Prosper Prosper
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Prosper Review

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Rating:
Bottom Line:
Peer-to-peer loan service with a personalized application process; good choice for new business owners with good/average credit or better

Full Review:
Prosper offers personal loans for small business use with a simple and unique application and funding process that allows you to get the help of your family and friends to get started. The proprietary rating system Prosper uses to determine interest rates ensures you will get the lowest possible rate based on your individual qualifications, and the peer-to-peer lending system means you don't need to deal with a bank.


Types of Loans Available

Prosper offers personal loans, which means you are not borrowing as a business but as an individual with the intention of using the funds for your business. This means you won't need to put a lien on your business assets; in fact, since Prosper's loans are unsecured, you won't have to put up any collateral whatsoever. Loans from Prosper can be requested in amounts between $2,000 and $35,000. Potential interest rates start at 5.99% APR and range up to a maximum of 36% APR. These rates are fixed, so the rate you receive will remain the same throughout the life of the loan.


Loans from Prosper are funded through a peer-to-peer format, and the investors are other customers of Prosper — ordinary people like yourself — who use the service as an investment tool to make money.


Qualifying

To qualify for a loan, the borrower must be 18 years or older and have a U.S. bank account, a state-issued driver's license or ID and a credit score of 640 or higher. Residents of Iowa, Maine and North Dakota cannot currently apply for a loan from Prosper, so keep that in mind. Prosper has developed what it calls a "Prosper Rating" to ensure consistency across the board when evaluating loan applications. The rating system consists of a grade range from AA down to HR and allows investors to make an easy decision about whether to fund your loan or not by showing the level of risk for default, as well as the estimated annual average loss rate to the investor.

Your Prosper Rating factors in your credit score, as well as your "Prosper Score" — which looks at the number of inquiries on your credit reports over time, the number of delinquent accounts you have, credit card use, debt-to-income ratio and, if applicable, your payment performance on past Prosper loans. After evaluating this criteria, you will be assigned a score from 1 to 11, which indicates the risk of you defaulting within the first 12 months of your loan. So, a score of 11 is the best you can hope to get. The Prosper Score is used in conjunction with the length of the loan term you choose and the current economic and competitive environments to determine the final Prosper Rating for your loan application. It's important to note that your Prosper Rating will also determine how much your closing — or origination — fee is.


Application Process

Prosper's application process begins with a simple online form to check your rate that requires some personal information along with basic information about how much you'd like to borrow and your purpose for the loan. Those borrowing for small business use will want to be sure to select "Business" from the drop-down list. Checking your rate won't harm your credit, and once you've been approved to apply for a loan, you can complete the application and receive your Prosper Rating.

Once you have a Prosper Rating, you can create a listing for your loan request. You can use this listing to tell prospective lenders about yourself and how you plan to use the money, which is a nice personal touch that isn't typically part of the traditional loan experience. Prosper has a three-stage verification process that helps you keep track of whether all the necessary paperwork and information has been received and verified. Prosper says 63% of loan requests by borrowers who reach Stage 3 of the verification process will receive full funding.


You can also help get your loan approved by requesting friends and family to invest small amounts of money — this enhances your credibility to potential investors by showing that you are viewed as a trustworthy person in the eyes of people to whom you matter. For small business loan applicants, this is especially important as loans for newer small businesses can be viewed as risky.

A loan request is active for 14 days, during which lenders can view and fund your loan. The listing will close once your loan is fully funded or the 14-day period ends — whichever comes first. The money will be deposited, less the closing fee, into your bank account. If you did not receive the minimum amount of funding required, it will not be approved — but if your loan receives at least 70% of funding, you can choose to accept that amount. If you did not receive the funding you desired or reach the minimum requirement, you have the option to create a new listing and try again.


Repayment and Fees

Like most online personal and small business lenders, Prosper does not charge fees to apply for a loan, nor does it cost anything to pay off your loan early. The closing fee, also known as an origination fee, is taken from the total amount of your loan proceeds before the rest of the money is transferred to your bank account. This fee can range from 1% to 5% of your total amount, depending on your Prosper Rating and the length of your loan term. It's important to keep this fee in mind when requesting a loan amount so you don't wind up not having enough money.

Repayment periods for Prosper are either three or five years (36 or 60 months), depending on the amount you're borrowing and your Prosper Rating. Prosper allows you to pay by automatic bank transfer or check. You can pay more than your minimum payment in a given month, or even pay the loan off in full early without penalty. In terms of late fees, Prosper charges a $15 fee if your payment is more than 15 days late. Additionally, failed payments — like an error with your bank or a bounced check — will incur a $15 fee. While Prosper passes late fees on to your investors, a failed payment fee will be retained by Prosper.


Customer Service and Trustworthiness

Prosper makes its loans through WebBank, an FDIC-insured industrial bank located in Utah that has been in business since 1997. WebBank and Prosper both have an A+ rating with the BBB and are accredited by the organization. This in addition to a transparent privacy policy contributes to an overwhelmingly positive image of the service. Prosper's privacy policy promises to protect its borrowers' identities during the lending process and never reveal any of their personal information to investors at any point during the process.

Prosper offers customer service via email and telephone, though email support is only for those with a registered Prosper account. If you have questions before submitting a rate request, you will need to call. Phone support hours are Monday through Friday from 8 a.m. to 9 p.m. ET and Saturday from 9 a.m. to 5:30 p.m. ET. When we called, we found the representatives to be friendly, courteous and knowledgeable.


Conclusion

Small business owners just getting started or in need of a small loan will likely appreciate the personalized approach Prosper takes to loans. The ability to use friends and family as goodwill investors is great for those who can't rely on credit alone, and those with average/good credit or better will likely receive a decent APR. Long repayment periods and fixed interest rates ensure stability for borrowers, and the service makes it easy to relist if your full amount isn't funded or you want to take out a second loan.

Apply for Prosper | Compare to Other Small Business Loans

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Service Details

Minimum/Maximum Loan Amount:$2,000 - $35,000
APR:5.99% - 36%
Terms Available:36 or 60 months
Origination Fee:1% - 5%
Owner's Credit Rating:640+

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