Both Prosper.com and Lending Club offer fixed-rate unsecured loans that amortize over a period of 3 years or 5 years. Although the loan products that borrowers are getting are essentially the same from both companies, the interest rates that borrowers will pay can vary dramatically between the companies.
Over the last couple of years, the interest rates that borrowers have had to pay on peer-to-peer loans has dropped steadily because of excess supply of investment funds from investors and a generally low interest rate environment in the United States in general.
Currently Lending Club is originating far more loans than Prosper.com. The interest rate that Lending Club charges ranges from 6.78% for borrowers with perfect credit scores, all the way down to 20% for high-risk borrowers. Lending Club also charges an origination fee between 1.25% and 4.50% of the loan depending on the borrower’s credit score.
Prosper.com typically charges 3.0 % as an origination fee (they call it a “closing fee”) for all borrowers with “A” and “B” credit ratings. Borrowers with “C”, “D”, or “E” credit scores will pay a closing fee of 4.50%. Borrowers with AA credit (the best credit rating), pay a 0.50% origination fee. Prosper.com also charges a 1.0% annual loan servicing fee.
To get a loan on Lending Club, you have to have at least a 660 credit score. Borrowers on Prosper.com must have a credit score of at least 640.
Which company is a better deal for you will vary based on your credit score, loan amount, and purpose for the loan. With Lending Club, you’ll know up-front what interest rate you’re paying. With Prosper.com, you would previously have to wait until the bidding period is over, but they recently changed their lending model to match Lending Clubs’ model.
