Prosper Personal Loans Review: A Solid Peer-to-Peer Lender for Fair-Credit Borrowers

Prosper has been around since 2005 and has originated over $21 billion of loans to 1.27 million people. While personal loans are by far the core product offered by Prosper, the company also offers home equity loans and credit card products to help meet customers' full borrowing needs.

Prosper loans are different from most personal loans in the sense that Prosper is a peer-to-peer lending platform. In other words, Prosper doesn't directly loan money itself, but it connects borrowers with investors (both individuals and institutions) who invest in the loans to earn interest income. Prosper matches borrowers with investors, and also services the loans it originates.

This personal loan is a good fit for: Borrowers with moderate to strong credit histories who need to borrow up to $50,000.

Top perks

Prosper offers several features that might appeal to personal loan borrowers, and just to name a few of the standouts:

Wide range of loan amounts: Prosper offers personal loans in amounts ranging from $2,000 to $50,000. While the $50,000 upper limit isn't exactly the highest in the industry, it is sufficient for most borrowers. And on the lower end, $2,000 is less than many competitors are willing to loan.

Next business day funding: Prosper funds its loans as soon as one business day following final loan approval. To be clear, this is when Prosper sends the money -- the timetable for it to actually show up in your bank account depends on their processes as well.

Easy to check rates online: Prosper makes it easy for borrowers to get personalized rate offers without affecting their credit score. The online pre-qualification process takes just a couple of minutes and performs a soft credit check to reveal a variety of loan options.

Co-borrowers are allowed: Prosper is among the few personal lenders that allow joint loan accounts. For example, if you and your spouse wanted to apply for a loan together, that's an option. Or, if your credit isn't particularly strong, you can use a creditworthy co-borrower to qualify for better loan terms.

Several loan purposes: Prosper offers personal loans for three specific purposes -- debt consolidation, healthcare expenses, and home improvements. The process of getting these loans are identical to one another, all have the same loan minimums and maximums, and in all cases the money is distributed to the borrower's bank account just one business day after accepting a loan offer. It's also worth noting you can use personal loan proceeds for just about anything you want -- after all, the entire concept of personal lending is that the loan isn't backed by any specific asset (like a mortgage is backed by a home).

What could be improved

There's no such thing as a perfect lender for everyone, and Prosper isn't an exception. While there are several things to like about Prosper's lending process, here are a few potential drawbacks:

High APR range: The APR given to each particular borrower depends on a variety of factors, but Prospers rate on both the low and high ends of the spectrum are relatively high. And to be clear, these APRs include Prosper’s origination fee.

Origination fees: All loans made by Prosper have origination fees, which vary from 1% to 7.99%, depending on the borrower. These are included in the quoted APR, but the important thing to understand is that these origination fees are deducted from the loan proceeds before they are distributed. In other words, a $10,000 loan with a 5% origination fee would result in $9,500 being deposited into your bank account.

No guarantee of loan funding: As Prosper is a peer-to-peer lending platform, it relies on individual and institutional investors to fund loans. Because of this, even if you're approved for a loan, there’s no guarantee your loan will have enough backers in a timely manner, or even at all. This is rarely an issue in practice, but it's worth noting.

In order to qualify for a personal loan through Prosper, you must be a creditworthy borrower, meaning that your income, other debts, and credit situation meet Prosper's minimum standards. And while it is only one piece of the puzzle, Prosper makes it clear that a credit score of 560 or higher is needed to qualify. To sum it up, here's what you'll need to qualify for a personal loan:

• Credit score of 560 or higher
• Income from verifiable employment or another reliable source
• An acceptable debt-to-income ratio

If you don't have all of these qualifications, it's also worth mentioning that Prosper allows co-borrowers. This means that if you don’t qualify on your own, you can apply along with a creditworthy individual in order to meet these requirements. It also means that if you want to, you can apply for a loan jointly, such as with a spouse.

Application process

Prosper's application process is similar to that of most personal lenders:

1. Check your loan offers, which consists of filling out a short form and agreeing to a soft credit check.
2. Choose the offer that best meets your needs and accept it.
3. Fill out the formal loan application and let Prosper know where you want the money deposited.
4. Receive your loan proceeds in as little as one business day.

It's also worth mentioning that if you decide to accept a personal loan offer through Prosper, a hard credit inquiry will take place as part of the final approval process. This is standard practice throughout the industry.

Prosper personal loans aren't right for everyone, as they have relatively high origination fees and a higher APR range compared to most rivals. However, with the ability to check your loan offers for free, Prosper is a solid lender to include on your short list.