The peer-to-peer lending (P2P) landscape is changing. Previously, P2P lending websites were the purview of individual investors who read borrowers’ stories and invested in the applicants they deemed most worthy. Recently, however, more and more hedge funds, institutional investors and even banks have begun to participate in P2P lending.
Given these changes, if you are thinking about taking out a P2P loan, it’s prudent to consider a website’s reputation and safety in addition to the other factors you ordinarily look into, such as interest rates, loan terms and ease of application. (See P2P Mortgage Loans – A Growing Trend on the rise of peer-to-peer mortgages.)
Portrait of a Reputable, Safe P2P Website
The most reputable and secure peer-to-peer lending websites possess a number of easily identifiable attributes. These include awards for excellence and innovation, as well as praise and respect from mainstream news organizations and professional agencies.
Security of personal information is also important – especially to potential borrowers. To that end, it’s important to know what measures a particular P2P website has taken to protect your identity and financial data. (See Tips For Keeping Your Financial Data Safe Online for more on this topic.)
Finally, evaluations from customers, the Better Business Bureau (BBB) and third-party reviewers provide insight into the type of trust a P2P website has earned.
The three sites named here all have these attributes, and they consistently receive recognition from industry professionals, reviewers and customers.
1. Lending Club
As the first peer-to-peer lender to register with the Securities and Exchange Commission, Lending Club (LC) has garnered much public praise and many accolades. (See Investing In (And With) Lending Club: How It Works for more on this P2P website.)
• Awards and Recognition. Lending Club’s honors include being named one of America’s Most Promising Companies in 2014 by "Forbes," receiving “The Economist” Innovation Award and earning a place on the “Inc.” list of America’s fastest-growing companies in 2014.
• Reviews. Top Ten Reviews ranked Lending Club the number one peer-to-peer lending site in 2015, saying the company was “very forthcoming with its information and procedures so you know exactly what you are getting.” Credit Karma gave the website four-and-a-half (out of five) stars overall with 83% of respondents giving it a full five stars. Lending Club is accredited by the Better Business Bureau and has an A+ rating, on a scale that ranges from A+ down to F.
Marketplace peer-to-peer lender Upstart was founded on the premise that Millennials do not have fair access to credit. The former Googlers who started the company concentrate on that generation. Borrowers are called “upstarts,” and the borrowing process is highly data-driven.
• Awards and Recognition. “The Lending Mag” rated Upstart number three on its list of P2P sites, calling it “innovative” when it comes to serving young professionals who lack an established credit history. (Upstart was first on the “Christian Science Monitor” list of “non-traditional money lenders for millennials.”
• Reviews. According to Credit Karma, 90% of its respondents gave Upstart a perfect five-star rating. Top Ten Reviews ranked Upstart second among P2P sites for 2015, saying, “Upstart offers impressive support,” and adding “team members with which we interacted were knowledgeable and helpful, giving us confidence that any concerns you may have will be addressed.” While Upstart is not accredited by the BBB (businesses are not required to seek accreditation in order to be rated), the company has an A- rating.
3. Prosper Marketplace, Inc.
Prosper Funding LLC, which actually connects borrowers to investors, is a wholly owned subsidiary of Prosper Marketplace, Inc. Major Prosper investors include Sequoia Capital, BlackRock, Institutional Venture Partners and Credit Suisse NEXT Fund, according to the company.
• Awards and Recognition. Prosper was named one of America’s Most Promising Companies in 2015 by “Forbes” and was recognized by AlwaysOn 2015 OnFinance Top 100 as among the most promising private companies in business. In addition, over the past three years the firm has been named one of the fastest-growing private companies in the Bay Area by the “San Francisco Business Times.”
• Reviews. Prosper has an A+ rating from the BBB and is fully accredited. Credit Karma gave the website four out of five stars overall and noted that 65% of respondents felt the service provided a five-star loan experience. As Top Ten Reviews’ third highest-rated P2P lending site, Prosper was cited for its transparency and customer service.
The Bottom Line
If you are like many potential borrowers, your search for funds begins and ends with your credit rating, the loan's annual percentage rate (APR) and the term (length) of the loan. In the world of lending – especially in the world of peer-to-peer lending – this is simply not sufficient. You must also pay attention to the safety standards and reputation of any potential P2P lender in order to protect yourself and your assets. Making these two items part of your P2P loan checklist can mean the difference between a satisfying loan experience and a financial disaster. (See P2P Lending Sites: How Safe Are They for Borrowers?)
For more information on peer-to-peer lending, see Peer-To-Peer Lending Breaks Down Financial Borders and Peer-To-Peer Lending – Determining The Future Of Banking Across The World.