Peer-to-peer (P2P) lending allows you to be a borrower or an investor. Find out what the best websites are for P2P lending.
Estimated reading time: 8 minutes
Table of contents
- 1. Prosper
- 2. LendingClub
- 3. Peerform
- 4. Funding Circle
- 5. Kiva
- Frequently asked questions
Prosper was founded in 2005, being the first peer-to-peer lending company. Since then, Prosper has originated more than a million loans totaling more than 18 billion dollars.
Get a loan or invest with Prosper.
Borrowing from Prosper
If you’re looking to consolidate debt, buy a car, make a big purchase, pay bills, or need a loan for another reason, Prosper is great because it offers loans up to $40,000.
It’s important to note that the minimum credit score is 640, which is on the higher end compared to other peer-to-peer lending companies.
The maximum loan amount is higher than what many other lenders offer. It also offers a 3 or 5-year term to pay it back. You can also pay off your personal loan without a pre-payment penalty.
The interest rate ranges from 7.95% to 35.99% APR, and the origination fee ranges from 2.41% to 5% of the amount that you borrow.
Borrowing from Prosper is straightforward. After completing the requirements, you’ll get the funds via direct deposit as soon as one business day.
Aside from personal loans, Prosper also offers a home equity line of credit (HELOC) in select areas. If you have the equity, a sufficient credit score, and income, you can get up to $1,000,000.
Prosper also has debt consolidation loans, healthcare financing, home improvement loans, car loans, small business loans, green loans, and military loans.
Investing with Prosper
If you’ve looked into investing with Prosper, you’ve either heard that it’s really good or terrible. While both are true, it’s important to understand the background.
Between 2006 and 2008, Prosper’s underwriting guidelines were very relaxed, and almost anyone could get a loan.
Due to poor underwriting guidelines and the economic crisis, investors lost money. This is where Prosper got a bad reputation for investing.
In 2009, they realized it was a problem. Prosper raised the minimum credit score to 640 and revamped the underwriting guidelines, which are still being used today.
Since then, returns have been much better for investors. According to Prosper, the average historical return is 5.3%.
As an investor, you can build your portfolio by selecting individual loans or use the automatic investing tool. Manually selecting the loans that you’d like to fund is the best way to have control.
Each loan is assigned a rating that ranges from AA, which is lower risk, and lower return to HR, which is higher risk and higher return. You’ll also be able to see credit information about the borrower before making a decision.
LendingClub was also one of the first P2P lending companies, as it was founded in 2006.
In 2021, LendingClub acquired Radius Bank and is no longer offering Notes for investing. Instead, it’s working on launching a high-yield savings account.
If you’re currently investing with LendingClub, your existing investments won’t be impacted until all Notes in your account fully mature.
Borrowing from LendingClub
If your credit score is below 640, you may be able to get a loan from LendingClub because the minimum credit score requirement is 600.
LendingClub offers personal loans that range from $1,000 to $40,000. The interest rate ranges from 8.05% to 35.89% APR based on creditworthiness. There’s also an origination fee that ranges from 3% to 6% of the total loan amount.
You won’t be charged an application fee, and LendingClub doesn’t charge prepayment penalties if you pay your loan off early.
Like Prosper, LendingClub gives you two options for the term, 3 or 5 years.
Aside from personal loans, LendingClub also offers small business loans and auto loan refinancing.
If your loan is approved, the funds can be deposited directly into your bank account, or you can pay the creditor directly from LendingClub.
Get a loan from LendingClub.
Peerform was founded in 2010 by a group of Wall Street executives. It’s excellent for borrowers due to the competitive interest rates. For investing, it’s open to institutional investors who purchase whole loans.
Get a loan or invest with Peerform.
Borrowing from Peerform
Peerform is an excellent P2P lending company to get a personal loan from. The loan amounts range from $4,000 to $25,000, and the interest rates range from 5.99% to 29.99% APR.
There’s also an origination fee that ranges from 1% to 5% of the total loan amount. The APR and fee amount will depend on your creditworthiness.
Peerform offers a 3-year term, and the minimum credit score is 600. Although it isn’t flexible with the term of the loan, the competitive interest rates make Peerform a top choice.
Investing with Peerform
Unfortunately, individual investors aren’t able to invest with Peerform because only institutional investors who purchase whole loans can. Institutional investors include banks, credit unions, insurance companies, and investment advisors.
4. Funding Circle
Funding Circle was founded in 2010 and is one of the few peer-to-peer lending companies made for small and medium-sized businesses. Since then, it’s helped more than 90,000 small businesses across the world. Investors have lent over $12 billion.
Get a loan or invest with Funding Circle.
Borrowing from Funding Circle
Funding Circle is geared towards businesses that have been operating for at least three years, and applicants must have a good credit history. The minimum credit score requirement is 660.
Depending on the type of loan you need, the loan amounts range from $5,000 to $500,000. The following are the different types of loans that Funding Circle offers:
- SBA loans.
- Business term loans.
- Merchant cash advance.
- Business line of credit.
- Invoice factoring.
- Working capital loan.
Overall, it’s a quick process because you can get a decision within 24 hours and the funds in as little as three days.
The most common loan through Funding Circle is the business loan. Terms range from 3 months to 10 years. The origination fee is 3.49% to 6.99% of the total loan amount, and APR depends on creditworthiness.
Investing with Funding Circle
Funding Circle is trusted by more than 100,000 investors across the world. It includes individuals, national banks, and governments. According to Funding Circle, historical returns range from 5% to 7% before the 1% servicing fee.
It’s a great alternative investment and allows you to invest in small businesses through the purchase of Notes.
You’ll get paid by monthly installment repayments over the terms of the loans, which could be up to 5 years.
Kiva is a non-profit organization that was founded in 2005. It allows individuals to lend to people in 77 countries. It’s great because those who are financially excluded and can’t access other fair sources of credit have the opportunity to get a loan.
Get a loan or invest with Kiva.
Borrowing from Kiva
To borrow from Kiva, you’ll apply for a loan, and if it gets approved, it gets posted to Kiva for lenders to support.
If you get a loan, you won’t pay interest to Kiva or investors. Instead, you’ll pay a local Field Partner. You can get a 0% interest loan if you get it directly from Kiva.
Investing with Kiva
Instead of receiving profit, you have the opportunity to do good. You’ll read the stories of people who are looking for loans and invest in whoever you’d like. The minimum to invest is $25.
When a borrower repays, you can use the money to fund new loans, donate or withdraw it.
Frequently asked questions
By working with a legit company, peer-to-peer lending is as safe as a traditional financial institution. As an investor, P2P lending is great if you can diversify your investment.
Some peer-to-peer lending companies lower the requirements for getting a loan, such as lower credit scores or income. This results in credit risk, which makes it riskier than traditional lenders.
Yes, P2P lending is an alternative investment. Like other investments, weigh the pros and cons before starting. However, P2P lending can provide great returns and consistent income.
Peer-to-peer lending is great for borrowers and investors. From a borrower’s perspective, it gives you the ability to get a loan when traditional lenders won’t lend to you. As an investor, it’s a great alternative investment and diversifies your portfolio.
Featured image courtesy of Pexels.
About David Em
David Em is the founder of More Money More Choices, which he launched to help you take control of your finances and build your dream life. Before More Money More Choices, David worked in leadership positions in the finance industry.