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What to Expect When Applying for a Personal Loan on Prosper

by Peter Renton on September 19, 2011

Last week, for the first time, I took out a loan on both p2p lending platforms. Today, I am going to be sharing my experience of applying for a loan on Prosper. The process was relative smooth and painless, taking about 10 minutes to complete.

For p2p investors I think it is important to have some understanding of the borrowing process. This is really the reason I undertook this exercise. I didn’t actually need a loan but I have been investing in p2p loans now for over two years and I have always felt that my education was somewhat incomplete without going through the other side of the process.

I have created a video of the actual application process. This walks you through the different screens and lets potential borrowers know what to expect. It runs just under 7 minutes and if you are looking to obtain a loan on Prosper I highly recommend you watch the entire video.

Obtain Your Interest Rate Quickly

A couple of points I want to highlight about the application process itself. You can find out your interest rate pretty quickly. Once you have entered in your personal details (including social security number) you will get to a screen that displays your interest rate. Prosper does a soft pull (meaning it will not impact your credit at all) of your credit report on the fly and is able to display your rate instantly. Now, this doesn’t mean you will be approved for the loan but your rate will not change from this quoted rate.

Now, you are under no obligation to accept the terms that Prosper offers to you. I was quite surprised that my own interest rate was basically the maximum rate (31.99%). When I asked Prosper’s head of risk management about this he pointed out that the self-employed are treated with extreme caution under Prosper’s risk algorithms so that skewed my rate really high. It might also have something to do with the fact that I don’t have much income at all right now apart from investment income.

For those curious about my listing here is a link to it. I chose a small amount of $2,500 and I deliberately included only the information that was mandatory. No loan description, no financial information and nothing for an investor to go by other than my obscure loan title: “Small loan”. Despite that my loan was funded within 24 hours, although I did use my wife’s account to kick start the funding by taking 30% of the loan. But this was obviously a loan that investors liked (even though I provided no details) because it was funded very quickly.

Of course, the work wasn’t finished when I completed the application process. I had to go through several verification stages before my loan could be issued but within 24 hours my loan was on the platform. The reason for that delay is that Prosper has to notify the SEC about every single loan and that it is going to available for investors as a security and this takes time.

Five Days from Loan Application to Money Received

The entire process was quick and easy. From the time I started the process until the loan money was in my bank account was just five working days. Here is a timeline with some of the steps involved:

Mon 9/12 – Applied for a loan on
Tue 9/13 – Loan is active on the platform for investors
Wed 9/14 – Loan is fully funded by investors
Thu 9/15 – Prosper emailed request for documents (driver’s license, copy of a voided check)
Fri 9/16 – Phone call from Prosper verifying personal details
Fri 9/16 – Loan issued
Mon 9/19 – Money appeared in my bank account

I was very impressed with the speed at which Prosper went through this process. I helped the process along by being very responsive, getting back to them within an hour of any request. I was also available to take their phone call which also helped speed things along. That phone call was very thorough. They wanted to know all the standard information such as data of birth, address, social security number and credit numbers. But they also dug a little deeper by asking for my monthly mortgage payment and balance. Overall they asked at least a dozen questions.

What was curious to me is that phone call was made around noon on Friday. Within two hours my loan was issued. They said it would be 3-4 days before I saw the money in my account but it was in there this morning less than one business day after that phone call.

I will be paying this loan back early, I certainly don’t want to be paying 32% in interest for very long. But I will wait at least a couple of months just to see how the rest of the process works and to give my fellow investors some return on their money.

Now, if you want to take out a loan on Prosper then I encourage you to use this link (it is an affiliate link). Later this week I will be reporting on the loan application process with Lending Club.

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{ 11 comments… read them below or add one }

LC Joe September 19, 2011 at 11:46 pm

@Peter, I am a little shocked (is it possible to be a little shocked?). 31% APR for someone with excellent credit seems (is) a little (a lot) high (usurious). No?


Dan B September 20, 2011 at 3:30 am

You just couldn’t leave that entire loan sitting there could you? I just want you to know that if you ever do a post on your wife’s Prosper account that I’ll be (probably the only one an*l enough here) to expect a 0.1% or whatever downward adjustment to the ROI numbers to reflect this self investment. :)


Peter Renton September 20, 2011 at 6:48 am

@LC Joe, It seems that credit score is far less important than income and in particular debt-to-income ratio. I have a $400K mortgage and not enough income to cover that easily – hence the high rate. They also do not take net worth into consideration. I don’t think it is usurious – if I don’t want to pay that rate I am under no obligation to take the loan.

@Dan, Well I wasn’t going to have a 31% return be only available to others. I think I exercised restraint in only taking 30% of the loan.


Haris September 20, 2011 at 6:53 am

Yikes! I know that you are doing for demo purposes, but why I should get a prosper loan if I can just do a cash advance on my credit card with a much better rate? 31% it is not hard to beat with credit cards. Not to mention the countless 0% offers.


Bilgefisher September 20, 2011 at 7:33 am


One thing to note on your loan. Your credit score was through the roof compared to 99% of the HR loans. All your details except self employed were probably very favorable to many investor’s criteria.



Peter Renton September 20, 2011 at 9:35 am

@Haris, The simple answer to that is you shouldn’t. As you point out a cash advance on a credit card would be a lot less expensive, particularly for someone with a high credit score. Most people who are willingly paying the 31% interest rate are doing so because it is their best option.

@Jason, I think you are right – that is why my loan funded quickly. As a result of this I have setup a new saved search to look for high credit score borrowers that are E and HR rated to see if I can take advantage of this. There are not many loans and they do tend to fund quickly but I have snapped up a couple of 800+ score loans in recent days.


Roy S September 20, 2011 at 10:45 am

I think an additional reason your loan funded so quickly is that you started the loan out 30% funded. I think there are a lot of people who invest in loans further along in the funding process. When you start factoring in investors, like worthblanket, who are funding 30, 40, 50% or more of certain loans I think there are a lot of people who just ride the coattails of those loans. I would attribute it to people thinking these other investors know something they themselves do not know, or they don’t want their cash sitting around not earning interest, or any number of other reasons for it. Of course, for those who have a strategy of picking and investing in loans, regardless of the funding from other investors, that included your loan: Kudos!


Dan B September 21, 2011 at 9:31 am

Peter……You have an investor account or 2 at Prosper. Has it been your experience with those accounts that funded loans get issued as quickly as yours apparently was? Because it certainly wasn’t my experience during the short time I was with Prosper earlier this year. I recall “several” instances where fully funded notes sat for days on end without being issued……………..& a few times when they didn’t issue for over a week.


Peter Renton September 21, 2011 at 10:43 am

@Roy, I agree that the 30% certainly helped kick things off. I know when I am looking at loans on Prosper I hesitate when they are at 1 or 2%. I will keep an eye on them and see if they get more interest. I try to avoid having my money tied up for 2 weeks when there is little chance of the loan originating. The loans I tend to invest in (previous borrowers for the most part) usually get fully invested within a day or two.

@Dan, My experience is that it varies. I have two loans right now that have been “Pending Review” now for a few days and I have another loan that I invested in on Saturday and it was issued yesterday. I think if everything goes smoothly and there is a responsive borrower things move quickly. But there are certainly those instances when a loan will sit fully funded for many days before being issued. Whether that is Prosper’s fault or the borrower’s fault your guess is as good as mine.


Roy S September 21, 2011 at 2:42 pm

@Dan/Peter, I think Prosper needs to address the issue of fully funded loans sitting for days. If the issue is on Prosper’s end, then they need to remedy it. If it is on the borrower’s end, then one of two things should be done to correct this issue. Either there should be a greater step initially taken by the borrower prior to the loan being listed on the platform or there needs to be a shorter time frame given for unresponsive borrowers.

My hope is that the delay is simply Prosper doing their DD on borrowers who may be flagged (for reason or at random) for further information verification. I would rather have a little delay on a few loans and lose potential interest than have no delay and suffer from higher default rates. I think a lot of people (myself included) focus on the things that directly impact them now rather than trying to focus on what is beyond it. I’m giving Prosper the benefit of the doubt here, but it is frustrating waiting and losing interest.


Peter Renton September 21, 2011 at 8:52 pm

@Roy, Given the large range in the time to have a loan move from funded to issued I think it is safe to say that it is likely Prosper doing additional due diligence on the borrower. My experience was one of a highly efficient credit department, but who knows maybe I got them on a good day. But I would rather have them spend additional time doing due diligence and rejecting the loan than have it default because they missed something.


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