3 Of The Best Peer-To-Peer Personal Loans To Consider

Personal loans are a common way to pay for large expenses like weddings, funerals and home renovations. They can be especially handy when you need funding in a pinch since some lenders can deposit your funds as early as the next business day.

Most lenders are what’s known as direct lenders, meaning the lender (usually a bank) provides the funding for your loan. But some lenders are actually peer-to-peer lenders, which means the funding for your loan comes from another individual, not an institution. Peer-to-peer loans can sometimes be more accessible to borrowers thanks to easy application processes and sometimes higher loan amounts.

Select rounded up some peer-to-peer personal loan lenders. We looked at key factors like interest rates, fees, loan amounts and term lengths offered, plus other features including how your funds are distributed, autopay discounts, customer service and how fast you can get your funds. (Read more about our methodology below.)

When searching for a personal loan, it can be helpful to compare several different offers to find the best interest rate and payment terms for your needs. With this comparison tool, you’ll just need to answer a handful of questions in order for Even Financial to determine the top offers for you. The service is free, secure and does not affect your credit score.

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Who’s this for? LendingClub Personal Loans is an attractive option for those looking to consolidate multiple debts since this lender allows you to send the loan funds directly to your creditors. This takes much of the hassle out of debt consolidation since you won’t have to send the funds yourself.

Borrowers looking for smaller loan amounts can benefit from a LendingClub loan, which start at $1,000. The maximum loan amount you can take out is $40,000. Just keep in mind that LendingClub loans come with origination fees ranging from 2% to 6% of the loan amount. This can be a significant expense depending on how much you’re borrowing, and the fee will be deducted from loan proceeds. For example, if you take out a $10,000 loan and you’re charged a 5% origination fee, only $9,500 will be deposited into your bank account, while you’ll still need to pay back the full $10,000 plus interest.

This lender doesn’t have any prepayment penalties, which means you can pay off your loan early without being charged a fee. Borrowers may also apply for a LendingClub loan with a co-applicant. Joint applications allow two borrowers to apply for a loan together so both credit histories are evaluated to potentially get you a lower interest rate on the loan.

Who’s this for? Prosper allows co-borrowers to submit a joint application, which can certainly be a huge draw for some potential borrowers when you consider the fact that this is not the case for all loans. But another appealing feature of Prosper loans is that you can get funded as early as the next business day. And if you’re a repeat borrower, you may qualify for APR discounts on your loan.

Prosper offers loan amounts between $2,000 and $40,000 with the possibility of next-day funding. Term lengths, on the other hand, may be less flexible for some borrowers: You can choose term lengths of either three years or five years. And, the APR for Prosper personal loans ranges from 7.95% to 35.99%. Origination fees are between 2.41% to 5% and get deducted from the loan proceeds.

Who’s this for? Upstart allows borrowers to apply for up to $50,000 and has a minimum credit score requirement of 600. This makes it a bit more accessible to those who have a lower credit score but still need to borrow money.

But to make it even more accessible, this lender also accepts applicants with no credit history, making it a good choice for someone who needs to borrow a larger amount of money but doesn’t have sufficient credit history. Just keep in mind that getting approved with a lower credit score or no credit score could mean that you receive a higher interest rate on your loan.

Upstart also allows you to apply with a co-applicant, so if you don’t have sufficient credit or you have a low credit score, you still have one more shot to receive a lower interest rate.

While there are no penalties for paying off your balance early, Upstart does charge an origination fee (up to 8% of the amount you borrow) and late fees ($15 or 5% of the past due balance, whichever is greater).

When it comes to repaying the balance, loan terms range from 36 to 60 months.

What is peer-to-peer lending?

Peer-to-peer lending is the process of getting a loan directly from another individual. Typically with a direct loan, you apply for funds through a financial institution and the institution funds you directly. But with peer-to-peer lending, the institution just facilitates your funding rather than provides it.

Are peer-to-peer loans safe?

Peer-to-peer loans should be as safe for borrowers as pretty much any other kind of loan. In fact, it’s the lenders who actually take on the real risk with peer-to-peer lending. Individuals (also known as investors) who deposit money meant to be loaned out to borrowers do not have their money FDIC-insured. Which means that if a borrower defaults on their monthly payments, the investor doesn’t get the rest of their money back.

What are the pros of peer-to-peer loans?

Similar to other personal loans, peer-to-peer loans carry lower interest rates compared to credit cards. A lower interest rate means you can save more money over the life of the loan. Additionally, peer-to-peer loans must usually be paid off within one, three, or five years. These shorter repayment terms means you can get rid of your debt a little quicker this way rather than if you were to take on a different kind of loan (personal loan terms can be as long as seven years).

The application and funding process also usually goes a bit quicker with peer-to-peer loans since there are so many lending options available (multiple peer investors rather than just one financial institution).

What are the cons of peer-to-peer loans?

While limited repayment terms can help you pay off your debt faster, it can also be unappealing to borrowers who would actually prefer more time to pay off their debt, which in turn gives them smaller monthly payments to budget for.

Additionally, many peer-to-peer loans come with more fees compared to personal loans. You may be charged a closing fee for a peer-to-peer loan in order to receive your funding, depending on the institution you apply through.

To determine which personal loans are the best, Select analyzed dozens of U.S. personal loans offered by both online and brick-and-mortar banks, including large credit unions, that come with fixed-rate APRs and flexible loan amounts and terms to suit an array of financing needs.

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