Should You Get a $40,000 Lending Club Personal Loan or a $50,000 Prosper Personal Loan?
We’re going to compare LendingClub Personal Loan versus a Prosper Personal Loan. We’ve spent years working in the lending industry and we track dozens of lenders. We want to break down these two lender so you can see which one might be better for your situation.
The first thing we are going to look at is the personal loan amounts that they offer. LendingClub’s minimum loan amount is $1,000 and Prosper’s minimum is $2,000. If you need just need a little money to cover a short-term emergency either of these lenders might be a good option. But I will highlight LendingClub because they offer more flexibility on the low end.
If you are looking for a more substantial amount of money, LendingClub will lend as much as $40,000 and Prosper will lend as much as $50,000. I will highlight Prosper because they have the higher top amount.
Both LendingClub and Prosper offer personal loans with terms between 2 and 5 years.
This is a pretty standard range for personal loans. Unless you are borrowing a lot of money, I would avoid terms over 3 years. The longer term will lower your monthly payment, but it will mean paying more in overall interest than you should.
Now let’s look the cost of the loans. LendingClub’s minimum APR is 8.98% and Prosper’s minimum is 8.99%. That 0.01 percentage point is a meaningless difference. For a $10,000 loan with a 4-year term, that amounts to less than $3 in interest expense. If you can get a 9% interest rate right now, you are doing really well. So, I will highlight them both.
Both companies have a maximum APR of 35.99%. There really isn’t anything special about that rate, so I won’t highlight it for either of them.
LendingClub charges an origination fee that will be between 3% and 8%. Propser’s origination fee ranges between 1% and 8%. A little more than half of the lenders we track charge an origination fee. Any fee over 6% is getting to be on the high side. But, 8% is not the highest in the industry. So, these numbers aren’t bad. So, I will not highlight either of them. The origination fee is a percentage of the borrowed amount and comes out of the proceeds of the loan. So, if you borrow $10,000 and have a 5% origination fee, you will receive $9,500 but will still need to repay the $10,000. Remember that the origination fee is accounted for in the APR. The APR is the origination fee plus the interest rate. All things being equal, you want a lower origination fee if you plan on paying off your loan early. Paying off early will save you on the interest you would have paid, but you don’t get a reimbursement of the origination fee.
Both LendingClub and Prosper targets borrowers who have fair credit scores. Prosper cautions potential borrowers that they will struggle to get approved if their credit score is below 600. I think the likely range for these lenders is between 620 and 700. These are guidelines. Lenders don’t usually use credit score to determine eligibility. They will use information like payment history, debt-to-income ratios, utilization, income, and other financial information.
The most common type of borrowing for a personal loan is unsecured. This means that you don’t have to put up any collateral to secure the loan. I like unsecured loans because additional financial setbacks are less likely to create a domino effect on your finances. LendingClub only offers unsecured loans. While unsecured loans are the most common loans that Prosper offers, they will offer loans that are secured with your home equity. They offer both home equity lines of credit and home equity loans. Home equity loans use the value stored in your home as collateral for the loan. If you fail to repay, they can put a lien on your home or foreclose. Given that risk, why would you consider a home equity loan? Well, it’s much easier to be approved, qualify for more money, and qualify for a lower rate. I will highlight Prosper because they offer this option.
LendingClub personal loans will not accept a cosigner on your loan, but Prosper will. A cosigner is someone who agrees to pay off your loan if you fail to repay it. If you can get the loan you need on your own, there is no reason to entangle a loved-one in the process. On the other hand, if you struggle to get approved for a loan, a cosigner can strengthen your application. I will highlight Prosper for allowing cosigners.
If you are using the loan to consolidate credit card balances or other debt, LendingClub will directly pay off those other creditors with the proceeds of the loan for you. Prosper will not. It’s convenient when a lender will do that, but it also shows that the lender knows that the loan will replace other debts and not stack on top of them. Because of that, the new loan won’t change your debt-to-income ratio. That should make it easier to be approved by them. It’s good that LendingClub offers this service.
If you are late on a payment, both LendingClub and Prosper will charge you either $15 or 5% of the late amount on their personal loans. These are pretty standard rates, but almost half of the lenders we track do not charge late fees. So, I am not going to highlight either of these lenders.
Some lenders have other fees as well. Prosper will charge you a paper check fee if you would like to pay by check rather than ACH withdrawal. If you do pay by check, you will pay $5 or 5% of the payment amount, whichever is less. If your payment does not go through, you will be charged a $15 failed payment fee. They also call them insufficient funds fees. I am highlighting LendingClub because they don’t tack on any additional fees.
So let’s summarize the personal loans offered by LendingClub and Prosper.
LendingClub Personal Loans and Prosper Personal Loans are fairly evenly matched lenders. LendingClub offers a slightly lower minimum loan amount and Prosper offers a slightly higher maximum loan amount. They have comparable APRs and origination fees. Prosper offers more types of loans and will accept cosigners. LendingClub will directly pay your other creditors when you use them to consolidate. LendingClub also does not add additional fees. All in all, I think either of these companies would be a good lender.
But, for many people, the most important thing about a loan is whether you can get the money you need at the lowest possible APR. That’s why we always recommend that before you accept a loan, you should shop around. Find the best deal. At The Yukon Project, we’ve tried to make shopping around easy. If you visit our marketplace page, you can apply to any one of our other featured lenders. Behind the scenes, we will check your rate with up to 40 other lenders. Our partners use a soft credit check, so applying won’t hurt your credit score. We will show you all of the approved offers so you can pick the loan that’s best for you.
If you have any questions about either one of these lenders that we didn’t cover, leave a comment below and we will try and answer it. If you found this video useful, please like it and subscribe to our channel. Thanks for watching.
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