lowest interest rates in the market. This low rate helps save on the extra interest you might have to pay with other personal loans.
• No extra fees or penalty is charged in case of early closure or payment of the extra amount.

Drawbacks of Prosper Loans

Although there don’t seem to be many drawbacks of Prosper loans, we have mentioned below a few things that might be inconvenient for some:

• Prosper’s hard credit inquiry might have a slight impact on your credit report for about six months, lowering your score faintly.
• If you are looking to borrow an amount that is anything lesser than $2000 or greater than $40000, Prosper might not be of great help as they have a borrowing scale of $2000-$40000.
• If you are looking for a long payback term to lower your monthly EMIs, Prosper might not be the right choice for you, as Prosper offers a maximum payback term of 5 years.
• If your loan goes unfunded for 14 days, you might have to reapply, which means a longer wait time.
• Prosper’s origination fee might be of major concern for some people as it could go up to 5% of the loan amount.
• Although a loan term of 60 months / 5 years is available with Prosper, the interest rates for five years repayment term is higher than that of 3 years. This might discourage most of the applicants from opting a 60 months term.
• Prosper is unavailable in a few states, namely, Maine, Iowa, and North Dakota. Making it impossible for the residents of these states to borrow via Prosper.
• If your credit score is anything below 640, you might not be able to borrow via Prosper Loans. In such cases, you might have to consider loans for poor credit score .
• If you do not have a job or a stable income, your loan might not be approved.
• Only individuals can apply for Prosper Loans. If you are looking to co-borrow a loan, you might have to look elsewhere as Prosper doesn’t support co-borrowing.

The best situation will be not to have to borrow money or take any loan, in case you must, Prosper Loans are a good choice with low-interest rates and easy repayment options.