Prosper Personal Loans 2021 Review: Good for Fair Credit or Bad-Credit Borrowers with a Co-Applicant

A photo to accompany a review of Prosper personal loans Illustration/NextAdvisor

We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

Founded in 2006, Prosper was one of the earliest peer-to-peer lending marketplaces in the U.S. and presently offers fixed-rate loans between $2,000 and $40,000. When you’re looking for cash to help you bridge a funding gap — whether it’s for debt consolidation, an emergency, or a large purchase — a Prosper personal loan can help as long as you’re careful about using the money responsibly and understand all of the terms.

Prosper can provide borrowers with next-day funding in certain situations, provided borrowers have at least a fair credit rating and swiftly provide all necessary documentation to vouch for their ability to repay the loan. The online lender might also be appropriate for co-borrowers when one applicant cannot qualify for funding on their own. However, the downside is that for all Prosper loans (co-borrowers and individual borrowers alike), you’ll have to pay origination fees. Additionally, your interest rate on a Prosper loan might be a little higher than what you’d see with competitors. 

Nonetheless, Prosper can be a helpful option for debt consolidation, home improvement, medical costs, dental expenses, or other lump-sum needs. 

What to Know Before Getting a Personal Loan

A personal loan can offer quick access to money when you need it, but make sure you have a plan to repay it before applying. Before turning to any personal loans, carefully consider alternatives and create a debt repayment plan. Do your due diligence by researching your options and comparing several lenders to get the best personal loan rate

While comparison shopping for a personal loan, understand that the exact rate you get may not match the rates advertised by the lenders. Your personal loan rate depends on a number of factors, including your credit score and income, as well as the specific loan value and terms. If you aren’t satisfied with your current personal loan rate, you might be able to refinance your personal loan later.

With some lenders, you can pre-qualify for a loan or check your rate using a soft credit inquiry, which doesn’t impact your credit score. On the other hand, when a lender uses a hard credit inquiry to qualify you, that may temporarily hurt your credit score. Once you turn in an official personal loan application, however, most lenders move forward with a hard credit inquiry. While interest rate is often the characteristic most people take into consideration, there are other terms to review. Find out if the lender charges origination or late fees, or if they impose prepayment penalties. Fees and penalties can increase the lifetime cost of the loan. 

After receiving your loan, consider setting up automatic payments through your checking account to make sure you never miss a due date. Making on-time payments will not only help you avoid fees and additional interest charges, but you’ll also prevent potential damage to your credit score.

Lastly, pay attention to the difference between a secured and unsecured loan. A secured loan requires that you put up an asset, such as a car or a home, as collateral in case you default. An unsecured loan, on the other hand, is made without collateral. Secured loans sometimes come with lower interest rates, but you run the risk of losing a valuable asset if you can’t make your loan payments. 

Alternatives to Personal Loans

Even though there are different reasons to get a personal loan, including managing debt and unexpected expenses, loans aren’t the only choice available. Here are a few alternatives to personal loans:

  • Home equity loan, home equity line of credit (HELOC), or cash-out refinance: You can use your home’s equity as a way to bridge your funding gap. You may be able to get a lower rate for a large amount of money since the loan is secured by your home. However, you risk losing your home if you default, and the process can take longer than getting a personal loan. 
  • Balance transfer credit card: Certain balance transfer credit cards have introductory rates of as low as 0% APR for anywhere between six and 24 months. Using a balance transfer credit card for debt consolidation can be a way to tackle your debt faster. However, it’s important to create a plan to pay off the debt before the introductory period ends and your interest rate shoots higher. 
  • Personal savings: Rather than taking on debt to cover your costs, you can be proactive and plan ahead — as long as your money needs aren’t immediately pressing. An emergency fund of six months’ worth of expenses can provide you with a reserve to draw from. If you have time to save up for a large purchase, that might make more sense than getting into debt with a personal loan. 
  • Free credit counseling: Rather than use more debt to consolidate your current loans, it might make sense to look into credit counseling to get you back on track. Even though you won’t be given money to cover your costs, credit counseling can provide you with the tools and education to improve your situation. 

Pros and Cons of a Prosper Personal Loan in 2021

Pros

  • Next-day funding for some loans

  • Joint personal loans

  • Borrow up to $40,000

  • Grace period of 15 days for late payments

Cons

  • Not available in Iowa or West Virginia

  • Prosper charges an origination fee on all loans

  • Only two options for loan terms (three and five years)

Prosper Personal Loan Compared to Other Lenders

ProsperLendingClubBest Egg
Current APR7.95% to 35.99%7.04% to 35.89%5.99% to 29.99%
Loan Term Range3 years or 5 years3 years or 5 years3 years to 5 years
Loan Amount$2,000 to $40,000$1,000 to $40,000$2,000 to $50,000
Credit Score Needed640600640
Prepayment PenaltyNoneNoneNone
Origination Fee1% to 5%3% to 6%0.99% to 5.99%
Unsecured or Secured DebtUnsecuredUnsecuredUnsecured

The above rates and loan information is accurate as of Aug. 23, 2021. The NextAdvisor editorial team updates this information regularly, though it is possible APRs and other information has changed since it was last updated. Some of the lowest advertised rates might be for secured loans, which require collateral such as your home, car, or other asset. Also, some loan offerings may be specific to where you live.

How to Qualify for a Prosper Personal Loan

To qualify for a Prosper personal loan, you need to be at least 18 years old and have a Social Security number and a U.S. bank account. However, residents of Iowa and West Virginia won’t be able to get loans through Prosper.

In addition to meeting those basic requirements, Prosper requires a credit score of at least 640, which is considered a “fair” credit rating by Experian. If you have poor credit, you might need to look for a bad credit loan from another lender. You also need to report your income, even if it is just a little more than $0 per year. Your debt-to-income ratio can’t be more than 50% to qualify for a Prosper personal loan.

Prosper personal loans are unsecured. However, if you’re having trouble meeting the minimum requirements, it’s possible to get a co-borrower and potentially qualify that way. A co-borrower will share all responsibility for the loan with you, compared to a co-signer who the debt will default to if it goes unpaid.  

Who Should Get a Prosper Personal Loan

A Prosper personal loan might work for someone with fair to good credit who wants to use the money for a large purchase, home improvement, an emergency, or debt consolidation. Prosper offers a peer-to-peer lending model in which the lenders are not traditional institutions but rather individual investors. However, when you go through the verification process, you can still get your money as early as the next business day. 

Unlike other debt consolidation loan options, such as Marcus Personal Loans, Prosper doesn’t provide the option to send payments directly to creditors. Therefore, anyone using a Prosper loan for debt consolidation should be extra diligent about having a plan in place. Personal loans arrive in your bank account as a lump-sum cash deposit, and you typically have to start making payments within your first 30 days. If you have a history of carrying revolving debt balances and worry about your ability to manage such a large amount of cash, consider looking for personal loan lenders that deliver funds right to your creditors. That way, your outstanding balances are immediately covered, and all you have to do is set up automatic payments for your new loan.

If you’re looking for fast funding for an emergency or if you want to consolidate debt, Prosper may be worth considering. Prosper also offers a home equity line of credit, even though its personal loans are aimed more at debt consolidation, auto purchases, home improvement, or health care costs.

How to Apply for a Prosper Personal Loan

1. Decide on your loan amount and terms

Start by determining whether you should get a personal loan, how much money you need to borrow and create a plan for paying it back. The same loan amount might have a lower monthly payment with a longer term, but the amount of time you pay interest leads to a higher overall cost over time. Lenders have varying amounts, but Prosper has loan amounts of between $2,000 and $40,000, and you can choose between terms of three and five years.

2. Compare interest rates online

Check your rate online with Prosper. You can do so on Prosper’s website, and you won’t need to worry about a hard inquiry since checking rates online won’t impact your credit score. Consider comparing your rate with other lenders to see where you can get the best deal.

3. Fill out and submit your application

Once you decide if Prosper is the right choice for you, fill out a formal application. This step will impact your credit score, as this is part of how personal loans work. You will need to prepare the necessary documentation for your loan application, including your proof of income and a government-issued ID. You might be able to add a co-borrower if you’re worried about qualifying for the loan.

4. Wait for approval, signing, and funding

Depending on your situation and how quickly your documents can be verified, you might be approved and receive your funds as soon as the next business day with a Prosper personal loan. However, if you have a less straightforward situation, including self-employment or a co-borrower, it could take longer to receive approval and funding.

Prosper Personal Loan FAQs

Is Prosper good for personal loans?

Prosper offers loans of up to $40,000 for a variety of purposes, which can be accessed by those with fair credit. On top of that, those looking for fast cash can receive funding as soon as the next business day. However, interest rates might be a little higher than what you’d see with other lenders, and you will have to pay an origination fee.

What credit score do you need for a Prosper loan?

You need a credit score of at least 640 to qualify for a Prosper personal loan. However, to get the best rates and lowest origination fees, you need a higher score than the minimum.

Can I get a Prosper personal loan with bad credit?

No, in order to qualify for a Prosper personal loan, you need fair to good credit at a minimum.

Does a Prosper loan hurt your credit?

Any time you apply for a loan, you receive a hard inquiry on your credit report, resulting in a slightly lower credit score. Once you’ve received your loan, any missed or late payments can damage your credit score, so it’s important to have a plan to make your payments on time and in full.