If you’re looking for a loan for your small business, it’s likely that you’ve come across Prosper and LendingClub. While they’re both technology-forward, peer-to-peer lenders with headquarters in San Francisco, there are a few key differences between the two.
Prosper, a personal loan company, only offers amounts of up to $35,000 that can be used towards business expenses. LendingClub offers access to higher amounts, with small business loans ranging up to $300,000. Let’s take a look at how these two lenders work.
Are Prosper And Lending Club The Same Or Related?
LendingClub and Prosper are two separate companies. Although both are peer-to-peer lenders, Prosper offers exclusively personal loans, and LendingClub has both a small business term loan and personal loan program.
Does Using Prosper Or Lending Club Affect Your Credit?
Because Prosper only offers personal loans, if you take out a loan with them for your business, it won’t affect your business credit. Looking into this lender could be a good option if your business isn’t able to qualify for a traditional bank or online loan with a similarly low rate. If you borrow a small business term loan through LendingClub, however, it will affect both your business and personal credit scores.
Are Prosper and Lending Club Legit?
While Prosper has an A+ rating with the Better Business Bureau (BBB), it only has a two-star rating on the BBB website. Additionally, over 130 borrowers have made formal complaints. The most common issue that customers said they faced had to do with the mishandling of loan repayments. Multiple reviewers said that despite making timely payments, the lender did not process them on time and their credit scores were negatively impacted.
LendingClub has netted an A rating with the BBB, and like Prosper, has a two-star rating on the site. There is also an alert that has been placed on the company, warning potential borrowers of fraudulent phone calls that are being made by people falsely claiming to be with LendingClub.
Despite both lenders having some negative reviews, both are legitimate and safe companies to work with. Before signing any loan agreement, however, make sure that you understand each aspect of the loan and the repayment process.
- Flexible repayment terms between three and five years
- No prepayment penalty
- Good for relatively fast cash, with funds becoming available within three to five days
- Low maximum loan amount of $35,000
- May be difficult for borrowers with new or poor credit to qualify, with a minimum credit score requirement of 640
- Not ideal for building business credit because Prosper only offers personal loans
Good option for: Prosper personal loans are a good option for funding small-scale renovations or repairs, or one-time basic expenses such as rent, utility payments, or supply purchases.
How to Qualify: In order to qualify for a Prosper loan, you should have a minimum credit score of 640. In addition to this requirement, your debt-to-income ratio should also be below 50%. Additionally, there is no minimum income requirement. However, the average income for Prosper borrowers is $89,000.
Rates & Costs: Prosper’s annual percentage rates start at 5.99% with a maximum of 35.99%. This rate includes an origination fee ranging between 2.4% and 5%. There is also a late payment fee of $15 or 5% of the total unpaid amount (whichever is greater) as well as an insufficient funds fee of $15.
Time To Funding: Prosper loans typically take around three to five business days to fund.
Loan Amounts: Borrowers can take out $2,000-$35,000 with Prosper.
» MORE: Prosper personal loan review
- Fast access cash, with loans funding within as little as two business days
- Potential for flexible repayment terms, with terms ranging between one and five years
- Wide range of loan amounts
- Low minimum credit score of 600
- Fast, easy online application
- UCC-1 lien and collateral required for loans above $100,000
- Potential for a higher cost than with a traditional bank, with APRs ranging up to 35.7%
Good option for: A Lending Club business loan is a great option for businesses whose owners might have a lower-than-average credit score, who are looking to build their credit and fund a wide range of projects. In addition to funding both small and medium-sized expenses, this lender’s product can also be good for refinancing.
How to Qualify: In order to qualify for a Lending Club loan, your credit score should be above 600 and you should have at least three years of credit history. Additionally, your debt-to-income ratio should be below 40%, or below 35% if applying jointly.
Rates & Costs: Lending Club’s small business loans start at a relatively low APR of 9.8% and have a maximum of 35.7%. Origination fees range between 1% and 6%, and there may also be a late fee applied in the case of an overdue payment. The lender does not charge any prepayment or application fees.
Time To Funding: While some loans may fund within just two days, most of their loans fund within one to two weeks.
Loan Amounts: Borrowers can access between $5,000 and $300,000 through LendingClub’s small business loans.
» MORE: LendingClub small business loan review
If you have good credit and are looking for a small personal loan to use for business expenses, Prosper might be worth looking into. However, if your application has been rejected by Prosper or simply want access to a larger loan amount, LendingClub could be the company for you.
Both companies offer products with similarly low interest rates for the online lending world, as well as flexible repayment terms and easy, online applications. However, prospective borrowers should be aware that a loan with Prosper won’t be helpful if you’re looking to build your business’ financial qualifications. By the same token, you might have to risk your assets if you’re taking out a LendingClub loan of more than $100,000.
Whether you choose to borrow from LendingClub, Prosper or another online lender, make sure to fill out more than one application and compare multiple offers before deciding on the loan that will help you fund your small business.