Prosper is a groundbreaking online lending platform that connects borrowers directly with lenders, cutting out the banks. Since its start in 2006, Prosper.com has grown to be the top peer-to-peer lending service, boasting over 1 million users and handling loans worth more than $262 million. It attracts borrowers with competitive loan rates starting at 6.59% (depending on credit history) and offers lenders returns as high as 10.59%.
For borrowers, Prosper offers loans for various needs like debt consolidation, home improvements, starting a business, or buying a car. Loans can range from $2,000 to $25,000. When you apply, you’ll go through a credit check that looks at your income, expenses, and payment history. If you have a credit score of 760 or higher, you can get an AA rating, which means lower interest rates—anywhere from 6.59% for a one-year loan to 11.76% for a five-year loan. However, if your credit score is lower, your annual percentage rate (APR) will be higher. There is a closing fee that ranges from 0.5% to 4.5%, depending on your credit rating, and this fee is taken out before you receive your loan. The good news is that there are no penalties for paying off your loan early, and you don’t need any collateral to secure the loan.
Lenders on Prosper can either choose their borrowers directly or use the platform’s ‘quick invest’ feature that matches them with loans meeting set criteria. This way, lenders can spread their investments across multiple loans, reducing overall risk. You can start investing with as little as $25. Prosper offers an appealing average return rate of 10.6%, which is higher than many traditional investment options. Investing in borrowers with AA ratings may yield lower returns but comes with less risk, while lending to lower-rated borrowers could offer up to 15% returns but with higher risk. Lenders can also trade notes as they wish, and there’s a 1% yearly fee once the loan is issued.
In summary, Prosper.com is a smart and innovative platform that benefits both borrowers and lenders by bypassing traditional banks. Borrowers get access to competitive interest rates and loans they might not find elsewhere, while lenders can enjoy better returns compared to conventional investments. Although this lending approach comes with risks, Prosper aims to balance these to create a beneficial system for everyone involved.