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What to Expect When Applying for a Personal Loan on Prosper

by Peter Renton on September 19, 2011

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.

{ 39 comments… read them below or add one }

LC Joe September 19, 2011 at 11:46 pm

@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?

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Dan B September 20, 2011 at 3:30 am

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. :)

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Peter Renton September 20, 2011 at 6:48 am

@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.

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Haris September 20, 2011 at 6:53 am

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.

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Bilgefisher September 20, 2011 at 7:33 am

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

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Peter Renton September 20, 2011 at 9:35 am

@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.

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Roy S September 20, 2011 at 10:45 am

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!

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Dan B September 21, 2011 at 9:31 am

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.

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Peter Renton September 21, 2011 at 10:43 am

@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.

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Roy S September 21, 2011 at 2:42 pm

@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.

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Peter Renton September 21, 2011 at 8:52 pm

@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.

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david December 8, 2013 at 12:16 pm

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)

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Peter Renton December 8, 2013 at 1:51 pm

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.

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david December 12, 2013 at 1:43 pm

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

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Peter Renton December 12, 2013 at 6:55 pm

Thanks for the update David. A week is about average for processing loans so I would expect you will reach approval (and receive funds) at any time now.

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bruce January 28, 2014 at 4:24 pm

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…

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Peter Renton January 29, 2014 at 2:00 pm

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.

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Jennifer April 9, 2014 at 2:34 pm

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 ?

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Peter Renton April 15, 2014 at 10:54 am

Jennifer, You would have to follow up with Prosper support on that. I have no idea what happened.

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sherry kahn April 14, 2014 at 11:36 pm

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

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Peter Renton April 15, 2014 at 10:59 am

Hi Sherry, There are other options – these are not peer to peer and I do not endorse these companies but they provide loans for people with scores under 660:
http://www.amone.com/
https://www.springleaffinancial.com/

Good luck!

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Timothy T April 23, 2014 at 11:12 pm

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?

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Peter Renton April 26, 2014 at 3:45 pm

There are two more pieces of information we need before we can answer that question – the interest rate and loan term.

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Carlos A. Piñero May 17, 2014 at 8:27 am

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

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Peter Renton May 19, 2014 at 3:01 pm

No. You will only pay the interest that has accrued. So, you can save possibly hundreds of dollars in interest by paying your loan off early.

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Gary June 1, 2014 at 11:23 pm

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….

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Peter Renton June 9, 2014 at 5:27 pm

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.

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Kevin June 14, 2014 at 6:04 am

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

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Peter Renton June 14, 2014 at 7:56 am

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.

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Kevin Kurtz June 25, 2014 at 7:19 am

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.

Peter Renton June 25, 2014 at 9:17 am

Thanks for sharing Kevin. Good to know the process went smoothly for you.

Sylvie June 10, 2014 at 7:24 pm

Hi Peter!

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

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Peter Renton June 11, 2014 at 9:16 pm

Hi Sylvie, Yes, you can apply for a loan if you rent a home.

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sylvia menchaca July 14, 2014 at 12:05 am

Would like to know more about getting aloan I need $1800 asap

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Peter Renton July 14, 2014 at 12:03 pm

You can apply for a loan on Prosper here: http://www.lendacademy.com/ProsperBorrow

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chris August 20, 2014 at 1:51 pm

Peter,

How do you pay of a loan early if they simply take the money from your account?

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Peter Renton August 20, 2014 at 5:14 pm

Chris, You need to contact Prosper directly to pay off your loan early. Here is the borrower services number: 1-866-615-6319.

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Chris C. September 13, 2014 at 1:44 pm

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%.

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Peter Renton September 13, 2014 at 6:26 pm

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.

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