Best Peer-to-Peer Loans of March 2024 (2024)

Guide to Choosing the Best Peer-to-Peer Lending Websites

Why Should You Use a Peer-to-Peer Loan?

Peer-to-peer lenders are best for borrowers who may struggle to qualify for loans from traditional banks and lenders. P2P lenders have more relaxed borrower requirements, making it more likely that you’ll qualify for a loan.

They also can be a good fit for those who need to borrow money but are ineligible for other types of financing. For example, entrepreneurs that are launching small businesses are unlikely to qualify for traditional business loans, so P2P loans can be a valuable alternative.

When deciding which loan type is best for you, keep in mind that peer-to-peer loans can have higher-than-average interest rates and added fees, such as origination fees, that can add to your overall cost.

Comparing Peer-to-Peer Loan Lenders

When comparing loan offers from peer-to-peer lenders or any personal loan lender, there are a number of factors to consider:

  • APR: The APR is the total cost you pay to borrow money, including interest rates and fees. The higher the rate, the more you’ll pay. The average APR for a loan with a 24-month term is 12.35% as of November 2023, but your rate is determined by your credit score, income, debt history, and selected loan term.
  • Loan Terms: The loan term is how long you have to repay the loan. Most personal loans have terms of five years or less. A shorter term will give you a higher monthly payment, but you’ll also likely get a lower interest rate and a lower overall repayment cost.
  • Origination Fees: An origination fee is charged by some lenders—but not all. The fee is a percentage of your loan amount; for example, a $1,000 loan with an 8% origination fee would add $80 to your loan cost (or it may be deducted from your loan proceeds).
  • Prepayment Penalties: Some lenders charge prepayment penalties if you pay off your loan sooner than is stated in the loan agreement. When comparing lenders, make sure there is no prepayment penalty to avoid those costs.
  • Minimum Credit Score: The minimum credit score is the score you need to qualify for a loan from a particular lender. In general, P2P lenders tend to look for credit scores of around at least 600. However, each lender has its own requirements.
  • Collateral: If you have less-than-perfect credit, some personal loan lenders offer secured loans. You use property, such as a car, as collateral for the loan. Using collateral increases your odds of qualifying for a loan and securing a better interest rate.
  • Loan Disbursem*nt: While some lenders will disburse your loan as soon as the next business day after approving your application, other lenders can take several days (or more). If you need the money fast, make sure you select a lender that offers quick loan disbursem*nt.

How to Apply for a Peer-to-Peer Loan

Most P2P lenders offer pre-qualification tools that allow you to check your eligibility for a loan and view sample rates and repayment terms without affecting your credit score. If you decide to proceed with the loan application, you can usually complete it online.

To apply for a personal loan you’ll need to provide your personal information, including:

  • Your name
  • Address
  • Social Security number
  • Income
  • Employer information

The lender will review your application and perform a hard credit inquiry. If approved, the P2P lender will assign you a risk category and submit your information to its investor platform. Its investors can review that information and make a bid to fund the loan.

Because lenders usually work with institutional investors, such as banks and credit unions, this process is relatively fast, and your loan can be funded and disbursed within a few days.

How Can I Invest and Make Money With P2P Loans?

While P2P lending used to be an attractive way to earn a higher rate of return than stashing money in a savings account, there are fewer options for individual investors now.

Few P2P companies allow individual investors to invest and fund loans; Prosper is one of the few left that allows individual investors to fund consumer loans. With Prosper, you can get started with a minimum investment of just $25.

Other options include:

  • Kiva: Kiva is a P2P lender that issues loans to people across the globe who may struggle to get financing elsewhere. You can invest as little as $25 to help people get small businesses off the ground and support their families.
  • Fundrise: Fundrise is a way to invest in a diversified portfolio of commercial and residential real estate, and you can start with just $10.
  • PeerStreet: Like Fundrise, PeerStreet is a P2P lender focused on real estate. Individual investors can contribute to home offers, bridge loans, and investment property loans. However, it has a higher minimum to start investing at $1,000.

What’s the Difference Between P2P and Crowdfunding?

P2P loans and crowdfunding are both ways to get a lump sum of cash from many people. But how these financing options work is quite different. A P2P loan is usually based on creditworthiness, and it must be repaid with interest over a set loan term. By contrast, crowdfunded funds don’t have to be repaid, and because people decide to donate to the fund based on the service it offers or the cause it supports, crowdfunding doesn’t involve credit checks.

Why Are Some Lenders No Longer Offering P2P Loans?

As a novel idea, P2P loans previously were largely exempt from the regulations and consumer protection laws that applied to personal loans issued by banks and credit unions. However, the U.S. Securities and Exchange Commission (SEC) labeled P2P loans as securities, and therefore they have to be registered with the FEC to comply with federal securities laws. Of the P2P lenders that continue to operate, most have moved away from working with individual investors and instead only utilize institutional investors.

Are P2P Loans a Better Choice Than Payday Loans?

While P2P loans may have higher interest rates than you see advertised by some personal loan lenders, they’re still significantly less expensive than payday loans. With consumer P2P loans, interest rates can reach 35.99% and higher. However, they’re much lower than the APRs of payday loans. According to the Consumer Financial Protection Bureau, the typical two-week payday loan has fees that equate to an APR of almost 400%.

Are P2P Loans Safe?

For borrowers, P2P loans are quite safe. Platforms that offer P2P loans act as intermediaries between investors and borrowers. Peer-to-peer loans aren’t insured or protected by the government. However, that puts most of the risk on investors, rather than borrowers.

Do P2P Loans Affect Your Credit Score?

Most P2P lenders have minimum credit score requirements and perform hard credit inquiries, and each inquiry can cause your score to drop. One exception is crypto-backed P2P loans. These are secured by collateral and can be issued without credit checks, so there are no credit inquiries that can affect your credit.With all P2P loans, your timely payments can affect your credit, too. If you fall behind on your payments and your debt is sent to collections, those actions will show up on your credit reports and cause your score to drop.

Final Verdict

There are fewer peer-to-peer lenders offering consumer loans than in years past, but they can still be useful options for eligible borrowers. If you’ve struggled to qualify for personal loans or business loans because of your credit, you may have a better chance of getting a loan by working with a peer-to-peer lender.

Prosper is our choice as the best overall P2P lender because of its available loan amounts and relatively low credit requirements. However, if you want a higher loan amount—or need more time to repay the loan—you’ll need to find another lender or funding avenue, such as crowdfunding.

And, if you have good credit and stable income, you may qualify for lower rates if you get an unsecured personal loan from a bank, credit union, or online lender. Get quotes and compare rates from our selections of the best personal loan lenders.

How We Chose the Best Peer-to-Peer Lenders

Our team evaluated 38 lenders and collected 1,520 data points before selecting our top choices. We weighed more than 20 criteria and gave a higher weight to those with a more significant impact on potential borrowers.

The top picks were selected based on factors like membership requirements (weighted 15%), average fixed APR (weighted 15%), and average origination fees (weighted 10%).

We also took into account the flexibility of repayment terms, helpful features like prequalification, and whether a co-signer or joint applications are permitted to ensure borrowers get the best possible experience. For further information about our selection criteria and process, our complete methodology is available.

Best Peer-to-Peer Loans of March 2024 (2024)

FAQs

Which peer-to-peer lending is best? ›

Best peer-to-peer (P2P) lenders
  • Prosper. Traditional peer-to-peer lending. Prosper. ...
  • Lending Club. Debt consolidation. Lending Club. ...
  • Funding Circle. Business loans. Funding Circle. ...
  • Upstart. P2P alternative. Upstart. ...
  • Avant. Low origination fee. Avant. ...
  • Happy Money. Customer experience. Happy Money. ...
  • LightStream. Good credit. ...
  • SoFi. Low fees.
Feb 26, 2024

What credit score do you need for a peer-to-peer loan? ›

In general, P2P lenders tend to look for credit scores of around at least 600. However, each lender has its own requirements. Collateral: If you have less-than-perfect credit, some personal loan lenders offer secured loans.

What is the minimum credit score for Peerform? ›

By contrast, Peerform's minimum credit score is just 600, which is in the “fair” range. Pre-qualification with a soft credit check: While some borrowers require you to submit your information and undergo a hard credit inquiry to check your eligibility and rates, Peerform has a pre-qualification option.

Is peer-to-peer lending still available? ›

There are a limited number of P2P lenders, so you may need to expand your search to find the best rates. Look for low interest rates, flexible repayment terms and as few fees as possible that come with the loan. Get pre-approval. Once you find lenders that fit your needs, get pre-approved for a loan, if possible.

What is the maximum amount for a peer-to-peer loan? ›

Where can you get a P2P loan?
LenderLoan AmountsLoan Terms
Upstart$1,000 to $50,00036 to 60 months
LendingClub$1,000 to $40,00024 to 60 months
Prosper$2,000 to $50,00024 to 60 months
Happy Money$5,000 to $40,00024 to 60 months
1 more row
Feb 24, 2024

Can you get a peer-to-peer loan with bad credit? ›

Peer-to-peer loans can be an option for bad-credit borrowers (those with scores of 629 or below), but they may have higher interest rates. For example, a four-year, $15,000 loan with a 28.7% APR would have monthly payments of $529 and an overall interest cost of $10,383.

What are the pitfalls of peer-to-peer lending? ›

Nevertheless, peer-to-peer lending comes with a few disadvantages:
  • Credit risk: Peer-to-peer loans are exposed to high credit risks. ...
  • No insurance/government protection: The government does not provide insurance or any form of protection to the lenders in case of the borrower's default.

How long does it take to get a peer-to-peer loan? ›

The bottom line

If you're interested in P2P lending, the first step is to research the lenders you want to work with and prequalify. If you're offered competitive terms for your financial situation and apply, you can expect the funds within a few business days.

Do you have to pay taxes on peer-to-peer lending? ›

Yes. The IRS now requires peer-to-peer third-party payment platforms to provide information to the IRS on users who receive payments for the sale of goods and services using their apps. Beginning in 2023, the IRS requires P2P platforms to issue Form 1099-K to users with transactions totaling more than $600.

Can I get a loan with a 524 credit score? ›

Key Things to Know About a 524 Credit Score

Borrowing Options: Most borrowing options are available, but the terms are unlikely to be attractive. For example, you could borrow a small amount with certain unsecured credit cards or a personal loan with no credit check, but the interest rate is likely to be high.

What credit score is needed for a 2500? ›

You will likely need a credit score of at least 580 for a $2,500 personal loan. Most lenders that offer personal loans of $2,500 or more require bad credit or better for approval, along with enough income to afford the monthly payments.

Can I get a home loan with a 470 credit score? ›

It is possible to qualify for an FHA loan with a credit score as low as 500, although you won't get the standard 3.5% down payment these loans are known for. Borrowers without a FICO Score of at least 580 need to put 10% down.

Who bears risk in P2P lending? ›

Lenders face the risk of losing their money if the borrower defaults on the loan. P2P loans can offer lower interest rates for borrowers with good credit and high returns for investors.

What is the largest peer-to-peer lending company? ›

Mintos. The second platform that I wanted to mention in this article is Mintos. Mintos is currently the largest Peer-to-Peer lending platform in Europe, and offer a huge amount of loans to invest in.

Which is a major online P2P lender? ›

Finzy. Finzy offers a unique mix of flexibility and transparency, making it one of the top P2P lending platforms. It allows only verified investors to fund their customers, and the latter's personal data is not shared with lenders at any given time.

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