I knew the rates on loans at Prosper were some of the lowest in the nation, but I was curious to see what interest rate they would offer me. So one Thursday morning I sat on my couch, turned on my computer, and went to their website to see for myself. Their offer was much lower than my credit card, so I accepted it. I finished the application, connected my bank account, and waited. I did not have to wait long. Later that day I received an email that said my loan had been approved.
Two business days later Prosper transferred almost $3,000 into my bank account.
What makes Prosper so special? How come their interest rates are so low, and how did I receive the cash so quickly? It’s all because Prosper is not a bank. They don’t have big vaults or thousands of employees like Bank of America does. Instead, Prosper operates almost 100% through the internet.
Any money that isn’t spent on buildings and employees is passed over to us, Prosper’s customers, in the form of lower interest rates and faster loan approvals. A lower rate can mean paying thousands of dollars less in interest. Also, the interest rate on a Prosper loan is fixed, meaning it will never go up, even if you make a late payment.
Loans up to $40,000 through ProsperCheck your rate
Won’t hurt your credit score.
There were basically four different steps to getting a loan through Prosper, and I have documented these below so you can see what it’s like.
Four Steps to Getting a Loan at Prosper
Step 1: Check your rate
The first thing to do is to click over to Prosper and check what rate they will give you on a loan (many use the SaveWithProsper site).
Checking your rate is super simple. You simply fill out some basic info like your address, yearly income, and the size of the loan you want (up to $40,000). Prosper will then use this info to run a soft inquiry (or a soft credit check) on your credit history to see if you qualify. This soft inquiry will not appear on your public credit report, and it will not hurt your credit score.
Once everything is ready you click the large button at the bottom of the page:
The next page will say if you are qualified for a loan, or if your request has been denied. If you do qualify, an interest rate will be shown. As seen in the graphic below, I was offered an interest rate of 8.39% and an APR of 11.92%. APR is the more important number on this page because it represents the interest rate plus the fee Prosper would charge you to get this loan.
As seen in the graphic above, I can choose to increase my loan size up to $28,000, or change my payback period from 3 years to 5 years. However, I’m going to keep my original loan request for a $3,000 loan paid back over 3 years. If you’re on this page and you like the APR that Prosper has offered you then click one of the “Get This Loan” buttons to continue.
Step 2: Verify your identity with Prosper
On the following page you will give Prosper some additional details about yourself so that they can prove your identity:
This page typically asks for things like your:
- Personal and work phone numbers
- Employment information
- Social security number
Some people may be nervous about typing their social security number into their home computer. That is completely normal. Keep in mind that Prosper has secured their website with very powerful TLS 1.2 encryption, so you can feel safe that your information is transferred securely.
Once this page is filled out, click the Continue button at the bottom to finish your application.
Step 3: Accept the loan’s terms
We’re almost done. Here you will be taken to a page that outlines the terms of your loan. This is basically your entire application laid out in a single legal document, so clicking your agreement at bottom of this page is like signing the loan application with your signature.
Did you agree to the terms page? If so, congratulations. Your application is on its way and you should hear back from Prosper shortly about whether your loan is approved.
What is a peer to peer loan?
The afternoon that I applied for my loan, Prosper opened it up for funding from investors. Soon it was 100% funded from a bunch of different people.
The reason that there are multiple investors of this loan is because Prosper loans are peer to peer loans. Unlike a bank that funds your loan itself, a peer to peer loan can be funded by hundreds of different investors all combining their money together (crowdfunding). So Prosper actually has two sides to its website: an investor side and a borrower side. Here is what your loan might look like if you saw it on the investor side:
Pretty interesting, right? Click here to read about becoming an investor at Prosper.
Step 4: Connect your bank and submit supporting documents
Once you have completed your application and are waiting for investors to fund your loan, there are a few final steps you may need to do:
- Verify your email address. This one is easy. Just click the link in the verification email they send you.
- Add your bank account. Provide your bank login and password to Prosper and they can verify your bank the quickest. Alternatively, you can type in your routing and account number and they can verify your bank with a small deposit (less than 10 cents), but this option is a lot slower.
- Submit additional documents to Prosper. This is probably the most complicated part of the loan application. Prosper may need a few additional documents to verify your information. Examples of supporting documents might be a recent paystub, bank statement, or tax document. You can either submit these documents electronically (like as a PDF) or you can fax them into Prosper.
Prosper didn’t need any documents from me during my application. They only needed me to verify my email and connect my bank:
After agreeing to the Terms page, Prosper will also run a hard inquiry (also called a hard credit check) on your credit history. Even though the soft inquiry from before will not appear on your public credit report, a hard inquiry will remain on your report for exactly two years, and may slightly lower your credit score for at least 6 months. As a result, make sure you actually need this loan when you apply. If you apply for another loan in the near future (like a home mortgage) then this second loan could have higher interest rate. It’s a good rule of thumb to wait six months between every loan application.
I got the cash in two business days
I applied for this loan on a Thursday afternoon. Later that same day Prosper emailed me to say that my loan had been approved and the money was on its way:
All in all, my loan process went like this:
- Thursday (9am): Checked my rate and completed the application.
- Thursday (5pm): Received an email stating my application had been approved and that I could expect the money soon.
- Monday: Logged into my bank account and saw that $2,850 had been deposited into my account.
It was great how fast Prosper got me this cash. The entire experience, from application to receiving the money, was very smooth.
What are the fees on a Prosper loan?
My application was for $3,000. But only $2,850 was deposited into my checking account, exactly $150 less than what I asked for. Why didn’t I get the full amount?
Prosper took 5% of my loan as an origination fee ($3,000 x 5% = $150). Borrowers will pay an origination fee between 2.4% and 5%, depending on their credit history. Your fee will be displayed on the Terms Page from earlier, so make sure it is to your liking before you agree to your loan.
Note: if you need a very specific amount of money then you should consider this origination fee before you apply. For example, let’s say you need a loan of exactly $5,000. If you assume an origination fee of 5% then you should ask Prosper for a $5,264 loan. 5 percent of $5,264 is a fee of $264, leaving you with the desired amount of $5,000.
Paying back this loan is pretty simple
Prosper will begin taking payments from your bank account about one month after you receive your loan, and will continue to withdrawal money for the length of your loan (either 3 or 5 years). Helpfully, there are a few ways you can speed up your repayment:
- Pay your entire loan off early (no fee). You can pay off your entire balance at any time without a penalty by logging into your Prosper account and clicking the “Pay off loan” link.
- Make an extra payment. If you can’t pay off the loan early, this is a great second option. Just login to your account and click the “Make an additional payment” link. There’s no penalty or fee to do this either.
Is Prosper legit? Is it safe?
There are a lot of scams out there on the internet, so it is normal to wonder if Prosper is a scam. Many people have never heard of this company, so it can be helpful to see some proof that they are a legit company. Here are some recent articles about Prosper in the news:
- The Wall Street Journal: Prosper Inks $5 Billion Loan-Buying Deal
- Bloomberg: Prosper Targets Retail Investors Anew
- Forbes: How This Fintech CEO Plans to Prosper in 2017
Review: A fast loan with a low interest rateGetting a loan at Prosper can be a great option. Not only will the interest rate be much lower than a typical credit card, but the rate is fixed. Your interest rate will never go up, even if you make a late payment. Compare that to a credit card with a variable interest rate that can go up or down.
- Some of the lowest interest rates in the USA
- Interest rate will never go up, even if you miss a payment
- Money can arrive quickly
- Pay loan off early anytime without a fee
- Interest rate vs. APR is confusing and probably not needed. There should be just a single percentage for borrowers to consider.
- Uploading or faxing documents to Prosper can be a hassle
Obviously, the best-case scenario is never needing a loan at all. But if you do need a personal loan, you might as well get one with the lowest possible interest rate, like what Prosper can offer. To check your rate, click the link below. It takes just a minute or two.
Won’t hurt your credit score.