Types Of Debt That Can Be Consolidated
The benefits of consolidating credit card debt are featured pride of place on Prosper’s website. If you’re carrying high balances on several credit cards, financing from Prosper will save you money. You’ll pay off your loan sooner than your credit cards, especially if you’re only making the minimum payment each month.
If you fall behind or miss payments, the late fees and creeping interest rates could trap you in debt for some time. While Prosper focuses more on credit card consolidation, you can use your loan to handle other high-interest debts as well.
A glance at LendingClub’s website leaves no doubt that the platform is serious about consolidation. Statistics compiled from borrowers and LendingClub itself indicate that roughly 50% of the platform’s loans are designed with debt relief in mind. There’s no limitation on what kind of obligations can be consolidated with a loan from LendingClub, although most borrowers handle credit card debt with these solutions.
The Winner: In this category, it’s a draw. Both platforms offer loans that you can use for consolidating most types of personal debt.
Consolidation Loan Size
When comparing Prosper vs. LendingClub, you won’t find much difference in loan sizes. If needed, you can consolidate as much as $40,000 in credit card and high-interest debt. The minimum amount is $2,000. Prosper’s investors make the final decision as to your loan size. If you present strong credit history credentials, you’ll have a decent chance at clearing your debt.
You can secure a loan for as little as $1,000 and as much as $40,000. If you‘re consolidating debt, you’ll likely need more than $1,000, but this lower amount probably makes the platform more popular. By folding multiple balances from several credit card accounts, plus other high-interest debts you’re carrying into a single loan, you’ll reduce your interest payments, lower your monthly bill, and improve your credit score. According to their website, borrowers say that they save more than $1,000 during their debt repayment.
The Winner: This Prosper vs. LendingClub matchup is a close one. Yet, LendingClub earns the nod because consumers can get a loan for as little as $1,000, which is unusual in the P2P lending marketplace.
[H2] Consolidation Loan Interest Rates & Duration
A loan from Prosper might be a bit more affordable than LendingClub. Still, it’s important to remember that your credit determines the interest and other fees that apply to your financing. Prosper’s fixed-rate options come with an APR of between 7.95% to 35.99%.
The APR includes an origination fee ranging from 2.40% up to 5.00% deducted from the approved funds before being disbursed. You can opt for a three year or a five-year term, but nothing in between.
The situation at LendingClub is similar to Prosper. You can choose three year or five-year financing terms. The interest rate offered is based on your credit history and other factors used by this platform’s investors to evaluate your creditworthiness. You might qualify for an APR as low as 10.68% or as high as 35.98%.
The APR includes an origination fee of between 1.00% - 6.00% which, like Prosper, is deducted from the loan before funds are deposited. The origination fee also depends on your credit profile.
The Winner: Prosper – but it depends on your credit history. Both platforms connect borrowers with lenders that decide the interest rate you’ll pay. However, you might be able to secure a lower APR with a Prosper consolidation offer.
In addition to a minimum credit score of 630, you must meet the following requirements:
- Two years or more of credit history
- A debt-to-income ratio less than 50% (not including your mortgage)
- At least three open credit accounts on your report
- No bankruptcy filings within the 12 months preceding your application
- Fewer than five credit inquiries in the six months before you apply for a loan
Prosper accepts borrowers with a credit score of 630 or above, but its preference is for consumers with a more robust credit history. On the other hand, it’s open to borrowers with significant debt, and there’s no minimum income requirement. You can add a co-signer to your application to help you get a better rate.
You can qualify for a loan from LendingClub with a FICO score of at least 600, but research shows that most borrowers have a credit score of approximately 700. Additionally, you’ll need the following:
- At least three years of credit history with no bankruptcies
- Two or more open revolving accounts
- No tax liens or collection activity
- Debt-to-income ratio no higher than 40%
- Fewer than six inquiries on your credit report during the six months before applying
There’s no minimum income requirement. You can submit a joint application, which can boost your chances of being approved and secure you better terms.
The Winner: LendingClub – it’s one of the best-known lending platforms for borrowers with poor credit.
Application & Approval Process
When comparing the application and approval process of Prosper vs. LendingClub, you’ll find a few differences. Both platforms have developed a design, which allows a consumer-friendly loan application process. You begin by answering a few preliminary questions to find out what rates you’re eligible to receive. If you’re ready to continue, you’ll move on to complete a full application and provide the requested documents regarding identity and income.
Your application is matched with investors who decide on your application, including the loan amount and terms. It could take two weeks before your application is accepted. If your financing isn’t at least 70% funded within these 14 days, it expires. Once approved, funds are deposited straight into your bank account.
Since LendingClub is a peer-to-peer lending platform too, the process of applying is the same as Prosper. Statistics indicate that it takes on average three minutes to complete the online application and learn what terms you’ll be offered. There’s no impact on your credit score. If you qualify, you’ll receive multiple consolidation offers.
You select the one that works best for you. You then complete the full online application, providing information such as an address, social security number, income, or employment documents. The website states that it takes seven to ten days from the time you submit your application until you see funds enter your account.
The Winner: Prosper – it might deposit your funds more quickly, but both platforms offer a streamlined application and approval process.
When calculating the cost of debt consolidation, you want to pay attention to fees. If you borrow from Prosper, your origination fee will be between 2.40% to 5.00%, depending on your credit history. This figure is included in the APR and will be deducted from the approved amount before the funds are visible in your account.
If you’re later than 15 days with your monthly payment, you’ll need to pay a late fee of 5.00% or $15, whichever is greater. There’s also a $15 returned payment fee if you’ve insufficient funds to cover your payment.
Depending on your financial circumstances, the origination fee for LendingClub debt consolidation ranges between 1.00% - 6.00%. Similar to Prosper, this fee is deducted from your loan before the funds are released. If your credit history is strong, you’ll qualify for the lowest fees.
LendingClub also provides borrowers with a 15-day grace period, after which you’ll be charged a late fee of 5.00% or $15 (whichever is greater).
The Winner: LendingClub – if you have a strong credit history, your origination fee could be only 1.00%, making your financing more affordable.
Special Benefits & Offers
There’re a few perks to a Prosper consolidation loan.
- You can change your payment date if necessary. Your account must be current, and you only do this once per year
- There’s no prepayment penalty if you want to pay off your debt before the term ends
- On the flip side, you can’t extend your financing duration, even if you’re facing an emergency
Prosper has a free personal finance mobile app called Prosper Daily that helps you better manage your money. You can connect your credit card account, view your credit score, catch any fraudulent activity, and monitor your spending.
There’s no prepayment penalty if you’re able to retire your LendingClub loan sooner.
Unlike most lending platforms, LendingClub allows you to apply for joint financing. If your credit isn’t the best, you can submit a joint application with someone who has better financial credentials. If their credit score is excellent, you’ll improve your chances of being approved and get the best terms.
The Winner: LendingClub – the ability to submit a joint application makes the lender more accessible to most borrowers whose credit scores have suffered from high debt.
Prosper Vs. LendingClub - Comparison
$2,000 - $40,000
$1,000 - $40,000
Minimum Credit Score
3 or 5 years
3 or 5 years
Application Approval Time
7 - 14 days
7 - 10 days
2.4 - 5% origination fee
5% or $15 late fee (with 15-day grace period)
$15 insufficient funds fee
1% - 6% origination fee
5% or $15 late fee (with 15-day grace period)
Which Is Better?
This Prosper vs. LendingClub matchup was hard-fought. As founders and leaders in the peer-to-peer lending industry, both platforms offer similar processes and eligibility requirements. Yet, beware of the possibility of slow processing times for your application while investors assess your creditworthiness.
While LendingClub offers amounts as small as $1,000, this point is irrelevant when consolidating debt. If you qualify, you might get a better APR at Prosper. But, LendingClub is better if you’ve got poor credit. And the ability to submit a joint application dramatically improves your chances of being approved.
In the end, the nod goes to LendingClub in this comparison, given many borrowers aren’t eligible for Prosper’s more favorable terms. Want to consider your options? Compare other leading consolidation loan lenders and the best for 2020.