Prosper Personal Loan Review: Is This Peer-to-Peer Lender Legit?
Prosper is a legitimate personal loan marketplace that uses a peer-to-peer model, which means the money for the loan comes from investors rather than banks. You apply with Prosper, the loan is originated by FDIC-insured WebBank, then investors commit funds.
You can use Prosper personal loans to pay for the same things you use traditional personal loans for. You could consolidate debt, make improvements to your home, pay for business expenses and more. Borrowers even have the option to do a joint application with someone with strong credit to boost their approval chances. That’s one of the reasons they’re a good option for fair-credit borrowers.
Our independent review of Prosper personal loans will explain the peer-to-peer model, whether it’s legit, the pros and cons, and how to qualify.
What Is Prosper?
Prosper launched in 2005 as a pioneer in the peer-to-peer lending marketplace industry. It connects borrowers with investors who fund the loans rather than a traditional bank. The loans are issued through its bank partner WebBank, an FDIC member, and can be up to $50,000. Prosper offers other products like a credit card, but we’re going to talk specifically about the loan marketplace.
You can use the loans to consolidate high-interest debt, pay for a wedding or honeymoon, cover emergency expenses and much more. If you’re looking for a loan for debt consolidation, we have a guide on how debt consolidation loans work.
How Prosper Works (The Peer-to-Peer Model)
Prosper operates similarly to other marketplaces with some key differences. Here’s how the process more or less works:
- Check your rate with a soft-pull prequalification. Prosper doesn’t advertise a minimum credit score, so prequalification will allow it to do a soft pull that doesn’t affect your credit to see what kind of loan and rate you’d qualify for.
- Prosper assigns your loan a risk grade. This is also called a Prosper rating, which is a letter grade that indicates the risk of loaning you money.
- Investors review and fund your loan. Prosper reviews and approves your application then investors commit to providing funding.
- Once funded, you receive the money. There’s no option to send the money directly to your creditors if you’re using the loan for debt consolidation.
Prosper says you may get your money as soon as one business day after approval. However, investors have about two weeks to commit to funding your loan, so it could take longer. Your application might get canceled as well if you don’t get a commitment in that time frame. But you can try again.
Prosper Rates, Terms and Fees
Prosper loans are between $2,000 and $50,000 to be paid back between two and six years. The annual percentage rate, or the cost of taking out the loan, is from 8.99% to 35.99%. The rate you get will depend on your credit report (and your co-applicant’s if you have one) as well as income, how much money you’re borrowing and the term length. They’re also fixed-rate loans, so the rate will remain the same for the life of the loan. We also have more information on how personal loan rates work.
The fee situation is not ideal. Although it doesn’t charge a prepayment fee for paying off your loan early, Prosper does charge an origination fee. That can be up to about 10% of the loan, which can get expensive. There’s also a fee if you pay with a check, make a late payment or have insufficient funds when a payment processes.
Who Qualifies for Prosper Personal Loans?
To apply, you must be a U.S. citizen who is 18 or older and lives in one of the approved states (Prosper loans aren’t available in Iowa, North Dakota and West Virginia). You also need a bank account and a Social Security number.
As far as what is more likely to get you approved, a fair-to-good credit score, dependable income and a lower debt-to-income ratio are all factors. Having a joint applicant can increase your chances as well if they have a better credit report. Prosper said this is different from having a cosigner. Your joint applicant is equally responsible for paying the loan back. A cosigner usually is a back up if you can’t or don’t pay. We also have an explainer on how cosigning a loan works.
Pros and Cons of Prosper
Pros
- Accessible to fair-credit borrowers
- Joint/co-applicant option
- Established, SEC-regulated platform
- Soft-pull prequalification
- Short-term hardship program that temporarily reduces interest rate
- Well-rated mobile app
- No prepayment penalty
Cons
- Origination fee (up to roughly 10%)
- Higher APRs for lower-credit borrowers
- Potentially slower funding due to the peer-to-peer model
- No autopay discount
- No direct-pay-to-creditors for consolidation
- Limited term options
- Unavailable in Iowa, North Dakota and West Virginia
Is Prosper Legit?
Yes, Prosper is a legitimate, long-established platform that since 2005 has facilitated loans through an FDIC-member bank, and it holds a strong Better Business Bureau rating and a high Trustpilot score. Its 4.5 star TrustPilot rating comes from more than 14,000 reviews. It’s also BBB accredited and has an A+ score, however, its reviews on the BBB have an average of one star. Many are related to its credit card and the fees associated with personal loans. It is important to note that in 2019, Prosper agreed to pay $3 million to settle claims from the Securities and Exchange Commission that it overstated returns to investors. Although that doesn’t really affect the borrowers, it does show an alleged history of some shady practices.
Prosper Alternatives
If you need a personal loan but need faster funding, a lower rate or you don’t want to pay as many fees, you can use other marketplaces that connect you with lenders like banks rather than investors. AmOne and Pennie personal loans can match you with loan offers that give you what you’re looking for. With both of these sites you can see what you qualify for without affecting your credit score.
Frequently Asked Questions
Yes. Prosper is a legitimate, well-established lender — it launched in 2005 as the first SEC-approved peer-to-peer lending marketplace in the U.S., has facilitated tens of billions of dollars in loans and issues its loans through an FDIC-member bank partner. It holds a strong Better Business Bureau rating (A+) and a high Trustpilot score (4.5). As with any lender, there are complaints — often about origination fees, funding delays or loan servicing — so read your terms carefully and compare a couple of other offers before committing.
Although it does not publish a minimum credit score, Prosper is relatively accessible. It’s aimed at fair-credit borrowers, and it weighs your income, debt-to-income ratio and credit history alongside your score. If you don’t qualify on your own or want a better rate, you can apply with a co-applicant who shares responsibility for the loan. You can check your rate first with a soft credit pull that won’t affect your score.
With peer-to-peer lending, your loan is funded by investors rather than directly by a bank. After you prequalify, Prosper assigns your loan a risk grade, and investors review anonymized details and choose to fund all or part of it. The upside is that this model can make it easier to qualify, especially with fair credit. The trade-off is timing: because investors have to fund the loan, it can take longer than a same-day lender — and in the rare case a loan isn’t funded enough within the funding window, the application can be canceled.
Prosper’s main fee is an origination fee, which is deducted from your loan proceeds before you receive the money — so you’ll get less than your approved amount while repaying the full amount plus interest. The exact percentage depends on your creditworthiness. Prosper also charges some other fees, such as late and returned-payment fees, but there’s no prepayment penalty, so you can pay the loan off early without an extra charge. Factor the origination fee into the amount you request.
