Here's the deal:
If you live in Iowa, Maine, or North Dakota I hope you also stay and read this info-article, but, as of right now your state is one of the few that will not let you get a loan from peer-to-peer lenders. Why? You'd have to check with them.
This article is necessary. Many people still have no clue that they could be getting a loan deposited into their bank accounts in under a week from today, while never even speaking to a bank.
And nothing shady either. These are not payday loans. These are peer-to peer loans, a fast-growing sector in the lending market.
Peer-to-Peer Loans Are Different Because The Loans Are Funded by Real People
One of the most unique things about peer-to-peer loans is that they are not funded by banks, no cowering in front of a stuffed-shirt. Normal people all over the United States are funding these loans. The major peer-to-peer loan companies, Prosper and Lending Club help organize this funding as it moves from their bank accounts to yours. When you pay your loan back over time, your payments then return to these lenders/investors in whatever state they live.
Who Can Borrow Money Though Prosper?
If you want to get a loan as a borrower you have to be a U.S. resident in a state that allows you to get these loans, as stated earlier, Iowa, Maine and North Dakota are not allowing their citizens to receive loans yet. Things may change soon though. In addition to living in one of the 47 eligible states...
You Must Have:
- A bank account.
- A Social Security number.
- A credit score of at least 640.
Depending on your qualifications, as an approved borrower you can request unsecured loans from $2,000 to $35,000.
What kinds of Loans are Available on Prosper?
Prosper offers fixed rate, "fully amortizing*", unsecured loans from $2,000 to $35,000. Loan terms of three and five years are available, depending upon the Prosper Rating you'll receive and your desired loan amount. There are no penalties for paying off your loan early or for making partial prepayments.
These Are The Most Common Loan Types Prosper Helps You Get Funded For:
How Much Can I Borrow?
Prosper loan amounts range from $2,000 to $35,000. The maximum loan amount for any borrower is determined by the borrower's Prosper Rating. Prosper rates potential borrowers from AA-to-HR (AA being the best prospect, HR being "high risk).
Can I Get a Peer-to-Peer Loan With Bad Credit?
Well, no. Unlike predatory debt traps like payday loans, peer-to-peer lenders like Lending Club and Prosper (Rated A+ with the Better Business Bureau) are running legit and fast-growing businesses built on a solid business model. Because of that, they do have standards in place to provide the everyday Americans that are investing in your loans some protection. They do not service folks with a very bad credit rating.
Prosper requires a bottom-floor credit score of 640. Lending Club is a bit more lenient in this area and only requires a 620.
I have A Lot Of Debt, Does It Matter?
Yes it does, but Prosper is willing to work with you a bit more than Lending Club in this area.
Prosper: Accepts a debt ratio of less than 50%
Lending Club: Accepts a debt ratio of less than 40%
This is a major factor to consider if you have debt, Prosper is willing to accept borrowers who have a bit more overall debt than Lending Club.
How Do I Figure Out My Debt-to-Income Ratio?
Debt-to-income includes your monthly payments, including mortgage, credit cards, rent, student loans, car payments and/or child support, divided by your monthly salary.
For example, if you pay $300 a month on your car note, $550 a month in credit card payments, and $1,100 in mortgage payments, while your monthly income is $4,000, your debt-to-income is $1,950 / $4,000 = 48.8%.
That would be acceptable to Prosper, but not Lending Club.
So How Do I Approach The People Who Are Lending Money?
This is one of the best parts for people who don't like to feel the pressure of trying to get a loan. These loans are done online, so for these online loans you simply make a listing of the money you need. A listing is basically detailing what you need and putting it into the loan marketplace by posting it on Prosper's website for everyday investors to see if they'd like to fund your loan.
Tell Me About The Interest Rates
Prosper's rates are 6.73% – 34.12%
And the rate you get depends on which of the ‘rating’ groups they assign you to.
Those ratings depend on your credit score, total debt amount, the type of debt you have, your payment history, income, and other factors. A person with a lower credit score can actually end up with a better rating than someone with a higher credit score if the other factors weigh in positively. It's worth it to check, many people doubt they will get a decent rating and are pleasantly surprised. They then go on to get a loan funded in a few days.
What Are The Fees For Getting a Loan?
There are no fees for posting a borrower listing on Prosper.
Origination fees between 1-5% (depending on your rating) are only charged when your loan is funded and the money is electronically transferred to your bank account.
The origination fee is immediately deducted from your requested loan amount before the money is deposited into your bank account. So if you're taking out a loan to purchase something specific (like kitchen remodeling), make sure you request enough money to cover both the remodeling project and the closing fee. It makes no sense to take out a loan and still come up short, so keep that in mind.
How Quickly Will I Get My Money?
Your listing will end as soon as it is sufficiently funded or after 14 days, whichever comes first. Once the listing ends, Prosper must complete a loan review process before the loan is approved. Prosper may require additional documentation from you as part of this review. A prompt response will speed up the process.
The Verification Stage, seen on your loan listing, serves as an indicator of your loan application's progress. Watch your Verification Stage closely and be sure to submit any requested information or documents as soon as possible. If all requirements are met, you will receive loan proceeds as early as 2 but possibly up to 8 business days after the listing is fully funded. Four days is seen as the average funding time with Prosper.
Your borrower loan proceeds should be available to you one to two business days after your loan is approved.
Prosper transfers your loan proceeds to you electronically using the ACH (Automated Clearing House) banking network.
Can I Pay Off My Loan Early?
Yes. If you are going to make a partial prepayment or pay off the total amount of your loan, it's simple, go to "My Account >Borrowing" and click "Make Payment."
There is never a fee for making prepayments or paying off your loan early. This is one of banking traps that you can avoid with P2P loans.
If you are paying off your loan in full, the principal balance, along with any interest accrued to the date on which the payment will be initiated (which may be 1 or more days in the future), will be added together to determine the amount required to pay off the loan.
What If I Have a Failed Payment Or I'm Late With My Payment?
Failed Payment: It's going to cost you $15 for a failed automated withdrawal, returned check, or bank draft.
You won't be charged multiple times in any month. Only one failed payment fee will be charged per payment period. Failed payments can be because of insufficient funds, a closed account, account changes that were not reported to Prosper, or for any other reason (other than an error by Prosper). Prosper keeps failed payment fees, it's not passed on to the investors.
Late Payment: If a monthly payment is 15 days late, you'll be charged a late fee. Prosper does NOT keep late fees, late fees are passed on to folks who've invested in your loan.
If you are late on a borrower loan payment, your loan is considered delinquent, and failed payment and late fees may be assessed.
Each month, your monthly loan payment is automatically withdrawn from your bank account on file. If you receive an email from Prosper that your payment failed, it usually means that your account has insufficient funds, or that the bank account on file at Prosper is out of date or incorrect. In either case, you will need to pay a failed payment fee and can fix the problem with no further penalty by making a manual payment before you are 15 days past due. Make a payment now. If your bank account information is out of date, be sure to add a new bank account first.
How Do I Find Out If I Can Get Money Through Prosper?
Just go check your rate, Prosper has pages set up for you to check rates that without needing to talk to anyone and without affecting your credit at all. Both Lending Club and Prosper do soft inquiries which don't do anything to your credit report.
Find out how simple it is to get a loan funded with Prosper, check your rates right now. (That's an affiliate link, if you get approved for a loan, I get a small referral fee. Hopefully this article helped.)