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Best Peer-to-Peer Loans in 2020
Peer-to-peer lending offers borrowers a new avenue to get funded. The process links borrowers with individual investors willing to lend money in exchange for a longer-term return. The result? A win-win for both investors and borrowers. Because of the vast options in the peer-to-peer lending market, it’s critical you look to find the best peer-to-peer lenders to meet your needs.
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The best peer-to-peer lenders of 2020
- Lending Club – Best for overall
- Upstart – Best for next-day funding
- Prosper – Best for short credit history
- Kiva – Best for business microloans
- Peerform – Best for bad credit
| Lender | SimpleScore | APR | Loan Amount | Terms |
|---|---|---|---|---|
| Lending Club | 3.2 | 10.68% – 35.89% | $1,000 – $40,000 | 3 or 5 years |
| Upstart | 3.4 | 8.13% – 35.99% | $1,000 – $50,000 | 3 or 5 years |
| Prosper | 3.2 | 7.95% – 35.99% | $2,000 – $40,000 | 3 or 5 years |
| Kiva | 4 | 0% | Up to $15,000 | Varies |
| Peerform | 2.75 | 5.99% – 29.99% | $4,000 – $25,000 | 3 or 5 years |
Best overall – LendingClub
Lending Club offers peer-to-peer loans up to $40,000 and within four days with no prepayment penalties and low fixed rates.
With over 3 million customers and $50 billion in loans serviced, Lending Club is a powerhouse in the peer-to-peer lending industry. The entire loan process can be completed online, and you can get access to up to $40,000 in as little as four days.
Currently, Lending Club services customers in 49 U.S. states, with Iowa being the exception. The company offers personal loans, small business loans and auto refinancing loans. While personal loans are available up to $40,000, small business loans are available up to $500,000. Customers can apply for a loan online within minutes. From there, you’ll be presented with several different offers. Once you select the best option for you, your money will be sent directly to your bank account. In some instances, you may select that the borrowed money is paid directly to your creditors in exchange for a lower APR.
As one of the largest peer-to-peer lenders with over 3 million customers, Lending Club has the experience and has built the industry trust borrowers should flock to.
Best for next-day funding – Upstart
Upstart offers peer-to-peer loans from $1,000 to $50,000 for those customers with at least a 620 credit score, but also will work with people with insufficient credit history.
Upstart can get you a rate quote in as little as five minutes and entirely online. While Upstart does mention it will only work with borrowers who have at least a 620 credit score, the company does say it’s willing to work with people who have insufficient credit histories. Upstart’s flexibility to work with consumers with insufficient credit history is a major positive. Additionally, the fact the company looks at more than just your credit score when making a decision can be big for some struggling to find loan approval.
Best for short credit histories – Prosper
Prosper services peer-to-peer loans up to $40,000 for customers with a debt-to-income below 50% and no bankruptcies in the last 12 months.
Prosper personal loans are available to customers who meet the company’s list of income, debt and bankruptcy requirements. Prosper loans have no prepayment fees but do come with an origination fee of 2.4% to 5%. While Prosper does not list exact income requirements except that you have some income, it does mention working with customers that have less than a 50% debt to income ratio. This signals favorable approval probabilities for people that may be struggling to get approval elsewhere across the marketplace.
Investors with Prosper can get involved through the company’s website or the dedicated mobile app. The mobile app provides extensive tracking abilities for investors and options for you to select the types of loans you want to invest in as well as the associated risk level giving investors a good way to diversify their portfolio. Historically, returns with Prosper have averaged 5.1%.
Best for microloans – Kiva
International borrowers looking for funding for a new entrepreneurial idea should look into Kiva as the company services 98 different countries around the globe.
Kiva, a 501(c)3 U.S. nonprofit, is based in San Francisco but has staff around the globe. The company offers entrepreneurial loans internationally to help new business owners in struggling areas get started. Started in 2005 as a crowdfunding company, Kiva has grown into a nonprofit lending powerhouse with over 3.5 million borrowers and $1.42 billion in loans to 77 different countries.
Currently, Kiva loans are helping small businesses grow in 77 countries across the globe. While the loan is helping hard-hit areas, the company stresses it’s a loan and not a donation. The current repayment rate on loans is 96.8% and investors can get started for as little as $25 because Kiva uses a crowdfunding model to complete its mission. 100% of every invested dollar goes toward loan funding. Some of the main uses of the funds through Kiva are funding education for students in need, helping women in oppressed areas start businesses and helping farmers to invest in necessary equipment.
People without access to traditional funding sources looking for smaller loans could find the funding they need from Kiva. The nonprofit offers loans up to $15,000 and with rates as low as 0% with repayment terms up to three years.
Best for bad credit – Peerform
If you have less-than-great credit and are in need of an unsecured loan up to $25,000, Peerform could be the provider you are looking for.
Peerform is a peer-to-peer lender that has some lower requirements for approval than other companies in the industry. Loan sizes are a bit smaller, though, than other companies maxing out at $25,000. This is typical with lenders willing to work with less-than-great credit profiles. You will want to have a bank account you can connect for auto-debit to repay your loan because the only other repayment option is by check which comes with a $15 processing fee.
Investors interested in Peerform have the opportunity to earn healthy and steady returns through the company. To help protect investors, Peerform employs a state-of-the-art Fraud Prevention System to better identify users, check credit scores and perform compliance checks. Additionally, investors have free access to the Peerform loan analyzer that breaks down the potential risks and returns on different loans.
Although people with lower credit scores may not be able to utilize any of the other listed peer-to-peer lending options. Peerform, though, is willing to work with borrowers with credit scores as low as 600 and debt to income ratios as high as 40%.
What is peer-to-peer lending, and how does it work?
Typically, personal loans are serviced through a bank, credit union or other major financial institution. With peer-to-peer lending, though, borrowers can get money from individuals not associated with a bank. Online peer-to-peer companies facilitate the lending process between the investors and the borrowers for a small fee.
On the borrowing side, things will look identical. You’ll make your payments to the peer-to-peer facilitator much as you would to a financial institution. The only difference is that payment will eventually end up with an individual and not with a bank.
Those people looking to invest in peer-to-peer lending may find a new avenue providing better returns than traditional investments. The risk will be higher, but the potential returns will also be higher.
Pros and cons of peer-to-peer lending
Pros
- Consumers with worse credit may be able to get approval easier than with a traditional funding source
- Loans are available unsecured without the need for collateral
- There are few limitations on what the money borrowed through peer-to-peer lending networks can be used for
Cons
- The size of loans available may be smaller than with other forms of borrowing
- You may have less flexibility in repayment terms than when working with a major financial institution
- You may be required to pay an application fee
Too long, didn’t read?
Finding the best peer-to-peer lender for your needs means unlocking a huge potential of funding from alternative sources. With peer-to-peer lending, some borrowers are granted access to cash that might have otherwise been blocked to them. These lenders are able to source funding from a pool of investors, making it easier for customers to lock in better interest rates and open financial doors to new opportunities of lending. When shopping around different peer-to-peer lenders, be sure to check your rates and see what amounts your eligible for before signing the dotted line and committing to repaying the funds borrowed.
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Methodology
The SimpleScore is a proprietary scoring metric we use to objectively compare products and services at The Simple Dollar.
For every review, our editorial team:
- Identifies five measurable aspects to compare across each brand
- Determines the rating criteria for each aspect score
- Averages the five aspect scores to produce a single SimpleScore
Here’s a breakdown of the five aspect scores and their rating criteria for our review of the best personal loans of 2020.
Why do some brands have different SimpleScores on different pages?
To ensure the SimpleScore is as helpful and accurate as possible, we developed unique criteria for every category we compare at The Simple Dollar. Since most brands offer a variety of financial solutions, their products and services will score differently depending on what we’re scoring on a given page.
However, it’s also possible for the same product from the same brand to have multiple SimpleScores. For instance, if we compare NetCredit’s personal loans according to our criteria for the best personal loans, it scores a 2.3 out of 5. But when we compare NetCredit according to the criteria for the best bad credit personal loans, it scores considerably higher, since the criteria for the latter review are more lenient (lenders who serve borrowers with bad credit will always offer higher rates, so we needed to adjust our category methodology to account for different industry standards).
Questions about our methodology?
Email Hayley Armstrong at hayley@thesimpledollar.com.
Rates
We looked at the maximum APR for each lender — the lower their maximum rate, the higher their score.
Loan Size
We awarded higher scores to lenders with more generous loan sizes.
Customer Satisfaction
We leveraged the J.D. Power 2019 Personal Loan Satisfaction Study℠ to see how customers rated their experience with each lender. (If a lender wasn’t included in J.D. Power’s study, we skipped this aspect and averaged the four remaining aspect scores.)
Support
We awarded higher scores to lenders with the most channels for customer support.
Fees
We looked at the three most common fees — origination, late payment, and pre-payment — and penalized lenders for each fee charged.
Reviewed by
Courtney Mihocik
EditorCourtney Mihocik is an editor at The Simple Dollar who specializes in insurance, personal finance, and loans. Previously, she wrote and edited for Interest.com, PersonalLoans.org, Ballantyne Magazine, Thread Magazine, The Post, ACRN, The New Political, Columbus Alive and the Institute for International Journalism.
