Prosper Review

Prosper is a peer-to-peer lending marketplace, which means that instead of borrowing from a bank, you are borrowing from investors. All of that takes place behind the scenes, so debt consolidation loans from Prosper function just like any other lending institution.

In 2005, Prosper was the first company to bring lending to the peer-to-peer (P2P) marketplace. P2P marketplaces (i.e. Airbnb, Uber) offer individuals a place to exchange goods and services. Think of Prosper as more of a middleman than a lender; instead of financial entities like banks and credit unions, peer-to-peer lending matches borrowers with people interested in investing … well, that’s how things started anyway.

The reality is your debt consolidation loan will be financed through a combined effort of retail investors and (mostly) financial institutions.

Prosper comes with the convenience of most P2P marketplaces, which occur online and can be accessed wherever there’s wi-fi. However, consumers with stronger credit profiles (740 credit score and above) may overpay because of Prosper’s various fees and interest rates.

Snapshot:

  • Type of Debt Relief – Debt Consolidation Loan
  • Eligibility & Requirements – 640 credit score; debt-to-income (DTI) below 50%; income of greater than $0; no more than five credit inquiries within the last 12 months; minimum of three open credit accounts; no bankruptcies in the last 12 months.
  • Fees – 41%-5% origination fee; $15 late fee; $15 insufficient funds fee; check fee
  • Credit score impact – Minimal
  • Consumer Reviews – Mixed

How Prosper’s Debt Consolidation Loan Program Works

Prosper offers both would-be borrowers and aspiring investors a shot at becoming prosperous. Individual investors sign up online just like borrowers do and they can contribute as little as $25 to get started.

Consumers interested in taking out a debt consolidation loan through Prosper should head to its website and click the “check your rate button.” It will ask how much you want to borrow, and you can select an amount between $2,000-$40,000. It will then ask how you plan to use the loan; here you can select debt consolidation. Prosper’s loan terms are a bit limited; you can choose either three or five-month terms.

Next, you will fill out some basic personal info like name, address, etc., followed by questions relating to income and rent. After plugging in your social security number, Prosper will run a soft credit check before revealing your rates.

Prosper Debt Consolidation Loan Eligibility & Requirements

Prosper has its fair share of eligibility requirements, but it shouldn’t be a problem for the majority of consumers. A decent credit score and reasonable DTI should get your foot in the door. There are, however, a few more things to consider.

Here are details on five eligibility requirements borrowers should keep in mind when applying for a debt consolidation loan through Prosper.

640 credit score – This is the minimum score you need to qualify for a loan through Prosper. It won’t guarantee your approval, nor will it get you the best rate, but it’s the minimum you will need to get things rolling.  According to Experian, 74% of U.S consumers have FICO credit scores above 640.

Debt-to-Income (DTI) below 50% – Your DTI is the sum of your monthly debts over your monthly pretax income.

To find your DTI, add up all your monthly debts. This includes rent/mortgage, credit cards, loans, child support, or any other type of loan that appears on your credit report. Then divide the sum of your monthly debts by your monthly gross income.

If your debts cost you $900 a month and you make $2,000 a month, you have a DTI of 45% (900 ÷ 2,000 = .45), which puts you under Prosper’s minimum and qualifies you for a loan. For reference, traditional lenders like to see a DTI below 43% before offering a mortgage.

Income of greater than 0$ – This one is pretty self-explanatory. You need to be making positive income if you want to qualify for a loan with Prosper.

No more than five credit inquiries within the last 12 months – If you’ve ordered more than five credit reports within the last year, you appear to be desperate and will need to look elsewhere for funding.

Minimum of three open credit accounts – If you’re interested in a debt consolidation loan, you probably won’t have to worry much about this requirement. Your problem is you have too many accounts saddled with debt. As long as you have three such accounts (credit card, personal loan, mortgage, auto loan, etc.), you can fund your debt consolidation loan through Prosper.

No bankruptcies in the last 12 months – Another one that speaks for itself. You won’t qualify for a loan through Prosper if you’ve gone through bankruptcy within the last year.

Fees for Prosper’s Services

The good news is Prosper charges no prepayment penalty if you pay off the loan early. The bad news is that’s about the only thing Prosper doesn’t charge for, or so it would seem. Here are a few of the fees borrowers can expect to pay for a loan through Prosper.

Origination fees2.41%-5%: This is a fee charged for establishing an account with Prosper. Not all lenders charge this fee and the amount can vary widely depending on where you go for your loan.

APR – 7.95%-35.99%: The max APR charged by Prosper is higher than you’ll find from many lenders. If you have excellent credit, you can save money by going elsewhere for your loan.

Late payment fee – $15 or 5% of payment amount: Prosper gives you a 15-day grace period starting the day your payments are due. If you fail to make a payment on your due date or within the grace period, you will be charged $15 or 5% of the unpaid monthly amount, whichever is greater.

Check fee: If you plan to pay by check, be prepared to fork over $5 for a check fee. An easy way to avoid this fee and to make sure you’re staying ahead of payments is to enroll in autopay, which can lower your rate by .5%.

Pros & Cons of Debt Consolidation with Prosper

Pros of Prosper

  • Pre-approval option
  • No prepayment penalty
  • A-plus BBB rating.

Cons of Prosper

  • A lot of fees
  • Higher APR rates

Prosper’s upside comes in terms of experience and convenience. It’s been around longer than any other P2P lender, which has helped it to maintain an A-plus rating with the Better Business Bureau. It’s lenient requirements also open the door to a lot of consumers, and its pre-approval option lets you see what rates you qualify for without harming your credit score. The downside is the fees. Believe it or not, not all lenders charge them. Prosper, on the other hand, is not shy when it comes to asking for more of your money.

Is Prosper Right for Me?

Prosper’s APRs are not the lowest; borrowers with strong credit profiles will find better rates elsewhere.  Nor are its loan amounts available the highest; borrowers looking to consolidate over $40,000 in debt won’t find much luck here.

Prosper is a good fit for borrowers with decent credit and enough income to pay off relatively high interest rates.

Prosper may work for young borrowers who have gotten in over their heads with credit card purchases. It has a high DTI cap of 50%, higher than most traditional lenders would be comfortable with. On the flipside, low-income consumers with severe debt might not make the DTI or credit score cut off.

Alternatives to Prosper

Debt Management

Debt management is a method for repaying unsecured credit card debt. It consolidates your credit cards into one monthly payment, which you make to the debt management company in charge of paying back your lenders. It works kind of like a debt consolidation loan minus the strain of having an actual loan. The debt management company has agreements  with creditors to lower your interest rates and drop late fees. These programs run between three to five years, and during this time you will have to give up using your credit cards. .

Avant Debt Consolidation Loan

Avant caters to a similar base as Prosper, however, it comes with lighter loan requirements. You only need a 580-credit score as opposed to a 640 and you don’t need any income at all to qualify. However, if you’re taking out a loan it would be best to have some money coming in. Avanta also offers a similar range in loan amounts to Prosper. Through Avant, you can take out a debt consolidation loan ranging between $2,000-$35,000.

LightStream Debt Consolidation Loan

LightStream is an online lender offering low-interest debt consolidation loans. Rates are capped at 20.49%, but there’s no prequalification option, so if you want to see if you qualify you will need to do a hard credit check. If you have bad credit it might not be worth damaging it more for a loan you probably can’t get. LightStream is an alternative for borrowers with good credit who want to find lower rates than those offered at Prosper.

Prosper Reputation & Consumer Reviews

Prosper has led the pack in P2P funding for over 15 years. During this time, it has serviced more than $17 billion in loans to more than a million people while maintaining good standing with the Better Business Bureau.

Positive reviews highlighted Prosper’s easy-to-use interface. Reviewers said applying for the loan was simple and straightforward. However, many consumers don’t feel the same way. A lot of customers complain that Prosper doesn’t live up to its reputation. Many cite miscommunications as their main grievance. For example, one customer reported receiving fewer funds than he expected, while another reported long customer service wait times that often led to being disconnected.

Bents Dulcio graduated from Florida State University in 2016 with a degree in Political Science, and knows a thing or two about Millennial student loan debt. While in school, he developed a passion for classic literature, reading books by authors from Homer to Adam Smith and developed a penchant for dealing with tight financial circumstances. Bents used the student loan money to pursue a semester of language study in France that helped convince him to become a writer. Bents still hits the books – he read 70 in the past year – and still knows how to cut corners financially.

Sources:

  1. N.A. (ND) 640 Credit Score: Is It Good or Bad? Retrieved from https://www.experian.com/blogs/ask-experian/credit-education/score-basics/640-credit-score/
  2. N.A. (ND) Customer Reviews: Prosper.com. Retrieved from https://www.bbb.org/us/ca/san-francisco/profile/loans/prospercom-1116-118427/customer-reviews
  3. N.A. (ND) Prosper. Retrieved from https://www.consumeraffairs.com/finance/prosper.html
  4. N.A. (ND) Personal Loan. Retrieved from https://www.prosper.com/help/