What to Expect When Applying for a Personal Loan on Prosper

Last week, for the first time, I took out a loan on both p2p lending platforms. Today, I am going to be sharing my experience of applying for a loan on Prosper. The process was relative smooth and painless, taking about 10 minutes to complete.

For p2p investors I think it is important to have some understanding of the borrowing process. This is really the reason I undertook this exercise. I didn’t actually need a loan but I have been investing in p2p loans now for over two years and I have always felt that my education was somewhat incomplete without going through the other side of the process.

I have created a video of the actual application process. This walks you through the different screens and lets potential borrowers know what to expect. It runs just under 7 minutes and if you are looking to obtain a loan on Prosper I highly recommend you watch the entire video.

Obtain Your Interest Rate Quickly

A couple of points I want to highlight about the application process itself. You can find out your interest rate pretty quickly. Once you have entered in your personal details (including social security number) you will get to a screen that displays your interest rate. Prosper does a soft pull (meaning it will not impact your credit at all) of your credit report on the fly and is able to display your rate instantly. Now, this doesn’t mean you will be approved for the loan but your rate will not change from this quoted rate.

Now, you are under no obligation to accept the terms that Prosper offers to you. I was quite surprised that my own interest rate was basically the maximum rate (31.99%). When I asked Prosper’s head of risk management about this he pointed out that the self-employed are treated with extreme caution under Prosper’s risk algorithms so that skewed my rate really high. It might also have something to do with the fact that I don’t have much income at all right now apart from investment income.

For those curious about my listing here is a link to it. I chose a small amount of $2,500 and I deliberately included only the information that was mandatory. No loan description, no financial information and nothing for an investor to go by other than my obscure loan title: “Small loan”. Despite that my loan was funded within 24 hours, although I did use my wife’s account to kick start the funding by taking 30% of the loan. But this was obviously a loan that investors liked (even though I provided no details) because it was funded very quickly.

Of course, the work wasn’t finished when I completed the application process. I had to go through several verification stages before my loan could be issued but within 24 hours my loan was on the platform. The reason for that delay is that Prosper has to notify the SEC about every single loan and that it is going to available for investors as a security and this takes time.

Five Days from Loan Application to Money Received

The entire process was quick and easy. From the time I started the process until the loan money was in my bank account was just five working days. Here is a timeline with some of the steps involved:

Mon 9/12 – Applied for a loan on Prosper.com
Tue 9/13 – Loan is active on the platform for investors
Wed 9/14 – Loan is fully funded by investors
Thu 9/15 – Prosper emailed request for documents (driver’s license, copy of a voided check)
Fri 9/16 – Phone call from Prosper verifying personal details
Fri 9/16 – Loan issued
Mon 9/19 – Money appeared in my bank account

I was very impressed with the speed at which Prosper went through this process. I helped the process along by being very responsive, getting back to them within an hour of any request. I was also available to take their phone call which also helped speed things along. That phone call was very thorough. They wanted to know all the standard information such as data of birth, address, social security number and credit numbers. But they also dug a little deeper by asking for my monthly mortgage payment and balance. Overall they asked at least a dozen questions.

What was curious to me is that phone call was made around noon on Friday. Within two hours my loan was issued. They said it would be 3-4 days before I saw the money in my account but it was in there this morning less than one business day after that phone call.

I will be paying this loan back early, I certainly don’t want to be paying 32% in interest for very long. But I will wait at least a couple of months just to see how the rest of the process works and to give my fellow investors some return on their money.

Now, if you want to take out a loan on Prosper then I encourage you to use this link (it is an affiliate link). Later this week I will be reporting on the loan application process with Lending Club.

Comments

  1. says

    @Peter, I am a little shocked (is it possible to be a little shocked?). 31% APR for someone with excellent credit seems (is) a little (a lot) high (usurious). No?

  2. Dan B says

    You just couldn’t leave that entire loan sitting there could you? I just want you to know that if you ever do a post on your wife’s Prosper account that I’ll be (probably the only one an*l enough here) to expect a 0.1% or whatever downward adjustment to the ROI numbers to reflect this self investment. :)

  3. says

    @LC Joe, It seems that credit score is far less important than income and in particular debt-to-income ratio. I have a $400K mortgage and not enough income to cover that easily – hence the high rate. They also do not take net worth into consideration. I don’t think it is usurious – if I don’t want to pay that rate I am under no obligation to take the loan.

    @Dan, Well I wasn’t going to have a 31% return be only available to others. I think I exercised restraint in only taking 30% of the loan.

  4. Haris says

    Yikes! I know that you are doing for demo purposes, but why I should get a prosper loan if I can just do a cash advance on my credit card with a much better rate? 31% it is not hard to beat with credit cards. Not to mention the countless 0% offers.

    • John Gonzalez says

      I couldn’t agree more. But that is how I got into high credit card debt in my early years of marriage so we could get all the vital things any family needs starting out. I just thought of it as the loan that the banks or credit unions would not give me and my wife.

  5. says

    Peter,

    One thing to note on your loan. Your credit score was through the roof compared to 99% of the HR loans. All your details except self employed were probably very favorable to many investor’s criteria.

    Jason

  6. says

    @Haris, The simple answer to that is you shouldn’t. As you point out a cash advance on a credit card would be a lot less expensive, particularly for someone with a high credit score. Most people who are willingly paying the 31% interest rate are doing so because it is their best option.

    @Jason, I think you are right – that is why my loan funded quickly. As a result of this I have setup a new saved search to look for high credit score borrowers that are E and HR rated to see if I can take advantage of this. There are not many loans and they do tend to fund quickly but I have snapped up a couple of 800+ score loans in recent days.

  7. Roy S says

    I think an additional reason your loan funded so quickly is that you started the loan out 30% funded. I think there are a lot of people who invest in loans further along in the funding process. When you start factoring in investors, like worthblanket, who are funding 30, 40, 50% or more of certain loans I think there are a lot of people who just ride the coattails of those loans. I would attribute it to people thinking these other investors know something they themselves do not know, or they don’t want their cash sitting around not earning interest, or any number of other reasons for it. Of course, for those who have a strategy of picking and investing in loans, regardless of the funding from other investors, that included your loan: Kudos!

  8. Dan B says

    Peter……You have an investor account or 2 at Prosper. Has it been your experience with those accounts that funded loans get issued as quickly as yours apparently was? Because it certainly wasn’t my experience during the short time I was with Prosper earlier this year. I recall “several” instances where fully funded notes sat for days on end without being issued……………..& a few times when they didn’t issue for over a week.

  9. says

    @Roy, I agree that the 30% certainly helped kick things off. I know when I am looking at loans on Prosper I hesitate when they are at 1 or 2%. I will keep an eye on them and see if they get more interest. I try to avoid having my money tied up for 2 weeks when there is little chance of the loan originating. The loans I tend to invest in (previous borrowers for the most part) usually get fully invested within a day or two.

    @Dan, My experience is that it varies. I have two loans right now that have been “Pending Review” now for a few days and I have another loan that I invested in on Saturday and it was issued yesterday. I think if everything goes smoothly and there is a responsive borrower things move quickly. But there are certainly those instances when a loan will sit fully funded for many days before being issued. Whether that is Prosper’s fault or the borrower’s fault your guess is as good as mine.

  10. Roy S says

    @Dan/Peter, I think Prosper needs to address the issue of fully funded loans sitting for days. If the issue is on Prosper’s end, then they need to remedy it. If it is on the borrower’s end, then one of two things should be done to correct this issue. Either there should be a greater step initially taken by the borrower prior to the loan being listed on the platform or there needs to be a shorter time frame given for unresponsive borrowers.

    My hope is that the delay is simply Prosper doing their DD on borrowers who may be flagged (for reason or at random) for further information verification. I would rather have a little delay on a few loans and lose potential interest than have no delay and suffer from higher default rates. I think a lot of people (myself included) focus on the things that directly impact them now rather than trying to focus on what is beyond it. I’m giving Prosper the benefit of the doubt here, but it is frustrating waiting and losing interest.

  11. says

    @Roy, Given the large range in the time to have a loan move from funded to issued I think it is safe to say that it is likely Prosper doing additional due diligence on the borrower. My experience was one of a highly efficient credit department, but who knows maybe I got them on a good day. But I would rather have them spend additional time doing due diligence and rejecting the loan than have it default because they missed something.

  12. david says

    I am particularly appalled that ANYONE could pose as an investor and phone you for copies of all your personal information. I am also shocked to note their terms that even in the event you prepay early one must still pay the total interest rate that would have existed had the loan gone through maturity; for instance i went through the process and didn’t complete and saw my request for $4000 end up wit $2k+ in interest all of which I’d have to pay even if I balance transferred early (lol. forgive the profile pic that’s my grandaughter from when I set her up on an avatar system so she could contribute as an author to a website i once operated)

    • says

      David, You make a few incorrect assumptions here so let me set the record straight. 1. Investors have no way of contacting borrowers – there is no personally identifying information on borrowers that is shared with investors. Prosper has this information and they will request personal information in order to approve you for the loan Prosper is not the investor – they simply connect investors with borrowers.
      2. You do not have to pay the entire interest bill if you pre-pay the loan. You only pay for the interest that has accrued up until the time you pay the loan off in full.

      • david says

        Thank you peter i ultimately did phone them and it is as you say–the info I responded to was from sources such as this–obviously a misunderstanding. As you were all noting, though, my loan got funded fast and i have uploaded the info they requested and it is going on a week now and funds still haven’t transferred and the website indicates they’re still waiting this information; I did contact personally and was told the system wasn’t always in sync with reality

  13. bruce says

    Watch out for this company. I have a loan with them and have been having trouble with them processing my payments when authorized. One month its processed when authorized and the next it showed that 5 days later. I called them and they would never quite explain the reason. They just kept coming up with excuses…

    • says

      Bruce, I am sorry you have had a bad experience. I obviously don’t know the details of your situation but I can tell you that Prosper has issued over 100,000 loans and most borrowers have had positive experiences.

  14. Jennifer says

    I tried to sign in to my account today, but found out it is closed. I submitted all docs as they requested, and I got 100% funding in 2 days. My credit score is 710. Anyone knows what happened ?

  15. says

    Good evening:
    I am Sherry Kahn…I have applied for a loan just like you posted on the video. I have applied for $2500 to move home to Florida. My family wants me home , and I Have saved $2320.00 for about a year. My credit score is 656 at the moment and I can payoff off two small credit cards ($386.00) that I have incurred. I have a new granddaughter I miss very much and my daughter as well. Any other suggestions would be greatly appreciated.

    Sincerely,

    Sherry S. Kahn

  16. Timothy T says

    I was hoping you could clear this up for me. Lets say I got a $2,500 loan. If I pay it off in six months, what do I end up paying in interest?

  17. Carlos A. Piñero says

    If I pay ahead of time do I need pay all interest ? Or will it lower my interest compounding?

  18. says

    Hey Peter, great site and helpful information… Thanks for the postings and tips.

    Just wondering if it would be difficult getting a loan to buy a building? I know it’s an open ended question, so I will try to clarify. For 30 years our business has always rented a building for tax purposes, etc. Well know that I’ve hit 60 years old (hopefully smarter) and have a nice piece of property, I am planning on putting up a metal prefab to replace our 2500 sf building in a commerce park. I am tired of paying a landlord and can easily cover a $2000+ monthly loan payment. I am smart enough to know your need OPM when in business, so I think the loan idea on Prosper or LC is a way to go (deductible, expense, etc).

    What is the max of a loan on one of these places, I am thinking we will spend $40K and was planning to pay back in about 24 months. My credit is good, the business is solid and I have never missed a payment on a single loan or credit card.

    Thanks for your thoughts….

    • says

      Gary, You could certainly apply for a loan at LC and Prosper if you have good credit but $35K is the max loan amount at both companies. This would be a personal loan and it would be fine to pay it off within 24 months. Good luck.

      • Kevin says

        Peter, I went thru the first part of applying for a loan after I got my pre approved offer and personal offer code. What am I waiting for now? Can you help me with what peer to peer means and what I need to do now that i have done the online initial paperwork I had to complete? Thank you much
        Kevin

        • says

          HI Kevin, Now you wait. You will have to go through the formal verification process which will likely require you to respond to an email and/or a phone call. Assuming you get through the initial verification your loan will be posted on the platform for investors. But the ball is now in Prosper’s court – you should hear from them early next week I would expect.

          • Kevin Kurtz says

            Peter, after I emailed them the documents they required, it took two days and the money was in my account. It was awesome!! Thanks for your guidance.

  19. Sylvie says

    Hi Peter!

    My husband received a preapproved offer. We don’t own a house; we rent. can we still borrow $$$?

  20. Chris C. says

    These people (Prosper) are ridiculous. I was looking for a loan to consolidate my credit cards into a single payment. My bank has already offered me 10.99%-11.99% and enough to cover all of my credit cards. I have good to very good credit, an above average income, and am NOT self-employed.

    Bankrate.com listed Prosper as starting at 6.73% and averaging 9.49%, so I figured I’d put my information in and get a quote. They might even be able to beat my bank. I seriously wondered if the computer had made an error when they wanted to offer me half of what I asked for and at 31.98%. That’s 50% more than I’m already paying. Consolidation loans are supposed to DECREASE your interest rate, not INCREASE them 50%. Why would I take out a loan to pay more money than I’m already paying?

    I suspect that the 6.73% is a come on and that no one is ever offered less than 30%.

    • says

      Hi Chris,

      Sorry you had a bad experience. Clearly, if everyone had a similar experience to you Prosper would find it impossible to attract borrowers to their platform. There must be something in your credit history that caused Prosper to deem you a high risk borrower.

      One of the great things about p2p lending is that it is very transparent. Anyone can download the entire loan history of Prosper and see for yourself. I can tell you that thousands of people have received interest rates in the 6-7% range and most borrowers are very happy with their rate. Obviously, that is not the case in your situation.

  21. Michelle says

    Hi Peter,

    I found your post to be extremely helpful. What is your opinion of the possible funding percentage rate for a 30k loan for sometime with a good credit rating, as viewed from an investor standpoint? Most of the referenced amounts here are for lower ones, so I am interested in knowing if the funding quickness & success rate is comparable to what you experienced.

    • says

      Hi Michelle,

      The funding quickness is more of a factor of loan grade than anything else. AA and A grade loans tend to move more slowly than D and E grade loans because investors like higher yields. Most loans are still getting fully funded, though, but the lower interest rate loans take longer on average.

  22. John says

    I have a loan funded with Prosper and in stage 1 verification. I sent all the requested items today and it is in review status. I checked Lending Club and now find that the interest rate they offer me is about 3% lower than Prosper.. Last time I had checked they were 2% higher. Is it possible to cancel my loan application with Prosper since I haven’t received money and go with the lower rate or am I locked into my Prosper deal?

    • MyselfO says

      Were you able to cancel the loan application? On Prosper’s website, they say you can only withdraw your application if the loan is still in funding.

      I also applied recently, the loan funded quickly and they requested documents. I wonder what happens if i don’t submit all documents and wait for the it to expire. I have already submitted proof of income though so I am not sure how much weighs on that. I plan on not verifying the address or bank account until I figure out what my options are.

  23. says

    I applied for a loan, had total funding. Sent them all the paperwork they requested. However, when I applied I put in what our current household income was. I was asked to submit my W2 to show proof of annual income. Our W2’s from last year showed we made almost 130,000. Do to the fact my husbands employer closed and he is now working a new job he is making less. I had all funding at our current household income which is less then the W 2’s. I explained this to them but they canceled my loan because I could not show proof of this. Not sure how that works. I was honest from the beginning by stating the lower annual income and the W2’s showed more. Not impressed with this company.

    • says

      Hi Kathi, Sorry to hear about your negative experience. While I can’t comment on what happened because I don’t know all the detail of your situation I can say that Prosper is quite strict on proof of income, particular when it gets into six figures.

  24. ljs41568881 says

    I am applying for a Prosper debt consolidation loan. I also checked out Lending Club. LC would give me less than half of my request ($20k) at 10+%. Prosper offered all of the amount at a bit over 6%. My only downside as a borrower is high debt to income. I am fixing up my home to sell in the next few years so most of the debt is house-related. Wells Fargo, where I have a credit line, turned me down for an equity line two years ago. As much as I would like the tax write-off, I am unwilling to go through that process again if I can get an equivalent non-deductable rate. So far the process with Prosper has been smooth and efficient. The holidays may have slowed things down a bit, but after 4 days the loan is over 50% funded. The difference in responses from the three lenders is interesting. I own shares of LC. Do I feel more confident because LC is a more conservative lender or do I think based on my application that they are missing opportunities?

    • says

      LJS, That was a very interesting question. Both LC and Prosper have different underwriting models and borrowers will often get major variances in the rates they are offered. Based on one data point it is difficult to make any assumptions here. Both companies have very similar loan books today with similar average interest rates and similar FICO scores. Both companies continue to execute well and will be good long term investments in my opinion.

  25. Lisa says

    I just received my money from Prosper. The whole process took 7 days from start to having the money deposited into my account. Smooth and simple. We spoke to them once on the phone just to verify everything. No snags, no lies, nothing, EVERYTHING was on the up and up. Nice people, simple process, good company to deal with.

  26. cheryl says

    how does prosper handle someone that has filed bankruptcy about 6-7 years ago but has paid everything on time since then

  27. Cyndee says

    Hi Peter,

    You’ve provided quite a bit of information here and I like what I’m reading so far.
    A little over a year ago I found myself needing a small loan to get myself ahead. I made the worst decision ever ( I didn’t know at the time ) I went on line and applied for a payday loan. After I submitted my application 10 to 15 phone calls a day came pouring in from lenders. They were calling my place of employment non stop. I ended up receiving one payday loan- taking out another one to pay the first one and the vicious cycle began. The calls never stopped offering more loans. I ended up with 9 payday loans and my weekly check which averages a $1000 a week was paying nothing but interst on the loans. My entire paycheck was taken out of my account every Friday for the interest. I finally broke down and went to my credit union for help. Luckily they gave me enough money to rid of the loans. My loans were sold to other lenders repeatedly and it took another 3 months to pay them all off due to I didn’t know where my loans were at.

    My question for you is: does prosper call my employer and do they sell your loan and information to other lenders?
    I started the application process with prosper and when it asked me for employers phone number I immediately logged off their site to do some investigating.
    Another question is: what documents are they requesting you to email them?
    I’m so cautious now with my past experience of putting my information on line now.

    • says

      Cyndee, Prosper may call your employer to verify some information but that only happens sometimes. They certainly do not sell your information to other lenders.

      Typical information that they require is proof of income, so they may ask you to send them your W2 or recent pay slip.

  28. Milly says

    HI Peter! Thanks for your information, I have I little questions. I was received the letter and pre-approved and called, they taked the informations but the answered to me, I will received the answer in 30 days, do you know why? Is something wrong.

    Thanks for your help!

    Milly

    • says

      Prosper will verify information and sometimes that takes several days but usually far less than 30 days. Many people are “pre-approved” but still verification will be done.

  29. Jennifer Shaw says

    Borrower beware! Prosper is unreliable at updating their records and credit reporting agencies. I phoned Prosper and made a manual payment to pay off the remainder of my balance owed for a loan. Three months later my credit report shows that the remaining balance is delinquent! When I log into my prosper account, my account STILL shows the amount past due plus interest is owed. After calling them and fighting with them, the only response I got was an email confirming that I paid off the final balance. My credit report still has not been updated from this error since 2012!

    • says

      Hi Jennifer,

      Apologies for the terrible experience. I’d like to assist in resolving this issue for you. Please call me directly at 415-593-5423. I look forward to speaking with you.

      Regards,

      Joshua Twomey
      Customer Experience Manager

  30. says

    I applied for a loan and it was funded 20 minutes after posting. They wanted a copy of my drivers license, I sent it 5 times before they said they received it, now it says in review. What does that mean.

    • says

      I’m responding to my post above. The reason I had to send a photo 5 times is because my phone was not taking a good quality photo. I used my wife’s phone and sent a copy of my drivers license on June 9th. June 10th I called Prosper and they said everything looked fine. June 12th 8:30 AM prosper called me to verify my info. 3 hours later at 11:30 AM loan was approved. Thanks Prosper, the employees I talked to were very friendly.

    • says

      Thanks Donald, I appreciate you checking back in with your experience. When a loan goes into review it can mean a couple of different things – sometimes they are waiting on the borrower or sometimes they are performing additional verification. But the process does happen quickly in most cases.

      • michael says

        What does it mean if it says excellent no documents required? I can’t submit and documents

        HELP

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