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Peer-to-Peer Lending Sites

By March 15, 2015April 13th, 2015Blog, Investing

By Drew Tulchin, Managing Partner, UpSpring

So there has been an explosion in the marketplace for online funding. Mostly, this is positive with many organizations, causes and people getting funding in new ways. This is now more than a US$1 billion a year industry and is clearly here to stay.

Within crowd based online funding there is a sub-group called peer to peer lending. This is an eBay for debt. Individuals, organizations, businesses, causes and other institutions raise money. This is debt – that needs to be repaid.

There are a lot of options out there, so caveat emptor – buyer beware if you are an investor or seeking to borrow money. While this is a great opportunity and opens access for many, there are risks and prudence is needed.

If you are an INVESTOR: it is valuable to understand your needs, your risk profile and what you can afford to lose. It is helpful to know how the site safeguards and underwrites its borrowers and what it does about collections. And, it is useful to see what types of borrowers are on the site. [Disclosure: I’ve invested in Prosper and made and lost money. Last I checked, they weren’t allowing investors from my state. I’ve also used a couple of other sites].

If you are a BORROWER. You still need to do your homework. All sites are not created the same. There is great variety in how they underwrite and what they expect in your qualifications and requested information. And, there is a range in how much you can borrower, the interest rates (which can be quite high), fees (also high) and terms (short and long). This market is changing quickly, so it is important to do.

What to look for?
Consider your APR (annual percentage rate). A site can advertise a reasonable interest rate, but with fees and other additions, it can add up. Know the recourse and the term.  We find interest rates at the larger sites to be quite high. Research and check up on that before you use a site.

Below is a table specifically of a few select peer-to-peer lending sites. This does not purport to have all of them, or even the largest ones. It is meant as exemplary for comparative purposes. Upspring does not assert this is correct and you must check yourself.

Lending Sites Examples
P2P Site


Limits Rates Fees Term

(640 min FICO)

$2,500 to $20,000/loan $40,000/year Aggregate:

$120,000 undergrad

$160,000 grad

1-month LIBOR plus margin of 3.5% to 7.9% and a 1%
guarantee fee
Borrowers: 2.9% to 6.9%

Lenders: 1% annual

5-10 years

(Friends & Family)

$1,000 to COA 6.8% fixed

(6.0% in PA and DC)

Borrowers: $49 or 2%

Lenders: 1% annual

10 years
Lending Club

(640 min FICO)

$1,000 to $25,000 7.37% to 18.86%

average 12.3%

Borrowers: 0.75% to 2.0%

Lenders: 1% annual

3 years

(569 min VantageScore)

$1,000 to $25,000 7% to 24% or more Borrowers: 2% to 3% origination ($95 min) depending on
credit score, plus 1% for a co-borrower
Lenders: 1% annual servicing
Up to 60 months
Prosper Marketplace

(520 min FICO)

$1,000 to $25,000 7.9% to 31.88%

average of 26.1%

AA average of 13.4%

Borrowers: 1% to 3%

Lenders: 1% annual

3 years
Virgin Money USA

(Friends & Family)

Not specified Not specified Loan Documentation: $199 for a single-loan promissory
note, $299 for the ability to add up to 10 loans to the original promissory
Loan Servicing: $9 per payment.
Not specified
Zopa USA

(640 min FICO)

Not specified 12.5% to 18.0% Not specified Up to 60 months.

In addition to these sites which lend to US students, QiFang is focused on providing peer-to-peer loans to Chinese students who want to go to other schools.

Information presented here was collected in March 2015. We cannot take responsibility for the current up-to-date accuracy of this information as time goes on. Websites changes frequently.

UpSpring helps organizations develop ideas, raise capital and launch projects for the betterment of communities worldwide.