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Social Lending Networks Compared

If you, like most Americans, are fed up with the banking system, then social lending might be for you. I believe social lending is the way of the future for both borrowers and investors. And today, when bank savings rates are tiny, the stock market is up and down, and few banks are making loans to even well-qualified borrowers, there has never been a better time to look at social lending networks like LendingClub and Prosper.

Social Lending Defined

What is social lending? In a nutshell, social lending is a bank without the bank. Individuals like you and I make loans to others (or get loans from others) directly through the network. One person may get a $5,000 loan from 100 investors who each front $50. As the borrower pays back the loan, each investor gets their principal plus interest back and the social lending network takes a small cut of the interest for acting as the intermediary and servicing the loan (billing the borrower and distributing payments to investors).

Social Lending Networks Compared

Here, I take a look at two of the biggest social lending networks, Lending Club and Prosper. You can also read more about my personal experience with Prosper.


LendingClub offers borrowers personal loans of up to $25,000 over three years (36 months) with rates starting as low as 7.88%. As a lender/investor, you can earn returns on your money ranging from 6.69% to 19.37%. To qualify as a borrower at LendingClub you need a credit score of at least 660 and meet other credit requirements. Although anybody can open a free lending account at LendingClub and browse available loans, only investors meeting specific requirements can fund loans due to SEC regulations.

When you invest with LendingClub, you actually choose which loans you want to fund. You can select loans that only meet certain credit criteria, are at a certain interest rate, or that are to be used for a specific purpose. That way, you have total control over how much risk you take (and how big of a return your could earn). For more, read my LendingClub review.


Prosper is also accepting new borrower and lender applications. Lenders can get started with as little as $25, and borrowers can list loan applications regardless of their credit history, although borrowers with “B” grade credit or better will be most likely to get their loans funded at a competitive interest rate.

Prosper lenders can choose to invest in individual loans (thus hand-selecting what interest rates and risk levels they want) or invest in prepackaged notes that combine loans to offer built-in diversification. Learn more in my Prosper review.

Is a Social Lending Network for You?

Social lending provides great alternatives to both regular bank loans and credit cards for borrowers and high yield savings accounts and stocks for investors. If you have good credit but can’t get a traditional credit card or are looking for a way to earn more than the 2% interest savings accounts are paying these days, consider giving either LendingClub or Prosper a try today.

Published or updated on April 6, 2009

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


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  1. Lakita says:

    Is there a minimum credit limit for the lender with Pertuity Direct? I was reviewing their website and I didn’t see one. I think Lending Club does have this.

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