How to Get a Person-to-Person Loan

Person to person (or peer-to-peer) lending is one the fastest-growing alternatives for accessing credit. Since 2006, over $1 billion in person to person loans have been issued in the U.S. to individuals seeking to consolidate debt, repair a car, pay for a wedding, or start a small business.

The new lending practice was borne out of social media technology, which enables prospective borrowers to create online profiles and get matched up with individual lenders. The two leading person to person lending companies are Lending Club and Prosper Marketplace.

What are the Benefits?

Low rates: If you qualify, the interest rates may be lower than what you can get from a bank or credit card. Borrowers with high credit scores on p2p platforms may be able to borrow for under 7%. Borrowers with lower credit scores, or with weaker credit histories will see higher rates.

• Easy approval process: The Prosper and Lending Club forms can be completed in less than five minutes. There is no paperwork or meetings involved. Your loan will be funded if enough investors are interested.

Qualifying is easier and more transparent than a bank loan: The lending platforms use their own models and criteria to approve a potential borrower. The approval criteria are explicitly stated on their sites (see more detail below).

No hidden fees: And the interest rates don’t change either.

Is it Easy to Qualify?

Good credit history is important. Borrowers need credit scores of at least 640 (on Prosper) and 660 (on Lending Club), with a debt-to-income ratio typically no greater than 30% (excluding mortgage). Borrowers also need at least three years of credit history, with a clean recent record (no delinquincies or bankruptcies). Visit the platform sites for more detailed criteria.

How Does it Work?

Borrowers can sign up for free. You can apply to borrow up to $25,000 on Prosper, and $35,000 on Lending Club, and get a rate quote after completing an application. The process will not count as a hard inquiry against your credit report, so it won’t count negatively on your credit history. Once your credit level is assessed, you’ll typically get to choose from a couple of different loans at different lengths (typically 36 or 60 months) and rates.

Loan Listing

Once approved, the loan is listed for investors to review. The loan stays listed for up to 14 days. If at least 60% of the loan amount is committed by investors, the amount is funded, as long as it exceeds $1,000. If not, the loan is taken down. Once the loan is funded, borrowers make monthly payments through the online platform, which are automatically deposited into the investors’ account.
If you qualify for a loan with a low credit grade, you’ll want to express yourself well to better attract investors wary of high risk.


The borrower experience overall is fairly straight-forward. You know quickly whether you qualify, and you know within 14 days if you’re funded. Not everyone can get a person to person loan. But if you can qualify, it sure beats paying those high rates on your credit cards.

To set up an account on Lending Club, click here.
To set up an account on Prosper, click here.

If your credit score is below 640, click here to qualify for a different loan.