A Comparison Between Lending Club and Prosper: Peer to Peer Lending

If you’ve been reading our blog in recent weeks you’ll know we’ve covered peer to peer lending and two services in particular: Lending Club and Prosper. This week we’re going to focus in on comparing the two, to enable you to get a better understanding of how they fare against each other.

What amount of loans has been met so far?

At the time of writing, Lending Club had filled $960,287,975 in loans since it had first got underway. Prosper has managed under half of this at $411,000,000. Prosper opened its doors in 2006, while Lending Club began life a year later.

Are the loans rated to provide different rates of interest at each club?

Yes – you’ll notice different grades of returns at each service, going from A upwards. This enables you to gauge what degree of risk you are happy with and to balance your investments in each case too, so you can spread the risk.

What is the maximum amount you can borrow if you are looking for a loan?

Prosper will lend a maximum of $25,000, with a minimum of $2,000 in place. Lending Club will lend up to $35,000 and there is no obvious minimum given.

Are you guaranteed acceptance for your loan?

No – Prosper indicates it will accept creditworthy borrowers, whereas Lending Club specifies that it approves less than 10% of the people who make a loan application.

How do you invest? Is the process similar for each one?

Yes – you invest in notes. Each note with each company is represents a $25 investment. You can choose how many notes you want to invest, although a larger amount is more likely to give you a good rate of interest, because you can spread your risk across more than just a handful of investments.

Do you get a good degree of control over your investments?

Yes you do, because in each case you can decide whether you want safer A graded investments or riskier higher graded investments. Most people balance out the risk and thus improve their chances of getting better returns while spreading the risk.

How do you decide which peer to peer lending organization to go to?

There is no simple answer to this. One person might prefer Lending Club while another might be happy with Prosper. The best course of action is to go through all the options and to read the information on each website. Compare what each organization is giving you (either as a borrower or an investor) and see which one seems best for your needs.

One thing is clear though: both Prosper and Lending Club have established themselves as leading players in the peer to peer lending market. If you like the idea of this new model of investing and borrowing, it might prove worthwhile to look into it further. Plenty of people have already had experience of peer to peer lending from one side or another: you could be next.