Best Peer-to-Peer Lending

Peerform is the peer-to-peer lending website with the best rates

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Peer-to-peer lending websites connect borrowers directly to lenders, known as investors, who loan money to qualified applicants. It’s an alternative to borrowing money from a bank or a more traditional online lender. Each website sets the rates and the terms (sometimes with investor input) and enables the transaction. 

The best peer-to-peer lending websites offer multiple types of loans and have competitive interest rates and low fees. They have varying minimum and maximum loan amounts and lend money for a variety of different reasons. The best sites have a streamlined application process and highlight their borrower qualifications upfront.

Best Peer-to-Peer Lending Websites of December 2021

Best Rates : Peerform


Peerform
  • Starting interest rate: 5.99%
  • Minimum credit score: 600
  • Loan terms: (Range) - 3-5 years
Why We Chose It

Peerform offers competitive rates, no prepayment penalties, and has extensive industry experience, having been around since 2010.  

Pros & Cons
Pros
  • Competitive interest rates for borrowers with excellent credit

  • No prepayment penalties

Cons
  • Low loan maximum

  • Loans not available in 5 states

Overview

Founded by a group of Wall Street executives, Peerform has been around since 2010. Applicants with excellent credit may enjoy rates as low as 5.99%, but the maximum loan amount is only $25,000.

Other important information:

  • Maximum/minimum amount you can borrow: $4,000 to $25,000
  • APR range: 5.99%–29.99%
  • Fees: Origination fees range between 1% and 5%. Late fees are $15 or 5% of the unpaid payment, whichever is greater. If you opt to pay by check instead of direct debits from your bank, there’s an extra $15 fee per payment. Failed payments result in a $15 fee per draft attempt. Peerform doesn’t charge prepayment penalties. 
  • Minimum recommended credit score: 600 FICO score
  • Other qualification requirements: Your debt-to-income ratio (DTI) should be less than 40%, and you need at least one open bank account. Your credit report should also show at least one revolving account and be free from current delinquencies, recent bankruptcies, or collections (other than medical) in the last 12 months.
  • Repayment terms: 3 or 5 years
  • Time to receive funds: Funds are distributed within 3 days of final loan approval, though it could take some additional time for your bank to process them.
  • Restrictions: Funds cannot be used for education-related expenses or to refinance student loans. Loans aren’t available to residents of Connecticut, North Dakota, Vermont, West Virginia or Wyoming.
  • The lender side: Institutional investors (organizations that invest on behalf of their individual members/clients, such as hedge funds, mutual funds, pension funds, etc.) who purchase whole loans are eligible to offer financing through Peerform.

Read the full review: Peerform Personal Loans

Best for Borrowers With Limited Credit History : Upstart


Upstart
  • Starting interest rate: 8.27%
  • Minimum credit score: 600
  • Loan terms: (Range) - 3-5 years
Why We Chose It

Upstart considers more factors than just your credit score so it’s ideal for borrowers with a limited credit history. 

Pros & Cons
Pros
  • Education or job history, not just credit, considered

  • Higher maximum loan amount than many other P2P lenders

  • Fast funding

Cons
  • High maximum APR of 35.99%

  • Origination fee as high as 8%

  • No co-signers allowed

Overview

Upstart, founded in 2012 by a group of former Google employees, has originated more than $7.8 billion in consumer loans. With its mantra, “You are more than your credit score,” the company says its underwriting software can help identify “future prime” borrowers based, in part, on education and employment history, even if those applicants have sketchy or limited credit at the moment. Personal loan borrowers who qualify may be able to access $1,000 to $50,000 in funding.

Other important information:

  • Maximum/minimum amount you can borrow: $1,000 to $50,000, based on credit, income, and other information considered in your loan application.
  • APR range: 8.27%–35.99%
  • Fees: Origination fees range from 0% to 8%. Late payment fees are 5% of your monthly past-due balance or $15, whichever is higher. Upstart also charges $15 for returns of ACH transfers or returned checks and $10 (one-time fee) for paper copies of records. 
  • Minimum recommended credit score: 600
  • Other qualification requirements: Upstart will check your credit reports for any information that might exclude you from a loan (such as bankruptcy, public records, more than 5 inquiries in the last six months, etc.). You must also be 18 years old in most states with a personal bank account, have full-time employment (or a full-time job offer starting within the next 6 months), and verifiable personal details (name, date of birth, and Social Security number). 
  • Repayment terms: 3 or 5 years
  • Time to receive funds: Within 1 business day after you accept the loan, or 2 days if you accept after 5 pm EST.
  • Restrictions: Residents of West Virginia and Iowa aren’t eligible.
  • The lender side: Accredited investors can register on the Upstart website. To become an accredited investor, you need either $200,000 in annual income ($300,000 for joint filers) or net worth or joint net worth of $1 million or more. Upstart boasts a low delinquency rate among borrowers: Close to 90% of loans are current or paid in full.

Read the full review: Upstart Personal Loans

Notes: Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Loans are not available in West Virginia or Iowa. The minimum loan amount in MA is $7,000. The minimum loan amount in Ohio is $6,000. The minimum loan amount in NM is $5100. The minimum loan amount in GA is $3,100.
If you accept your loan by 5pm EST (not including weekends or holidays), you will receive your funds the next business day. Loans used to fund education related expenses are subject to a 3 business day wait period between loan acceptance and funding in accordance with federal law.
The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart platform will have an APR of 25.16% and 36 monthly payments of $37 per $1,000 borrowed. There is no down payment and no prepayment penalty. Average APR is calculated based on 3-year rates offered in the last 1 month. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.
When you check your rate, we check your credit report. This initial (soft) inquiry will not affect your credit score. If you accept your rate and proceed with your application, we do another (hard) credit inquiry that will impact your credit score. If you take out a loan, repayment information will be reported to the credit bureaus.

Best for Borrowers With Established Credit History : Prosper


Prosper
  • Starting interest rate: 7.95%
  • Minimum credit score: 640
  • Loan terms: (Range) - 3-5 years
Why We Chose It

Prosper offers higher loan amounts, flexible funding dates, and programs specifically for borrowers with an established credit history. 

Pros & Cons
Pros
  • Lower maximum origination fee than some other P2P lenders

  • Flexibility to change your monthly payment due date

Cons
  • Slow in funding

  • Must have at least 3 open credit accounts

  • High maximum APR of 35.99%

Overview

Founded in 2005, the United States’ first peer-to-peer lending marketplace, Prosper, paved the P2P way. Since that time the company has helped more than $770,000 borrowers obtain financing. Qualified applicants can borrow up to $40,000, with starting rates as low as 7.95%.

Other important information:

  • Maximum/minimum amount you can borrow: $2,000 to $40,000
  • APR range: 7.95%–35.99%
  • Fees: Origination fees range from 1% to 5% for a 3-year term and from 2% to 5% for a 5-year term. Late fees are the higher of either $15 or 5% of the missed payment. If you pay by check, there’s a fee of $5 or 5% of your payment, whichever is lower. There are no prepayment penalties.
  • Minimum recommended credit score: Not disclosed, reported to be 640
  • Other qualification requirements: Your debt-to-income ratio must be less than 50%, with some amount of stated income above $0. Your credit reports must be clear of bankruptcy filings in the last 12 months, have fewer than 5 credit inquiries in the last 6 months, and have at least 3 open tradelines (credit accounts). 
  • Repayment terms: 3 or 5 years
  • Time to receive funds: Usually within 5 days. Next-day funding available with certain requirements.
  • Restrictions: Not available to residents of West Virginia or Iowa
  • The lender side: Investors can create an account and start with a minimum investment as low as $25. Prosper’s average historical returns are 5.3%.

Read the full review: Prosper Personal Loans

Best for Small Businesses : Funding Circle


Funding Circle
  • Starting interest rate: 11.29%
  • Minimum credit score: 660
  • Loan terms: (Range) - 6 months to 5 years
Why We Chose It

Funding Circle gives loans to small business owners who need them quickly, and it works with borrowers with fair credit. 

Pros & Cons
Pros
  • Open to business owners with fair personal credit

  • Fast access to funds

Cons
  • Only businesses more than 3 years old

  • Hard credit inquiry for general partnerships

Overview

Funding Circle was founded in 2010 and has 100,000 investors and counting. The company has helped 90,000 small businesses access funding to reach their goals. If your business has been established for more than 3 years, and you have at least a 660 FICO score, a P2P small business loan from Funding Circle may be worth considering.

Other important information:

  • Maximum/minimum amount you can borrow: $25,000 to $500,000
  • APR range: 11.29%–30.12%
  • Fees: Origination fees range between 3.49% to 6.99%. Funding Circle does not charge prepayment penalties. Late payment fees are 5% of the missed payment and are assessed when it is 10 days past due. 
  • Minimum recommended credit score: 660 FICO score (personal score)
  • Other qualification requirements: You must have been in business for more than 3 years and have no bankruptcy filings within the last 7 years.
  • Repayment terms: 6 months to 5 years
  • Time to receive funds: As little as 3 days
  • Restrictions: Nevada-based businesses aren’t eligible.
  • The lender side: You must be an accredited investor willing to deposit a minimum of $25,000 to your investment account with Funding Circle. The platform’s historical annual returns for investors range between 5% to 7%. Investors will pay 1% of loan repayments in an annual servicing fee.

Best for Fair Credit : Payoff


P
  • Starting interest rate: 5.99%
  • Minimum credit score: 640
  • Loan terms: (Range) - 24-60 months
Why We Chose It

Payoff works with borrowers with a limited credit history, and it gives them free access to their FICO score. 

Pros & Cons
Pros
  • Free FICO score access

  • No prepayment penalty

  • Prequalification option available

Cons
  • Longer funding times

  • Not available nationwide

  • No joint applications

Overview

Launched in 2005, Payoff offers loans with a limited credit history which is useful if you’re applying for a loan individually. Borrowers will get access to their FICO credit score and rates as low as 5.99%. However, loans aren’t available in all states.

Other important information:

  • Maximum/minimum amount you can borrow: $5,000 to $40,000
  • APR range: 5.99%–24.99%
  • Fees: 0% to 5% origination fee
  • Minimum recommended credit score: 640
  • Other qualification requirements: Individual applications only
  • Repayment terms: 24 to 60 months
  • Time to receive funds: Within 2 to 5 business days
  • Restrictions: Residents of Massachusetts, Mississippi, Nebraska, and Nevada are ineligible
  • Notes: Minimum loan amount in New Mexico is $5,100 and in Maryland is $6,100.

Read the full review: Payoff Personal Loans

Final Verdict

All of the best peer-to-peer lending websites on our list have different things to offer. Some have high maximum loan amounts and others have more lenient minimum credit score requirements and fast funding times. Overall, we recommend checking out Peerform because the company offers competitive rates and no prepayment penalties. 

Compare The Best Peer-to-Peer Lending

Company Starting Interest Rate  Minimum Credit Score  Loan Terms (range)  Maximum Loan Amount 
Peerform
Best Rates
5.99% 600 3-5 years $25,000
Upstart 
Best for Borrowers With Limited Credit History
8.27%  600  3-5 years  $50,000 
Prosper 
Best for Borrowers With Established Credit History
7.95%  640  3-5 years  $40,000 
Funding Circle 
Best for Small Businesses
11.29%  660 6 months to 5 years  $500,000 
Payoff 
Best for Fair Credit
5.99%  640  24-60 months  $40,000 

Guide to Choosing the Best Peer-to-Peer Lending Websites

Is Peer-to-Peer Lending Right for You?

You will want to explore different types of lenders and prioritize your needs to see if peer-to-peer lending websites are right for you. Consider things like how much you need or want to borrow and how quickly you need access to the funds. You should also determine what the loan will be used for and if this fits into one of the P2P lending guidelines. 

Comparing Peer-to-Peer Lending Websites 

You should compare peer-to-peer lending websites, so you choose the one that best suits your needs. It’s important to consider if the P2P website lends in your state and if you meet their credit score requirements. You will also want to compare interest rates, loan amounts, fees, and funding times. 

Choosing Peer-to-Peer Lending Websites

When choosing peer-to-peer lending websites, there are some important things that you should consider. Things to think about when choosing the right website for you include:

  • Application process: Know what kind of documents you will need to submit and if you can complete the process online. 
  • Time to funding: You may need the funds immediately so it’s important to find how long it will take to fund the loan. 
  • Loan amounts: What are the minimum and maximum loan amounts? Do they offer the amount you need?
  • Borrower qualifications: Know what qualifications you need to meet to get a loan. These can include things like income and credit score. 
  • Fees: Besides the interest rate, what fees are you going to pay? When do you need to pay them?

What Is Peer-to-Peer Lending?

Peer-to-peer (P2P) lending, sometimes called “social” or “crowd” lending, is a type of financing that connects people or entities willing to loan money with people or businesses that want to borrow money. As an alternative to traditional financing, a financial tech company (aka fintech) creates an online platform that matches loan applicants directly with investors.

Your rate and terms (and whether you qualify in the first place) are still based on common factors that other lenders consider. For example, your credit score, credit history, and income will each play a big role in your ability to qualify for a P2P loan and the price you pay for financing if you do.

If you have excellent credit, sufficient income, and a low DTI ratio, you might find a good deal on a P2P loan. However, if you have credit problems or other borrowing challenges, finding a competitive loan offer (or even qualifying at all) may be a challenge.

How Does Peer-to-Peer Lending Work?

When you apply for a P2P loan, the process typically involves the following steps.

  1. You complete and submit an online application. This step will usually include a credit inquiry—either soft or hard. 
  2. The lending platform may assign you a risk category or grade. Your rating will impact the interest rate and terms you’re offered. If you’re satisfied with an offer, you can opt to move forward. 
  3. Investors review your loan request. You can include details such as how you plan to spend the money or why loaning money to you is a good risk. Your story may improve your odds of receiving funding. Depending on how the P2P platform is structured, lenders may make bids to win your business. However, your loan request might also be passed over. 
  4. You accept the loan. If an investor makes a bid that you’re happy with, you can review the terms and accept the loan. Depending on the platform, the funds could be deposited into your bank account as soon as the same day or within a week. 
  5. You make monthly payments. In general, P2P lenders report accounts to the credit bureaus like traditional lenders, so late payments could hurt your credit score. Late payments may also come with late fees that increase your overall cost of borrowing.

Types of Loans Available Through Peer-to-Peer Lending

P2P loans can be used for many of the same purposes as personal loans. Here are a few of the loan types you may find on popular P2P websites. 

  • Personal Loans
  • Home Improvement Loans
  • Auto Loans
  • Student Loans
  • Medical Loans
  • Business Loans

The Investing Side of Peer-to-Peer Lending

P2P lending can potentially help investors earn extra income and diversify their portfolios.

P2P investing appeals to many people who are looking to make their savings work for them. When all goes well, P2P investors may enjoy a higher return on their money versus what they would gain in a high-yield savings account, certificate of deposit (CD), or other investments.

Becoming a P2P investor begins with applying to open an account on a P2P lending platform. If you are approved, you deposit money that will be loaned out through the platform to qualified borrowers. You can review loan requests (along with applicant risk grades) and choose the applications you’d like to approve, either providing the full loan amount or a portion of it.

Through the platform, you can track your earnings from principal and interest as your borrowers make their payments. You can cash out your earnings (you’ll likely have to pay taxes on them) or reinvest.

Keep in mind that there’s risk involved, as with any investment. First, there’s no guarantee your borrowers will repay as promised (whether the platform goes after delinquents, and to what extent, is something to check out in advance). There’s also a potential hazard that the lending platform itself could shut down. In either case you might lose a substantial portion of your investment, especially if the loan you financed was unsecured. 

Is Peer-to-Peer Lending the Right Fit?

A P2P loan may be a good fit for those who can’t qualify with conventional lenders or who simply prefer to explore alternative financing sources. Still, bear in mind that despite the fashionable fintech setup, the P2P loan process isn’t considerably different from the traditional one: The most creditworthy applicants will typically qualify for the lowest rates and best terms. Trying to improve your credit may work in your favor. In the meantime, shopping around for the best P2P deal may help you save money.

Methodology

To find the best peer-to-peer lending websites, we researched dozens of the top websites and compared them based on several important factors including interest rates, fees, and qualification requirements. We also considered overall company reputation, repayment terms, and minimum and maximum loan amounts.

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Article Sources

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  1. Peerform. "Get Your Personal Loan Today and Earn a $25 Visa eGift Card." Accessed April 16, 2021.