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Founded in 2006, Prosper is a San Francisco-based company that offers unsecured personal loans in a peer-to-peer lending format. The company is not a bank and does not use its own funds. Instead, it matches borrowers with investors. The company underwrites the loans, and then it charges a fee for loan-matching.
Prosper is geared toward borrowers who already have good to excellent credit scores. The site offers low interest rates which don’t change during the life of the loan. Below are some of the things borrowers can expect from Prosper:
In addition to a credit score, Prosper applies a grade to each applicant. Based on data about your past behaviors combined with your debt-to-income ratios and your credit scores, this grade determines your interest rate and origination fee. Investors can also see your grade and use it to decide whether or not to invest in your loan.
To begin the process, you enter the amount of money you would like to borrow, from $2,000 to $35,000. The site also asks for the purpose of the loan. In addition, Prosper requests some basic information to begin the process. The application requires you to give your name, address, phone number, email address, employment status, and yearly income. This information is used for a soft credit check.
After inputting this information, you can then check the rate that you qualify for. The loan amount as well as the APR and interest rate are listed along with a monthly payment. You are also given other options for larger loan amounts. Once you select a loan offer, the site asks for additional personal information including your employer, occupation, SSN, and other details.
Next you are presented with the loan terms which you must read and sign. Since this is a legal contract for a loan, read it carefully before signing. Submitting the application then opens the loan up to investors. As stated above, Prosper matches borrowers who are looking for personal loans with investors. However, not everyone who applies for a personal loan through Prosper is matched successfully.
If you are matched, Prosper asks you to confirm your email address. The site then requests proof of identity and proof of income, like a pay stub or bank statement along with a tax statement.
According to the website, Prosper’s investors have funded over $10 billion dollars in loans since 2006. Investors can invest as little as $25 per loan in a range of risk categories.
Lower risk loans with a AA rating pay lower returns while higher risk loans with an HR rating offer higher returns. AA loans have an estimated return of 4.12 percent while HR loans offer an estimated return of 11.73 percent. According to Prosper, 83.5 percent of investors receive returns that exceeded their expectations.
The site allows investors to browse loans, invest in the ones they want to invest in, and then collect returns. There is even an automatic tool (Auto Invest) through which investors set criteria and their money is invested for them. Then, the returns are deposited into the investors’ accounts each month.
Here are some important things to consider about Prosper:
Prosper is a reputable online lender with an A+ rating from the BBB (Better Business Bureau). The company has been helping people find the cash they need for over a decade. The site is user-friendly, easy to navigate and simple to use.