Home > Personal Loans > Peer-to-Peer Loans: An Option for Consumers with Excellent Credit

Comments 6 Comments
Advertiser Disclosure


After a couple of rocky years, peer-to-peer lending (P2P) has been making a comeback. Now with the SEC involved, P2P lenders appear to be on solid ground again.

For those not familiar with the concept, P2P lending is a form of alternative financing. These loans take place on an online P2P lending site, such as Prosper and LendingClub. These sites act like the middle man in the loan transaction. A would-be borrower creates a “listing” that often includes a photo and details of the loan request. The loan then gets funded by a multitude of P2P lenders who visit the site.

There are no banks involved, so there are no overhead expenses to pay for. These loans aren’t just for those who don’t have the credit score to go through traditional loan channels. If you’re the borrower and you have a FICO score higher than 750, you might come out ahead financially with a P2P loan.

Here’s why:

Better interest rates. According to MarketWatch, the current national average for personal loans is 9.73 percent. And if you’ve been considering transferring your credit card debt to a balance transfer card, the current average rate on those cards is a 12.93 (V) APR. Let’s compare these rates to those of the two major P2P lenders, Prosper or Lending Club. Both of these lenders have scoring systems that are hard to generalize. But we’re looking at the best rate, so it’s safe to assume excellent credit is required.

[Resource: From Debt to Wealth]

Prosper’s top rates depend on the length of the loan. You get a 5.93 percent APR for a 1-year loan and a 6.33 percent APR for a 3-year loan. These APRs goes to those with an AA Prosper Rating. Prosper uses Experian scores, along with other credit history and economic data, to determine a borrower’s rating.

LendingClub uses FICO scores (and other credit history information) to determine your Loan Grade, which is their rating system. According to Lending Club’s site, if you have a FICO score of at least 770, this most likely translates into an A1 Loan Grade, which gives you around a 6.78 percent APR.

These APRs aren’t written in stone, of course, since P2P lending websites look at more than your credit score. But these rates give you an idea of whether or not you can save money by pursuing this option.

[Partner Spotlight: Interested in peer-to-peer lending options? Apply for a personal loan with a low rate through Prosper.com]

Unsecured, fixed rate loans. These days, you almost can’t find a credit card with a fixed rate. If you have a lot of credit card debt at a variable rate, the thought of a fixed loan probably makes you swoon. You can borrow up to $25,000 (depending upon the length of the loan) on both Prosper and on Lending Club. Note, though, that the length of the loan also impacts the exact APR you get.

Easy online process. Read the the eligibility requirements for both sites. Just so you know, the requirements on Lending Club are higher. When you choose the site to use, you can apply online. Even if your loan is approved to be funded, this doesn’t guarantee that you’ll get your loan. Sometimes, loans simply don’t get fully funded. To give yourself a better chance, be honest and sincere when you create your listing. And using a photo of a puppy with big eyes doesn’t hurt, either.

Image: Quazifoto, via Flickr.com

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Pingback: Is a Peer-to-Peer Loan Right for Your Small Business? | Best Credit Repair()

  • D. DeLaurentis

    Our son has college loans in the amount of $45,000 with over $500/mo in payments, plus a car payment. Can you give us advise on where we can get a personal for under 10% to help “stop-the-bleeding”!!

    Thank you

    • Beverly Blair Harzog

      D–Wow, that’s a big loan to repay. If you have excellent credit, you might check out Lending Club or Prosper and see if you can get a rate under 10%. The maximum loan amount at LC is $35,000, but if you can get that at a low rate, it would save a bunch on the interest expense. Also, check with your local bank where you have a checking or savings account. If you have a good history with them, they might work with you. Good luck!

  • Pingback: Financial Chore #3: Consolidate Your Debt | | Debt Consolidation ManagementDebt Consolidation Management()

  • Beverly Blair Harzog

    Kellie–you have a pretty good score so my guess is that there’s something else in your credit history or financial situation that’s preventing you from being approved as a borrower. Generally, Prosper requires only a 640 score (Experian). I suggest you contact Prosper and ask for more details.

  • Kellie

    I have a 705 credit score (which I just checked today) and was told by prosper it was too low. Do you know what it needs to be to be considered?

  • Pingback: More Americans Buying Houses With Cash « Howtofixmycredit.com()

  • Beverly Blair Harzog

    Peter, thanks for your comments. And thanks for the update about Lending Club’s new maximum loan amount. I’ll be writing more blogs about P2P lending so I hope you’ll drop by again. 🙂

  • http://www.sociallending.net Peter Renton

    Good article Beverly. I think for most people, even if they don’t have excellent credit, they will find the interest rate at Lending Club and Prosper better than they would get from their credit card company. With over half the loans on these platforms for debt consolidation it is the most common use of funds in p2p lending. As you point out paying a lower, fixed rate of interest for a finite amount of time is very appealing to borrowers. If the borrower has a FICO score of 660 or more, I would guess that they will find a better rate, particularly at Lending Club.

    One minor correction. Last week Lending Club raised their maximum loan amount to $35,000. Prosper is still at $25,000 but they will likely match it at some point.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team