Peer-to-Peer Lending Platforms: A Quick Guide

The emergence of the peer-to-peer lending market is a relatively new phenomenon, but over the course of only a few years, the financial steam engine has originated hundreds …

The emergence of the peer-to-peer lending market is a relatively new phenomenon, but over the course of only a few years, the financial steam engine has originated hundreds of billions of dollars in loans and connected millions of private borrowers and lenders.

The industry is rapidly growing, but there are several majors players that appear to continually stand out above the rest. NuWire reviewed the following four peer-to-peer lending platforms for distinctive qualities such as respective levels of risk on investment, potential for return, strictness of borrower criteria and any unique features offered exclusively through these companies.


Prosper, which calls itself “America’s largest people-to-people lending marketplace,” has garnered more than 790,000 members and some $169 million in loans since its debut in 2006. Through the platform’s auction-style format, borrowers post loan applications with requested loan terms and relevant credit and personal information, and lending members view and bid on loans until the loan is fully funded or until the auction deadline has elapsed.

With a minimum required bid of $50 for any single loan, Prosper offers lending members the opportunity to diversify their funds across many different loans. It also offers the highest possible rates of return for loans with the highest risk among the lending platforms we reviewed. Lending members with a high-risk tolerance can earn up to 31.73 percent for loans of $1,000 to $5,000 provided for borrowers with the lowest possible credit grade, according to Prosper’s website. Lending members with low-risk tolerance, by comparison, earn 8.51 percent for a loan of a similar amount provided for borrowers with a high credit score of 760 and up.

The most significant downside, however, is that lenders face a significant risk of loss on their investment, as repayment of loans is not guaranteed.

Borrowers can obtain unsecured, three-year fixed rate personal loans up to $25,000 for rates as low as 8.68 percent. Qualifying borrowers must have a minimum credit score of 520. Fees for obtaining a loan through Prosper generally range from 1 to 3 percent, depending on the borrower’s credit grade.

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The concept behind LendingClub is similar to that of Prosper, in that lending members can contribute money to specific loans that are posted on their website. LendingClub also offers its own unique feature: LendingMatch™, a sophisticated online tool that presents lending members with a diversified portfolio of borrowers that fall under specified lending criteria.

There is a minimum contribution level of $500 to lend through a diversified portfolio that is built through LendingMatch™. For specific loans, lenders contribute in $25 increments, starting with a minimum amount of $25.

Similar to Prosper, LendingClub offers three-year term loans of up to $25,000. Interest rates start as low as 7.88 percent. Lending criteria for borrowers, however, is considerably more strict than that of Propser: applicants must have minimum credit score of 640 and debt-to-income ratio (excluding mortgage) below 30 percent.

Because loans offered through LendingClub tend to be at lower risk of default by virtue of their strict underwriting standards, the potential return on investment is relatively moderate, with interest rates of 7.37 percent for low-risk loans and up to 18.86 percent for high-risk loans.

It is important to note that LendingClub is not accepting new lender registrations or lender commitments at this time, as the company awaits its complete registration with the SEC in order to offer up to $600 million in Member Payment Dependent Notes. For more information read our previous article, Peer-to-Peer Loans May Be Classified As Securities, or visit


Of all peer-to-peer lending platforms we reviewed, Zopa offers lenders the lowest risk on investment. Through the Zopa website, lending members purchase one-year CDs at a rate of 3.75 percent for a minimum amount of $500. The CDs are insured investments guaranteed by any of six credit unions partnered with Zopa. The biggest advantage of peer-to-peer lending through Zopa is that if a borrower defaults on a loan, it does not affect the lending member’s return on investment on the CD.

As a required term of purchasing a Zopa CD, investors much choose at least one borrower to “help,” and adjust the rate they earn on their investment accordingly. For instance, an investor who elects to earn 2.75 percent instead of the standard 3.75 percent on a $1,000 CD provides the borrower with 1 percent—in this case, $100—of “help,” or $100 less that the borrower has to pay off on the loan. Thus, the larger the amount that a lending member invests in a Zopa CD, and the lower the rate they choose to receive, the more help they give borrowers. The amount of “help” ranges from a minimum of one-tenth of a percent to the full amount of interest that could be earned on the CD.

Because borrowers may receive help from any number of other Zopa members, it’s possible for a borrower to receive an interest rate of 0 percent if they receive sufficient help from other Zopa members. Borrowers can obtain loans at a rate as low as 8.49 percent for a five-year, $5,000 loan, not including any of the help that borrower may receive through other Zopa members. In order to qualify for a Zopa Loan, however, borrowers must meet strict standards, such as a minimum credit score of 640 and a stable gross income of at least $2,000 per month.

For more information, read our previous article, Zopa U.S. Website Launched, or visit

Virgin Money

While most traditional peer-to-peer lending platforms facilitate lending relationships between complete strangers, Virgin Money facilitates loans between family and friends. Consequently, Virgin Money does not provide a listing service for lenders and borrowers, as it is assumed that the two parties have already been “matched” through relationships that have already been established.

Although individuals involved in the transaction ultimately decide on the terms of the loan, Virgin Money offers invaluable guidance and loan management services. Because informal loans between family and friends tend to have a high default rate, the company essentially formalizes the process and lowers the risk of default. A range of services are provided for real estate, business, personal and student loans, with fees ranging from $199 to $2,299.

For more information read our previous article, Virgin Money Manages Friend and Family Lending, or visit


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