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.