Prosper Peer to Peer (P2P) loans help borrowers with credit issues
Prosper is one of the leading peer-to-peer (P2P) lending marketplace and it is also one of the oldest - it has been operating since 2005. Loans issued by Prosper allow people to both lend money out to others and the company allows individuals who need funds to borrow the cash they need. The non-traditional lender provides borrowers the opportunity to get more favorable interest rates on a loan. Learn more about Prosper, the marketplace available and their loans below.
Prosper and their P2P lending model is attractive to borrowers who have a low-income or poor FICO scores as well as other people may face challenges with obtaining loans from traditional financial institutions. The loans can be used to pay a wide range of bills including for debt consolidation, student loans, financing to pay a specified type of expense, and maybe even a loan to buy an automobile.
Benefits to using Prosper for a loan
The biggest advantage is for people with poor to fair credit scores or a more moderate income. As typical lenders rely heavily on credit scores and rigid underwriting processes, often excluding those with less-than-perfect credit histories or unique financial situations, such as someone who works in the gig economy with a variable income. In contrast, Prosper evaluates a broader set of criteria, potentially improving access to funding for borrowers who might otherwise struggle.
The Prosper P2P lending network is legit too - no scams like may be found in other places on the internet. How it works is that lenders on the peer to peer platform will bid on borrowers requests for loans by offering the applicant competitive interest rates. In total, Prosper’s membership is over 2 millions people from across the U.S. Billions of dollars in loans have been funded since the company was founded.
Prosper will, in general, have competitive interest rates for their loans. Due to the direct connection between borrowers and investors as part of the P2P model, Prosper can often provide competitive rates, especially for borrowers with solid credit ratings. There are also transparent terms for borrowers as they will receive clear and upfront information regarding fees, interest rates, monthly payments, and the total cost of borrowing.
There is also a fast application process (approvals or denials) for a Prosper peer to peer loan. Applicants can quickly apply online and typically receive a decision within minutes, with funding often occurring within a few days.
How to borrow money from Prosper lenders
The process begins when a prospective borrower applies online, providing basic personal and financial information as well as the reason for the loan. Prosper evaluates this data using proprietary algorithms and assigns each borrower a “Prosper Rating”, ranging from AA (highest rating, lowest risk) to HR (high risk). The rating helps determine the interest rates and terms offered to the borrower. There are also fraud detection tools built into their algorithm.
Once approved by Prosper, the borrower’s loan request is posted on the Prosper peer to peer marketplace. This is when the P2P model kicks into gear. As Investors then review these requests from borrowers (listings) and decide whether or not to fund them based on risk tolerance, expected returns, and borrower profiles. Investors can invest as little as $25 in a single loan, spreading their investments across multiple borrowers to diversify and reduce overall risk. The Peer-to-peer model should help drive down interest rates for the borrower as the demand for the loan from the investors can lead to a better deal.
When enough investors commit to funding a borrower’s request, the loan is originated, and the borrower receives the funds directly into their checking or savings account. The borrower then makes fixed monthly payments over the loan term (while they vary it is usually between 2 to 5 years), with Prosper handling all administrative tasks, including payment collection and distribution back to investors.
While every P2P site has its own way of calculating the lending interest rate or other fees, and the rate will also depend on the number of people offering a loan in the marketplace, the fact is that in general borrowers with decent credit scores will typically get a better interest rate than they would from a bank loan. This can lead to significant savings over time.
Type of loans offered by Prosper and uses of the money
Prosper allows the borrower to use the funds for a wide variety of expenses with generally $2,000 to $50,000 provided. This is part of their Personal Loan program. There are also Joint Loans from Prosper that involve multiple borrowers. But the interest rates will of course vary based on the use of the funds and the borrowers credit score(s).
- Healthcare expenses: Cover medical bills, travel to the doctor or other health-related costs.
- Major purchases: Buy a vehicle, furniture, home repairs, or other significant items.
- Vacations or travel: Finance a dream trip or family getaway.
- Household expenses: Manage unexpected costs or day-to-day needs such as a rent or mortgage payment, with many loans used for paying rent.
- Debt Consolidation: Prosper loans can be used to pay off higher priced debt. While the interest rate you pay on a Prosper loan will vary, the interest rate you may receive on a debt consolidation loan can range from about 5% to over 15%, which is often lower than a credit card or other sub-prime loans. Or find other ways to consolidate debt with loans.
- Student loans: Prosper can also a great option for families who cannot secure college grants, student loans or funds through more traditional lenders. Education loans have become a special niche within the P2P industry, and Prosper is meeting that need.
Considerations and risks
While Prosper offers significant advantages to people with challenging credit histories or a lower income, borrowers should also consider potential risks. Borrowers with lower credit scores will generally pay higher interest rates, and investors of a P2P loan risk losing money if borrowers default on loans. Prosper attempts to mitigate this risk through thorough credit assessments, using multiple investors to bring down the rate for borrowers, and diversified investments.
While their service eliminates the need for potential borrowers to go through a bank for a loan and the marketplace may be able to offer lower interest rates to consumers than banks can. However borrowing money from any place is generally not idea. However Prosper’s peer-to-peer lending platform, which is the largest in the indistry, represents an innovative way to borrow money to pay a wide variety of bills. The company, and P2P in general, provides opportunities to those who might find traditional lending avenues challenging
Applying for a loan from Prosper
The process is done online and their is also a customer service department if additional help is needed. That number is 866 615-6319. The application can be approved (or denied) within a matter of minutes or hours. More information can also be found at www.prosper.com, including the online application.
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