Prosper Marketplace Lending – Who is Prosper Marketplace Lending Right For?

Over the past decade, P2P lending has emerged as a game-changer in the realm of borrowing and investing. It offers a refreshing departure from the traditional bank lending system by directly connecting individual borrowers with individual and institutional investors through online platforms like Prosper.

Prosper Marketplace Lending
Prosper Marketplace Lending

This online marketplace model has its advantages but also comes with some drawbacks. In this article, we will explore everything you need to know about Prosper marketplace lending, including how it works, and the pros and cons for borrowers and investors.

What is Prosper and How Does P2P Lending Work?

Prosper Marketplace Inc. operates one of the largest P2P lending platforms in the U.S. The company uses an online marketplace model that connects borrowers looking for loans with investors who want to earn interest by funding those loans.

Here’s an overview of how Prosper lending works:

  • Borrowers request personal loans ranging from $2,000 to $40,000. Loan requests get listed publicly on the Prosper site.
  • Individual and institutional investors review loan listings and invest in those they find desirable. You can invest as little as $25 per loan.
  • Once a loan gets fully funded by investors, the borrower receives the money, minus an origination fee.
  • Investors receive the repayments on principal and interest as the borrower makes monthly payments over the loan term.
  • Prosper handles facilitating transactions, verifying identities, assessing borrower risk, and servicing the loans.

So in short, Prosper brings together lenders and borrowers who otherwise would never connect, using advanced technology to make the process seamless.

Advantages  of Borrowing Through Prosper

If you need to borrow money, here are some of the key benefits of using a P2P lender like Prosper versus traditional financing options:

Fast Funding with Minimal Hassle

The online process results in funding often within 1-5 business days of listing your loan request, significantly faster than awaiting bank loan approval.

Lower Interest Rates Than Credit Cards

Given investors compete to fund loans, rates can be much lower than high-interest credit card debt. The average APR is 7% – 36% based on credit.

Multiple Term Options

You can choose loan terms of 3 or 5 years. Longer terms have lower monthly payments but higher total interest.

No Hidden Fees or Prepayment Penalties

Prosper has no origination fees for borrowers with great credit. There are also never any penalties for early payoff.

Rate Check Doesn’t Hurt Your Credit Score

You can get estimated rates from Prosper without impacting your credit report. A hard inquiry only occurs during official application.

Disadvantages of Borrowing Through Prosper

However, there are also some limitations to consider with this lending model:

  •  You’ll need a minimum score in the 600s to qualify, so borrowers with poor credit are disqualified.
  • Except for the best borrowers, you’ll pay origination fees of 1-5% deducted from the loan amount.
  •  The process is done completely online with no option to speak with a loan officer.
  •  Those with great credit scores may find lower APRs at banks and credit unions.

Prosper Borrower Eligibility and Requirements

To qualify for a Prosper personal loan, here are some of the basic criteria: The minimum credit score requirement is between 640 and 740, depending on the loan amount

  • Stable monthly income of at least $2,000
  • U.S. citizen or permanent resident
  • No bankruptcies or public records in the past year
  • Debt-to-income ratio generally below 50%

During the application, you’ll need to provide identity verification, bank statements, income documentation, employment info, and outstanding debt obligations.

Step-By-Step Process for Getting a Prosper Loan

If you decide Prosper meets your borrowing needs, here is an overview of what to expect:

Step 1. Check Rates

Use Prosper’s online tool to see estimated rates tailored to your credit profile and requested loan amount. No credit checks required.

Step 2. Complete the Loan Application

Provide your basic personal information, and income details, and link your bank accounts.

Step 3. Verify Your Income and Identity

Upload documents to confirm your employment, income, and who you are.

Step 4. Loan Gets Listed for Investor Funding

Prosper posts your loan request on the marketplace for investors to review and invest in at their chosen amounts.

Step 5. Loan Gets Fully Funded

Once the full loan amount is funded by one or multiple investors, underwriting begins.

Step 6. Loan Funds Get Deposited

If you are approved, Prosper deposits the loan amount directly into your bank account. You’ll then make monthly principal and interest payments.

Who is Prosper Marketplace Lending Right For?

Here are examples of good borrowing and investing candidates for Prosper:


  • Those who need to consolidate high-interest credit card balances into one lower monthly payment
  • Borrowers with mid-range credit scores who may not qualify for the best rates from banks
  • People looking for loans under $35,000 that are not mortgages or auto loans


  • Individuals interested in earning higher returns than bonds, CDs, or savings accounts
  • Those looking to diversify their portfolios beyond just stocks and bonds
  • People comfortable doing online research to assess borrower risk levels
  • Retail investors as well as larger institutions

Pros of Investing through Prosper

Investing in P2P loans can also be an attractive option compared to traditional investments such as stocks and bonds. Here are some potential advantages:

  •  Historical returns range from 5% – 8% depending on risk level.
  •  You can diversify across many loans by investing in small increments.
  •  P2P lending provides an uncorrelated asset class.
  •  Invest in pre-set baskets of loans or customize your own with just a few clicks.

Cons of Investing Through Prosper

However, P2P investing has risks that stock market investors may not be accustomed to:

  •  Historical returns don’t predict future performance. Defaults can cut into earnings.
  • Loans under $15K default more often than larger loan amounts.
  •  Need to invest across hundreds of loans to diversify risk.
  • Need to factor credit data, employment info, loan purpose, etc.

Prosper vs. LendingClub for Loans and Investing

Prosper and LendingClub are two of the biggest P2P lending platforms. They have similar models but some key differences:

For Borrowers

  • Prosper may offer slightly lower rates for those with excellent credit
  • LendingClub has no origination fee for best borrowers; Prosper charges 1-2%
  • Loan amounts up to $40K on Prosper; only $35K for LendingClub

For Investors

  • LendingClub requires less ($25 vs $100) for initial investment
  • LendingClub has automated investing portfolio options
  • Prosper offers estimated returns; LendingClub does not
  • Both have comparable historical returns in the 5-9% range

Is Prosper Worth It?

Here are a few key considerations when deciding if Prosper P2P lending fits your needs:

For Borrowers

  • Do I meet the minimum credit score requirement?
  • Is the interest rate low enough to justify origination fees?
  • Would I qualify for lower rates at a credit union or traditional bank?

For Investors

  • Does the projected return compensate me enough for the risk?
  • Do I have the time and risk tolerance for researching individual loans?
  • Is this just one piece of my diversified investment portfolio?

The right choice depends on your financial situation. For some borrowers and investors, Prosper Marketplace can provide a great financing solution. But make sure to compare all your options.


Prosper pioneered the concept of online P2P lending, allowing borrowers and investors to connect directly. This marketplace model offers some advantages but also has limitations versus traditional lending.

Borrowers should consider Prosper if they need quick financing and a lower rate than credit cards, but likely won’t qualify for the best rates from banks. Investors can benefit from diversification and higher yields than bonds but need large, diversified loan portfolios to mitigate risk.



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