Prosper Personal Loans: Approval, Interest Rates & Fees

Prosper logoIndividuals can utilize personal loans for a myriad of purposes, including refinancing higher interest rate debt, filling in a short-term cash-flow gap, funding major expenses like medical bills or home renovations, or starting a small business venture. Prosper is a viable solution within the personal loan market due to its unique crowdlending platform that connects willing funders with borrowers in need. Prosper offers personal loans up to $35,000 with interest rates that are slightly less than those made available through conventional bank channels, and the process to apply and secure funding can be less burdensome. It is important to note that not every borrower is the best fit for a Prosper loan, however.

Borrower Qualification

As a marketplace lender, Prosper loans are made available through the company’s online platform. Individuals must complete a brief application via the website to start the loan process which requires borrowers to provide personal information to help Prosper identify the borrower and his or her credit history. Social security number, current address, earned and unearned income as well as bank account balances are necessary for most individuals to provide to Prosper in order to submit a loan request. Once an application is completed, Prosper may require an individual to produce verifying documentation of the information submitted during the initial application, including pay stubs or bank statements.

Prosper approves or denies a borrower’s loan request based on information provided in the online application and supporting documentation. Loans are made available to the investor crowd prior to approval, but borrowers do not receive loan proceeds until Prosper has accepted the loan. Once a loan is accepted and funded by the crowd, borrowers receive their funds via direct deposit within two to eight business days. To qualify for the lowest interest rate through Prosper, borrowers must have a credit score of no less than 760 and strong income.

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Interest Rate Calculation

Prosper offers a broad range of interest rates to cater to a number of borrowers with various credit histories. Similar to other marketplace lenders, Prosper utilizes a rating system to determine the overall credit risk posed by a specific borrower. Borrowers are graded based on their credit profile including income, outstanding debt, repayment history and credit score, as well as amount of money requested and term of the loan. The highest rating under Prosper’s system is AA, starting at 5.99% and not exceeding 8.73% for three-year loans; borrowers requesting a five-year loan with an AA rating can receive an interest rate as low as 8.65%. Individuals with less than ideal credit may be able to qualify for a loan with Prosper, but could be assigned a loan rating as low as HR. The HR rating is only available with a three-year repayment term with interest rates as low as 31.72% and as high as 35.97%.

In addition to the interest rate charged on a Prosper loan, borrowers are assessed a closing fee when the loan is accepted. For highly rated loans, the closing fee ranges from 1 to 2% for three-year commitments, and is a set 3% for five-year loans. Poorly rated loans are assessed a closing fee of 5% of the total amount borrowed for both three- and five-year terms. Borrowers with low credit scores, poor repayment history or unstable income may not be well suited for a Prosper personal loan due to the total cost of borrowing based on a higher interest rate and closing fee.

Alternative to Prosper Loans

Prosper is a leader in the market for peer-to-peer lenders, but alternatives do exist. Lending Club and SoFi are competing marketplace lenders that offer personal loans with no collateral up to $35,000. Individuals undergo a similar vetting process with each marketplace lender, and loan requests are submitted to a crowd of eligible investors for funding. Interest rates vary with each platform, as do repayment terms and total funding fees. It is important for borrowers to understand the total cost of borrowing through a marketplace lender prior to accepting the loan, and comprehend how an additional monthly debt obligation may affect cash-flow and budget.

Posted on August 3, 2017 by in Personal Loans,

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