About three weeks ago I filled out the application for a Prosper loan. It was early in the morning, and I was sitting in my dining room with the radio on. As I poured myself a bowl of cereal and tried to wake up, I flipped open my laptop computer.
I had heard Prosper had great interest rates but was interested to see this for myself, so I went to their website and checked my rate. The rate was really low, so I accepted the offer. After a few extra steps to verify my identity, Prosper emailed me saying I had been approved for the loan.
Just three days after applying almost $2,000 landed in my checking account.
Why are Prosper’s rates so low? One reason: they are not a bank. They do not have buildings across American cities like Chase Bank or Wells Fargo. Instead, Prosper is mostly just a website. Since everything is cheap and done with computers, they can pass the savings over to their customers as lower interest rates.
Loans up to $35,000 through ProsperCheck your rate
Won’t hurt your credit score.
In fact, most borrowers get a rate 5% better than their credit cards, which can amount to many thousands of dollars in saved cash. Also, their rates are “fixed”, which means they can’t go up, even if you miss a payment. The rate is the rate forever.
Three Steps for a Personal Loan at Prosper
Applying for a loan at Prosper is simple. The entire process can be broken down into three steps:
Step #1: Check your interest rate
First, go over to Prosper’s website and see what interest rate they offer you for one of their unsecured loans (many use SaveWithProsper.com). The form you have to fill out is fairly simple with things like your name, address, and yearly salary. Checking your rate is done with a soft credit check (or soft inquiry) that will not hurt your score. When everything looks good, press the big pink button.
Just a few moments later and you will see the rate they offer you. Seeing this rate also means you qualify to get a loan with them. Looking at the picture below, you can see I am qualified for a loan with an interest rate of 8.51% and an APR of 11.31% (an APR is the interest rate plus the fee).
I have the ability on this page to choose a bigger loan amount or a different loan length (5 years instead of 3), but I’m going to stick with my original plan: a 3-year $2,000 loan.
If you like your interest rate and term on this page then click the big “Get this loan” button to continue the application.
Step #2: Complete the application
On this page you’ll provide Prosper with personal details to help them verify your identity. This includes typing in things like your employer and social security number. Sending this stuff through the internet may make some people feel nervous, but one way to feel safer is knowing that this page (and the rest of the application) is protected with very powerful 2048-bit encryption.
Once this page is filled out to your liking, you can press the Continue button to move over to the Loan Terms page.
Agreeing to the terms on this page is like signing your name at the bottom of the loan form. It means your application has been officially submitted to Prosper. Nice!
Note: These are actually peer to peer loans
Tuesday morning, the day after I applied for the loan, Prosper opened it up for funding by investors. Prosper loans are peer to peer loans, which means they are not funded by banks but by people living all over the country. It is normal in peer to peer lending for dozens of investors to work together to fund these amounts. That said, this section is really just an interesting bit of information. It really doesn’t change the things you need to do.
If you’re curious, the picture below shows how my loan looks to investors on Prosper’s website. Within 24 hours of my application, this loan was 100% funded.
Step #3: Verify your identity and wait to be approved
Let’s finish this loan process. Prosper will ask you to confirm your email as well as show them some proof of identity, perhaps a copy of your pay stubs or a bank statement. For my loan, they asked for proof of my income and a copy of my old tax forms, as seen below.
Here are four steps that need to happen:
- Connect your bank to Prosper. They will ask for the account and routing numbers that are on the checks in your checkbook, so keep those handy.
- Confirm your email. Check your inbox and click the link they send you. Done.
- Sending documents to Prosper. This step probably takes the most work. Prosper will probably want to see some proof of your income. For example, they may ask for a copy of past tax forms or paystubs. Each loan will have different requirements. If you have an electronic copies (like a PDF file) you can upload them to Prosper through their website (or email them to email@example.com). If you only have physical documents then you will need to scan them yourself, perhaps at a local office supply store like Kinkos.
- Prosper checks your FICO score (credit history). Prosper will also run a hard inquiry (also called a hard credit check) on your credit report, in contrast to the soft inquiry from before. Hard inquiries may slightly lower your credit score by for a few months, and will stay on your report for two years. Understand that recent hard inquiries may make it a little harder for you to get a low interest rate on another loan, since lenders don’t like it when they see borrowers shopping around for credit. For this reason, it’s a good idea to wait six months between each loan you apply for.
How long did the entire loan take? 3 Days.
I applied Monday morning. By Tuesday I had received this email saying my loan had been funded and that it would soon be in my bank account:
Here’s my entire loan process:
- Monday – February 29: Checked my rate and accepted their offer over a bowl of cereal.
- Tuesday – March 1 (12:02pm): received an email from Prosper asking for proof of my income and last year’s tax forms. I sent the documents twenty minutes later. At 1:07pm that same day I received an email from Prosper saying the loan was approved and the money would be in my bank account in 2-4 days.
- Wednesday – March 2: Contemplated the meaning of the universe.
- Thursday – March 3: Prosper deposited $1,920 in my bank account.
Honestly, it was amazing how fast Prosper got me this money.
Prosper Loan Fees
I applied for $2,000 but Prosper only gave me $1,920. Where did $80 go? Prosper only deposited about 96% of my loan. They took the other 4% as a fee ($2000 times 4% equals $80). They call this fee a “closing fee”. It is how Prosper makes money as a company, and it is different for every borrower. Those with excellent credit may pay just 0.5% in fees. Most borrowers will pay 4% or 5% like I did.
It can be helpful to be aware of this fee early on. For instance, if you need an exact loan amount of $15,000 and expect to pay 4% in fees like I did, you would probably want to ask for a loan of $15,625. Fees of $625 (4% of $15,625) would leave you with exactly $15,000.
Paying Back the Loan is Easy
30 days after getting approved, Prosper will begin pulling payments from your bank account automatically. These monthly payments will continue until the loan is paid off completely. That said, here are a few things you can do to speed up the loan process:
Pay a little extra: A great idea! Prosper does not charge a fee to do this, and you will be that much closer to being debt free. Make an extra payment through their website, or call Prosper’s phone number: (866) 615-6319.
Pay back the loan early (no fee): probably the best option, if you can spare the cash. Immediately get out from all that extra interest that would have paid over the years. There is no prepayment fee. You can pay off your loan early through the website or by calling Prosper using the phone number above.
Prosper Loans are Both Safe and Legitimate
Sometimes borrowers are worried that this is a scam. Prosper is still a very new company that few have heard of before, so it’s normal to be suspicious. Hopefully this review showed you enough of Prosper’s website that you feel confident to take out a loan. If you need further proof of Prosper’s authenticity, here are a few mentions of them in major media:
- New York Times: Prosper Marketplace Raises $165 Million in Latest Seed Round
- Bloomberg Business: Online Lender Prosper to Help Track Your Money
Also, it might be nice to know how safe Prosper’s website is, running through very powerful 2048-bit encryption. Anything you send to Prosper through their site will remain confidential, secure, and away from prying eyes.
Review: Fast unsecured loans at awesome low ratesIf you’re trying to pay off high interest credit cards, need to repair your home, or have some other financial problem, Prosper can be a great option.
- Very low interest rates
- Fixed rate never goes up
- Easy online application (apply at home in your pajamas)
- Fast! (I got cash in 3 days)
- No penalty to pay off loan early
- Biggest loan they offer is just $35,000
- Difference between APR and interest rate could be clarified
- Uploading documents can be a hassle
Hopefully most of us never need a loan. But if we do, we might as well get the best one we can find, the loan with the easiest application and the lowest rate. In this way, I think Prosper is one of the best options. Give it a try yourself. Checking your rate takes just a minute.
Won’t hurt your credit score.