If you are thinking about getting a loan, one of the most important things to look at is the interest rate and fees that you will pay. Some lines of credit (like credit cards) have higher rates and fees, and should be avoided. Other lines of credit (like Lending Club or Prosper loans) have lower interest rates and fees, which can make them a better option to consider if you are carrying any long-term debt.

In this article, I will compare the interest rate you might pay on your credit card with the current **Lending Club rates** and Prosper rates.

## What is the overall interest rate (APR) Lending Club or Prosper?

The main thing you want to examine is your loan offer’s APR. APR is the abbreviation for “annual percentage rate”, which is a *confusing* industry definition because the base interest rate is annual as well. I think a better way to understand your APR is to see it as your loan’s *overall* interest rate when the base interest rate and fees are added together. In short: **base interest rate + fees = APR**.

The loan’s APR is the most important thing you want to look at when considering a loan at Lending Club or Prosper. If the APR in your loan offer is higher than your credit card or whatever line of credit you’re trying to consolidate then you probably shouldn’t get a loan! On the other hand, if it’s lower then a loan might be a great way to consolidate everything and get out of debt.

Let’s examine the two parts of the APR (the rate and the fee) one by one.

## Base interest rates

The first thing that goes into the overall interest rate (APR) is the base interest rate. Here are the base interest rates at Lending Club and Prosper:

As seen in the chart above, the average credit score will be different if you have excellent credit, good credit, or average/fair credit. Borrowers with an excellent or perfect credit score (around 800) will receive a lower interest rate on their loan, while borrowers with an average or fair credit score (around 700) will receive a higher interest rate. A poor credit score (around 600 or lower) will likely not qualify for a loan.

This base interest rate will determine your monthly loan payment. For example, if you borrow $5,000 and Lending Club gives you a base interest rate of 9% then your monthly payment on a 3-year loan would be $159 (see this calculator). You would pay $159 per month until the loan is completely paid back, and overall you would pay $724 in total interest. Of course, if your interest rate is lower then your monthly payment and total paid interest would be lower as well, so you should try and get the lowest interest rate possible.

## Origination fees

The other thing that goes into the overall loan rate (APR) is the origination fee. This is the fee that Lending Club or Prosper charge you when you first get a loan through them, and it is the main way they make money as a company. Here’s what their fees look like:

As you can see, borrowers with excellent credit pay an origination fee of 1% at Lending Club and 2.4% at Prosper. Most borrowers will pay a fee of around 5%, and some borrowers at Lending Club may pay a fee as high as 6%. This percentage is based on the loan you take out. So if your loan is for $5,000 and your origination fee is 5% then you would pay $250 (5000 x 5% = 250).

This origination fee is taken out of the lump sum that Lending Club or Prosper send you when you finally get approved for your loan. So if your loan is for $5,000 and your fee is 5% then your loan approval will result in a lump sum of $4,750 deposited into your bank account ($5000 minus $250). Does that make sense? You don’t actually pay the fee out of pocket. Instead, they take this fee out of the overall lump sum that they send you.

It can be helpful to consider this fee when applying for a loan. Let’s say you need a loan of *exactly* $5,000. If you assume you will be charged an origination fee of 5% then you might want to borrow $5,264 because the actual amount they would send you would be exactly $5,000 ($5264 minus 5% = $5000).

## APR = interest rate + origination fee

Now that you understand the base interest rate and origination fee, you can roughly understand how Lending Club or Prosper calculate your overall interest rate (APR).

Let me speak from personal experience. As seen in the picture below, I borrowed $3,000 from Lending Club in June 2018 (read my review here). They offered me an APR of 16.49%. This rate was calculated by combining my base interest rate of 12.13% ($594 in total paid interest over three years) with my origination fee of 6% ($180 in origination fees) for a **total combined fee of $774**. This total fee results in an overall rate (APR) of 16.49%.

Perhaps this stuff makes your head spin. The truth is, you probably don’t really need to know how the APR is calculated. You just need to find the lowest APR possible (check your rate at *both* Lending Club and Prosper!) and consider whether or not that rate is good for your situation.

## A few additional fees

### Late fee

On top of the APR, you should be aware that Lending Club and Prosper charge their borrowers a fee if they make a late payment. Every loan has a monthly date for when the payment is due. Thankfully, both companies give you a 15-day grace period to make a late payment without a fee. But if you still have not made a payment after 15 days then they will charge you a fee.

The late fee is either 5% of the unpaid amount or $15

The late fee at both Lending Club and Prosper is either 5% of the unpaid amount or $15, whichever is greater. Let’s say your monthly loan payment is $100. If you don’t make this payment within 15 days of it being due, you will be charged $15 since 5% of $100 is just $5, and $15 is greater than $5. In contrast, if your monthly loan payment is $350 then your late payment would be $17.50 since 5% of $350 is greater than $15.

### Check fee

Both Lending Club and Prosper prefer to electronically deduct your loan payment from your checking account. Both also offer the option for you to make your loan payments with a check, but there is a fee to pay by check. The fee to pay by check at Lending Club is just $7. The check fee at Prosper is the lesser of 5% or $5. Basically if your loan payment to Prosper is $100 or more, and you want to pay by check, add a fee of $5 to the amount you pay. If it’s less than $100 then add an extra 5%.

### Insufficient funds fee

Finally, both Lending Club and Prosper charge you a fee if your payment fails due to insufficient funds (IE: not having enough money in your bank account). The insufficient funds fee at both Lending Club and Prosper is $15, which is pretty reasonable in my opinion.

## For the best rate, check both Lending Club and Prosper

Both companies are great options to get a loan. Not only are their rates and fees about 30% cheaper than what most people pay on their credit cards who consolidate, but the loan has a fixed-rate. This means the interest rate will never go up, even if you make a late payment. The rate is the rate forever.

**So who has the lowest loan rates, Lending Club or Prosper?** It really does depend on the borrower. Some people seem to get the best loan rate at Prosper, while others get a lower offer from Lending Club. This is why it’s important to check your rate at both so you can make sure you’re getting the lowest possible offer.

To check your rate with both Lending Club and Prosper, click the buttons below. Checking your rate is completely free and is done with a soft credit check, meaning it can’t hurt your credit score and will not appear on your public credit report:

## Check both, go with the best rate

Won’t hurt your credit score.

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