Prosper Loans
In-Depth Guide for Prosper Borrowers
Borrowers sign up and provide their personal details to Prosper. They must pass an identity verification screening as well as a credit check (through Experian). They are then assigned a credit grade by Prosper, which will range from AA (for great credit) to HR (for “High Risk” credit). At that point, they are allowed to begin creating a listing for the loan that they will request.
Detailed Information about Prosper Personal Loans
All of Prosper’s personal loans are amortized over a fixed term. Loan terms are, currently. are either 1, 3, or 5 years (12, 24, or 36 payments, spread over as many months). Loans of different durations – as well as of different types of loans (ie, small business loans, startup loans, etc) – are planned for the future. One huge upside for individuals borrowing via Prosper is that there are no (none, zero) early-payoff or pre-payment penalties on Prosper’s personal loans, for borrowers. This means that borrowers can pay off their entire loan as early as they wish or make extra payments on their loans as often as they like – thereby reducing the amount of interest that they would have otherwise paid over the full life of the personal loan – and that they can do this with no penalties or fees.
How to Begin Borrowing via Prosper
Upon beginning the loan listing process, borrowers are assigned a credit grade. A soft-pull (which will not adversely impact your credit report) will be made to your credit report. (The pull only becomes “hard” – ie, visible to other lenders and therefore likely to affect your credit score – in the event that your listing is funded and you receive a Prosper loan). Borrowers are shown a summary of their various credit details and are asked to write a brief narrative explaining their reasons for needing the loan (which should address both their income and ability to pay back the loan), and, should such be necessary, to describe the circumstances surrounding any negative credit information which may be contained in their (lender-viewable, but identity scrubbed) credit summary. It is important to note that lenders are not shown any personally identifying information about the borrowers – nor are borrowers shown any identifying information concerning their lenders. All transactions occur behind “screen names”, and involved parties are therefore able to reveal as much (or as little) personally identifying information as they feel comfortable sharing. Borrowers can choose to request an unsecured personal loan of any amount from $1k to $25k (though there are a few states that have different limits). Borrowers can select the maximum interest rate that they’re willing to accept for the funds that they need to borrow. This rate is a starting rate for the auction, and doesn’t necessarily represent the final rate of the loan. (In fact, it’s often best to start high, attract more lender attention, and let the auction frenzy begin.) Once the borrower has completed their personal loan listing and posted it to the marketplace, lenders are then able to bid on these loans and the more lenders who compete to place bids and lend the borrower money, the lower the borrower’s interest rate will fall. Prosper.com acts as an aggregator and pools the funds of the winning bidders, then issues the full amount of the loan to the borrower. Each month, Prosper will collect payments from the borrower (via automatic monthly ACH withdrawal from the borrower’s verified checking account. Prosper then divides and disburses those payments to the lenders (based upon how much money they contributed to funding that particular loan).
What to Expect After Requesting a Prosper Personal Loan:
Now you wait for lenders to bid on your loan. If you chose Instant Funding, then your loan will originate as soon as the full amount of your request is met by lenders. (Many loans go unfunded for a variety of reasons, and if your loan request expires without funding, it might be time to visit Prosper’s official Discussion Forums. If you choose (wisely) to let your listing run for the full duration and to participate in the rate-auction, then your loan will originate after lenders have competed over your loan and the auction has run its course. If your listing meets the criteria of a number of lenders, it is quite possible that your rate will be driven down significantly (assuming that you listed at a competitive interest rate). Do keep in mind that loans only fund if the full amount of the request has been met, so, regardless of whether you selected either rate-auction or auto-fund, if not enough lenders bid on your loan to meet your desired amount – you will not receive a loan. You can, however, re-list your request and add (or alter) any information that you feel might make your loan more attractive to lenders and improve your chances at funding.
What happens after my Prosper Loan is funded and closes?
When Automatic-Funding listings are fully funded or when a successful rate-auction ends, loans then go into “Pending Review” status. During this time, Prosper may elect to request identity, income, and address verification documents from borrowers. Borrowers have 7 days within which to send in copies of whatever documentation Prosper might request. Of the different types of documentation often requested, it is often especially important that you be able to verify your address, employment, or individual income – but the information requested – if any – often differs. Borrowers who verification do not get a loan. Once Prosper has requested and received any verification documents, your loan should be originated within a matter of days. You will receive an email stating that your loan has been approved and the funds will be directly deposited into your bank account via ACH transfer (which normally takes 1-3 business days). One month later, Prosper will begin automatically debiting your monthly loan payments from your checking account, and will continue to do so for either the full term of your loan or until your loan has been repaid in full. Prosper reports individual loan activity to Experian(tm), and your Prosper loan should show up on your credit report within 2-3 months. In the event that you are 30 days or more delinquent in making a payment, Prosper will (in addition to turning your loan over to a collections agency) report this negative information to Experian(tm), thusly impacting your overall credit score and making it substantially more difficult for you to obtain credit in the future. Of course, you can immediately put an end to such efforts, at any point, by making a payment and bringing your loan current. * Borrowers take note: Prosper.com uses a proprietary & predictive credit scoring model called “Experian ScoreX PLUS(sm)” to assign credit grades for P2P Loans. This is NOT the same as FICO(tm), and the Credit Grade you are assigned by Prosper may be somewhat different than the more traditional FICO(tm) or FICO(tm)-like scoring products with which you might be familiar. Even so, and even if you are scored lower than you believe you deserve, not all hope is lost. After close observation of ScoreX over the last year, it is at least clear that the majority of the same factors that would lower your traditional credit score also lower your ScoreX score – though perhaps not to the same degree. What that means is that you can always attempt to better your ScoreX score (and thereby increase your chance of being funded on Prosper) by contacting Experian.com to have inaccuracies and oversights removed from your Experian Credit Report – the source from which ScoreX derives its data to calculate your Prosper.com credit grade. Additionally, all consumers are entitled to one free annual credit report per year from each of the 3 major credit reporting agencies via the annualcreditreport.com site.
