Peer-to-Peer Lending Sites: Lending Club vs Prosper vs Upstart

Best Peer to Peer Lending Sites

So you need some extra cash to get your business idea off the ground or pay off your overpriced credit card debt but not sure a bank will go for it? Welcome to the club! If you are looking for an alternative to taking out a traditional loan, then a peer-to-peer lending site could be a viable option. Lending Club and Prosper are widely considered the dominant peer-to-peer (P2P) lending sites, but what makes them the best of the pack? 

And how do they compare with other, lesser-known P2P sites? Here we give you a rundown of what P2P lending sites are all about and a comparison of several top services you'll find on the web. But, first, we explain some of the basics so you can make a more informed decision.

If you are already familiar with how peer-to-peer lending works, jump ahead to our reviews section.

Peer-to-Peer Lending Sites vs Traditional Loans

So, what's the difference between peer-to-peer (P2P) and traditional lenders? The biggest difference is that P2P lending sites are directly backed by everyday investors rather than financial institutions. And P2P lenders often offer lower fixed APR rates than other lenders, but like mortgage lenders and credit card companies, the riskier you are as a borrower (i.e. the worse your credit rating), the higher your APR. Depending on your credit score and documentation, you can receive your loan in as little as one business day versus a longer wait with traditional loans. There are some fees associated with most P2P loans - typically these are an origination fee, late payment fee and failed payment fee.

The borrowing and investing activities of P2P lenders in the United States are regulated by various federal and state entities. Each state's regulations may differ so you need to check each P2P lending site to see if your state restricts you from borrowing and/or investing.

What to Expect When Borrowing from a Peer-to-Peer Lending Site

With most peer-to-peer lending sites, you're required to fill out an online loan application, but your application won't negatively impact your credit score like it does when you apply for typical loans (it's called a soft inquiry). As with traditional loans, your interest rate is based on your credit score, usage and history, as well as your loan amount and terms. Your loan request receives a grade, depending on your risk factor as a borrower -- these grades are also used for investors to determine how risky they want their investment to be (see our grading system overview below). Generally loans range from $1,000 to $35,000, but this depends on the lending site, as does the grading process, interest rate, and terms. See our comparison chart for the details.

Debt Consolidation, Credit Card Payoff and More

What types of loans do peer to peer lending sites offer? According to a 2014 Federal Reserve report, debt consolidation loans account for more than half of all peer-to-peer loans, followed by credit card payoffs (17%) and home improvement (8%). Small business loans account for an estimated 3.5% of all funded loans. Want to refinance student loans, put in a swimming pool, buy a new car, or fund medical expenses? Depending on the P2P lending site, you have a lot of options.

What's In It For Investors?

There are a lot of opportunities for everyday investors to invest their money into peer-to-peer lending (you can start investing for as little as $25). For one thing, the yields tend to be pretty high compared to similar investment options - often several percentage points higher than investing in a CD.  And most peer-to-peer sites require at least a minimum 630 credit score for borrowers to be approved, so you're not lending to the riskiest borrowers out there. One drawback for potential investors is that with most peer-to-peer lending sites, you must be an accredited investor, pursuant to the Securities Act of 1933. One of the biggest positives for some investors is the personal investment - as an investor you choose who you want to invest with based on a number of criteria, not the least of which is the borrower's personal story. This process cuts out the anonymous, big financial institution and brings both lending and investing down to a one-on-one, investor-to-borrower relationship.

What Are The Grading System And "Note" All About?

With peer-to-peer lending, everyday individuals fund small portions of loans, called notes by most P2P lending sites, and receive their principal plus interest when the borrower repays the loan. An investor typically can choose to: 1) invest in a number of different notes; and 2) determine how much to invest in each note.

The risk grading system is based on a credit score-based model for evaluating investment options. Each loan applicant's credit rating is evaluated and translated into a letter grade, and investors can then choose how much risk they wish to take when funding a loan.

What's The Risk with Investing in Peer-to-Peer Lending Sites?

Although the benefits of peer-to-peer lending can be lucrative for investors, you need to be a somewhat risk tolerant investor. Risk of loss is the biggest downside to investing in peer-to-peer lending. P2P loans are unsecured, meaning there are no assets backing each individual loan. So if a loan goes unpaid, investors are at a loss. And, of course, there's always the risk of the P2P lending site discontinuing its services. Notes are not guaranteed or insured by any third-party or governmental agency.

Diversification is key. The range of risky versus not-as-risky borrowers you have to choose from as an investor really depends on the lending site - some have a solid base of less risky borrowers; others not so much. Some lending sites offer good risk investment tools to help investors determine how to best meet their individual needs. As a general rule, it is best to invest in small portions of many different loans rather than putting all your eggs in one basket.

Top Three Peer-to-Peer Lending Sites Reviews

Below are our picks for the top three lending sites with pros and cons for each. If you are looking for a loan, make sure you do your research and choose the site that is right for your unique needs. If you are an investor, hopefully these reviews will help you decide whether to invest in one of these peer lending sites or if you should look elsewhere.

#1 Lending Club

Lending Club
    • Pro BulletOne of the best known P2P lending sites, so they have a solid track record
    • Pro BulletThey offer larger loans than most other P2P lending sites
    • Pro BulletExcellent customer service
    • Pro BulletFor borrowers, they have Saturday customer service phone hours and email anytime
    • Pro BulletYou can choose from several different types of investment accounts: individual, joint, trustee, corporate, custodial/minor and IRA
    • Pro Bullet99.9% positive returns for investors who own 10+ Notes of relatively equal size
    • Pro BulletFor investors: their minimum credit rating for borrowers is 660
    • Con BulletFor borrowers: their minimum credit rating is 660, which is higher than other P2P providers
    • Con BulletAPR not always the best rate available
    • Con BulletResidents of Iowa and Idaho cannot borrow personal or small business loans
    • Con BulletOnly offer business for individual investors in 33 states
    • Con BulletThey offer fewer types of personal loans than competitors
    • Con BulletThey charge investors collection fees which are deducted from any amount recovered. The amount charged either of the following: 1) 18% of the amount recovered if the loan is 16 or more days late and no litigation is involved, or 2) 30% of hourly attorneys' fees, plus costs, if litigation is involved. Lending Club does not charge a collection fee if no payments are collected, and no collection fee will be charged in excess of the amount recovered.

    Lending Club launched in 2007 as one of the first peer-to-peer lending sites, and today is one of the two dominant P2P lending sites based in the U.S. They have both experience and a solid base of investors, so they're definitely deserving of their prominence. They offer small business loans starting at $5,000 and personal loans to consolidate debt, pay off credit cards, finance home improvement and swimming pool installation. LendingClub earns our #1 Best Peer to Peer Lending Site award for its attractive APRs, excellent customer service, investment options and much more. They are clearly leading this industry.

    You can read our full review of Lending Club here.

    #2 Prosper

    • Pro BulletThey offer a number of different types of personal loans beyond the usual: military, wedding, baby and adoption, engagement ring, bridge and short-term loan
    • Pro BulletFor borrowers: one of the lowest beginning APR rates available, and a lower minimum credit score than its major competitor
    • Pro Bullet92% of Prosper employees are investors
    • Pro BulletThey offer a program for financial professionals to get involved
    • Pro BulletTheir legal documents and SEC prospectus are available on their website
    • Pro BulletFor investors: With Prosper's Quick Invest option, you can easily allocate your funds to a variety of borrowers, so even if one goes into default, the impact on your return is minimized.
    • Con BulletAll loans are capped at $35,000 – which is average for personal loans, but may not be enough to cover the costs of starting a business.
    • Con BulletThey only offer 36 or 60-month loans
    • Con BulletFor investors: based on their lower minimum credit score and high-end APR for borrowers, they tend to deal with riskier borrowers than some competitors
    • Con BulletA large number of customer service complaints posted on online forums
    • Con BulletWeb platform is hard to navigate, difficult to find information

    Prosper is our #2 pick for Best P2P Lending Site. It is one of the two P2P lending sites that currently dominates the market. Its parent company launched in 2005 and Prosper P2P lending site went online shortly thereafter. Over the past six years, Prosper peer-to-peer lending has granted more than $2.5 billion in personal loans. In mid-2014, Prosper raised $70 million in capital, led by Francisco Partners, a private equity firm, along with Institutional Ventures Partners (IVP) and Phenomen Ventures.

    You can read our full review of Prosper here.

    #3 Upstart

    • Pro BulletOther than the typical personal loans, Upstart offers loans for: student loans, relocation, travel, medical bills, and more
    • Pro BulletLoans for small business start-ups
    • Pro BulletCustomer support via live chat, email or phone
    • Pro BulletRefunds on origination fees to investors on defaulted loans
    • Con BulletCheck processing fee of $15 if you choose to make loan payment by check
    • Con BulletTo invest, you must be an accredited investor
    Upstart, our #3 choice for Best Peer to Peer Lending Site, is a younger peer-to-peer lending site geared largely toward college students and up-and-coming young professionals. "Ex-Googlers" founded Upstart in 2012 with the model of going beyond your credit score, with a focus on the potential of borrowers. Their statistical model considers schools you attended, your area of study, academic performance, and employment history to offer you the loan you've earned. Their loans are unsecured, but as an investor you can invest in loans by buying loan-related securities. These securities are issued by a trust and represent an ownership in the loan that the trust holds.

    Best P2P Lenders: Category Winners

    We've also ranked four of the peer-to-peer lending sites as the best in certain categories:

    Comparison Tables Of Peer To Peer Lending Sites

    We have two comparison tables for you to look over. The first is for borrowers and the second is for investors.



    Monthly Service Fee: The amount charged to the investor based on a percentage of the borrower's monthly payment amount. These are typically collected anytime an investor receives a payment proceed.

    Other P2P Lending Sites

    CircleBack Lending Review

    CircleBack Lending

      CircleBack launched in early 2012 by a founder of Loanio. Loanio was one of the original three P2P lending services which folded in the 2008 financial crisis. It took until 2014 for CircleBack to get firmly planted with the help of Jeffries (a premier global investment bank), which securitized a $500 million batch of consumer loans. CircleBack has a long way to go to compete with the big players, but their founder is committed to the ideal of peer-to-peer lending. Time will tell if they have the staying power of their competitors.

      • Pro BulletThe personal loan types are much more varied than competitors. Other than the typical types, they offer loans for: medical expenses, auto/car, motorcycle or boat purchases, wedding, engagement ring, vacation, relocation and military loans.
      • Pro BulletTheir founder has a commitment to social peer-to-peer lending
      • Pro BulletComprehensive blog with up-to-date advice
      • Pro BulletQuicker than average turnaround for loan approval and funding
      • Con Bullet$15 Check processing fee if you choose to pay your loan by check
      • Con BulletCustomer support is via email only, but they indicate on their website their
      • Con BulletNo listed information for investors - you have to submit their online form first

      Daric Review

      Launched in late 2013, Daric is one of the newcomers to online peer-to-peer lending. Although it hasn't reached the big leagues yet, Daric founders have tried to differentiate their platform by being user-friendly and easy to apply - you only need to fill out their online application and add your bank account to your profile. Only in rare cases, they say, do you need to upload other documentation. Daric is a true peer-to-peer lending site that has pretty standard rates and investor options. The one thing that sets Daric apart is the ability to take out a second loan once you've made on-time payments for 6 months.

      • Pro BulletOffer personal and small business loans
      • Pro BulletSolid APR rates
      • Pro BulletSecond loan option after six months of on-time repayments (maximum total of $50,000 for both loans)
      • Pro BulletAll legal information, including SEC filings, listed on their website
      • Pro BulletInvestors can earn returns from borrowers' fees, such as late or failed payment fees
      • Con BulletCustomer support via email only and there aren't many resources on their website
      • Con BulletLoans for less than $5,000 are only available for 36-month terms
      • Con BulletEligibility standards to borrow are more stringent than many other sites
      • Con BulletDaric won't grant you a partial loan if your loan is less than 60% funded by investors after 14 days
      • Con BulletMust be an accredited investor to invest with Daric

      Funding Circle Review

      Funding Circle

        With sites in the U.S., the U.K., Germany and the Netherlands, Funding Circle is positioning itself to be a global leader in peer-to-peer lending. They focus exclusively on small business loans. US Funding Circle's founding owners (small businessmen themselves) launched the brand in 2013 to fill a void within the traditional bank lending system. Their goal was to help other small business owners secure funding that they otherwise wouldn't be able to get. To date, Funding Circle has lent more than $8 billion globally to 62,000 businesses. To qualify, small businesses must have been in operation for more than 24 months.

        • Pro BulletEach borrower gets a personal account manager who is their dedicated contact throughout the application process
        • Pro BulletOnce you apply online, you'll typically hear from a loan specialist within 1 hour
        • Pro BulletAll loans are secured (most P2P loans are unsecured)
        • Pro BulletGreat customer service via phone, email and a blog
        • Pro BulletRobust platform
        • Con BulletNo personal loans
        • Con BulletNo start-up business loans
        • Con BulletThey only lend to established small business owners
        • Con BulletApplicants must pay an origination fee of 3.49% to 7.99% which is deducted from your loan proceeds
        • Con BulletYou must be an accredited investor to invest

        Peerform Review


          Peerform, launched by Wall Street executives, has been around since 2010 - a healthy life-span for a peer-to-peer lending site. Although they're not as well-known as Lending Club or Prosper, they bring a healthy alternative to P2P lending. For one thing, their minimum credit score is lower than all other sites we've seen, and you don't have to be currently employed to qualify if you can provide other sources of income. The downside, perhaps, is for eager investors - their minimum to invest is $100,000, clearly leaving out a huge portion of everyday people in their process.

          • Pro BulletCustomer support via phone, live chat and email
          • Pro BulletYou don't necessarily have to be currently employed to qualify if you can provide documentation of another source of income
          • Pro BulletLowest minimum credit score, so borrowers with less than stellar credit have a shot at getting a loan
          • Pro BulletIf your loan isn't totally funded by investors you have the option to accept or to decline the partially funded loan
          • Pro BulletInvesting with Peerform allowed in all 50 states
          • Con Bullet$15 check processing fee if making loan payment with check
          • Con BulletOnly 36-month payback term is available
          • Con BulletLoan amounts are smaller and APR higher
          • Con BulletNo weekend customer support hours
          • Con BulletBorrowers are charged a collection fee if loan goes into default
          • Con BulletMust be an accredited investor to invest with Peerform
          • Con BulletWith a minimum investment of $100,000, they are geared more toward institutional investors rather than everyday ones

          SoFi Review

          Social Finance, Inc. (commonly known as SoFi) began as a peer-to-peer lending site focusing solely on student loan refinancing, but in early 2015 they expanded their product line into personal loans. Their target borrower is an early career professional, who has the additional options of MBA loans and mortgage loans. APR rates and terms differ for each type of loan. What we like is their nontraditional underwriting approach, which takes into account merit and employment history, among other factors, to provide financing for those who may not be able to qualify elsewhere. In 2014 SoFi acquired $200 million in Series D funding led by Third Point Ventures and affiliates, but they continue to follow the peer-to-peer lending model with everyday investors.

          • Pro BulletUnique member benefits: career support and job placement assistance
          • Pro BulletUnemployment protection (they temporarily suspend loan payments if you lose your job)
          • Pro BulletCustomer support 7 days a week via phone and email
          • Pro BulletNo borrower origination fee
          • Pro BulletImpressively low student loan refinance rates: 1.92%-5.17% variable or 3.5%-7.24% fixed (5, 10, 15 or 20 year terms available) for both Federal and private student loans
          • Pro BulletMay accept co-signers for student loan refinancing and MBA loans only, depending on situation (contact them)
          • Pro BulletParent PLUS loan refinancing
          • Con BulletNo small business loans offered
          • Con BulletTo qualify for a loan, you must have a degree from one of their selected Title IV accredited universities or graduate programs
          • Con BulletStringent eligibility requirements, including solid employment history, very strong monthly cash flow and credit score
          • Con BulletLittle to no information on website about their investment options - you must contact them
          • Con BulletA number of customer complaints on online forums about poor customer service

          The Morphing Business of Peer to Peer Lending Sites

          Although Lending Club and Prosper have their drawbacks they still clearly dominate the peer-to-peer lending site market. But it's a service that's been in pretty constant flux over the last few years. The unfortunate reality for true peer-to-peer diehards is that most of these services don't seem to be able (or willing) to survive and thrive without some kind of institutional funding from investment groups, rather than large banks. Peer-to-peer lending is still morphing, so we'll keep an eye on where the industry goes from here.

          We Want To Know What You Think!

          Have you used one of our profiled peer-to-peer lending sites? If so, tell us your experiences. Do you already have a peer-to-peer lending site in mind and don't see it listed here? Let us know and we'll make sure to add it to our review.