In the past year, we have seen banks cut back credit lines, raise interest rates, and limit new loans to only people with immaculate—and I mean immaculate–credit histories. That means it’s become difficult, if not impossible, for well-meaning borrowers to consolidate debt or transfer their debt to a lower interest rate through a traditional bank.
Lending Club and Prosper are social lending networks that bring together investors and creditworthy borrowers to provide personal loans at rates that are generally better than those offered by traditional banks. Here’s how they work:
- Borrowers apply for a loan with an online profile
- Lenders (people like you and me, not bankers) choose whether or not to lend you money.
- If enough lenders invest $25 or $50 each, your loan is funded
- You make monthly payments to the network, who distributes your payment to lenders
Who Can Get a Person-to-Person Personal Loan?
To receive a Lending Club or Prosper personal loan, you must be a US citizen or permanent resent, at least 18, and have a valid bank account and social security number. For the time being, residents of a few states are excluded (check on their site to see the status of your state).
Lending Club also specifies some minimum credit requirements. In order to qualify for listing a loan request with Lending Club, you will need:
- A FICO score of at least 660
- A debt-to-income ratio (excluding mortgage) below 25%
- At least three years of credit history
- No current delinquencies or recent bankruptcies (seven years)
- No open tax liens, charge-offs, or non-medical collections account in the past 12 months
- No more than 10 inquiries on your credit report in the last six months
- A revolving credit utilization of less than 100%
- At least three accounts on your credit report, of which more than two are currently open
Prosper does not specify minimum credit requirements to list a borrower application, although you can expect them to be similar to have a good chance of getting your loan funded.
How To Apply for A Peer-to-Peer Personal Loan
Think you’ve got what it takes to score a lower rate and consolidate your debts with a Lending Club or Prosper personal loan?
You’ll create an account (email address and password), select an amount and purpose of your loan, and enter your contact information and credit and employment specifics. The network will check your credit, ask for any additional information, and list your loan. If your loan is funded, you’ll have the cash deposited in your bank account within a few days of your listing ending.