Should you consolidate your debt with LendingClub or Prosper?

LendingClub has recently added a section to its website that provides statistics about borrowers and lenders. A significant portion of LendingClub loans can be used to consolidate debt. This data point caught my attention. At one time, nearly 60% of borrowers stated that they intended to consolidate debts with the loan. However, this number has dropped a little.

Below is a graph that shows the main uses for LendingClub loans.

Consolidating debt can be done in many ways. To reduce my interest payments and pay my bills, I used balance transfer offers at 0% APR to consolidate debt. Balance transfers have one drawback: the more extended offers are only good for 21 months.

LendingClub and Prosper offer benefits for debt consolidation

Both Prosper and LendingClub have distinct advantages worth looking into when trying to get out of debt.

  • Fixed Interest Rate: The most appealing advantage LendingClub or Prosper have to offer is a fixed interest rate. Fixed interest rates are rare on credit cards today. There have been horror stories about people who have had their credit card rates rise. LendingClub or Prosper will give you the rate that you pay, but you can also keep it.
  • Three-year or five-year term: The loan term for the two social loan websites is three or five years. I believe that three years is a good time to repay a consolidation loan. The payments are affordable, and the term is long enough not to have high-interest rates. For those who require more time to pay off debt, the 5-year option can be used.
  • Prepayment is free. Although the loan term lasts three to five years, you can still prepay it. There is no prepayment fee.
  • Simple application: Prosper and LendingClub make it easy to apply. LendingClub’s online application takes only 3 minutes, and you will receive a decision about your loan immediately.
  • Automatic Payment Process: After taking out a loan, monthly payments are taken automatically from your checking account.
  • Confidentiality – Although LendingClub is a social lending site, Prosper protects your privacy.
  • Loans can be unsecured. Unlike a home equity loan, a LendingClub and Prosper loan are not secured by your house. The loan is not guaranteed by your home, although you are obligated to repay it.

Eligibility for borrower

It is important to understand that LendingClub has different requirements than Prosper. Below is a summary of the LendingClub requirements you need to meet to be eligible for a loan.

  • U.S. citizen or permanent resident
  • Minimum 18 years of age with a valid bank account.
  • FICO Score of at least 600
  • An income to debt ratio (exempting mortgage) of 40 percent or less. This means your total monthly debt payments (e.g., credit card, school loan, or car loan) should not exceed 40%.
  • Minimum of 3 years credit history.
  • In the past six months, you have received six or fewer credit requests
  • Minimum 2 open revolving credit account currently

You must have a minimum FICO score of 680 to be eligible for Prosper. You can click here to find your credit score. LendingClub has the exact requirements for Prosper’s debt-to-income ratio.

Credit score and consolidation

Your credit score plays a significant role in determining your loan eligibility and the interest rate and fees that you will pay. Take a look at the Lending Club rate table below.

The first column shows “Loan Grade.” This is the rating Lending Club assigns your loan. This rating is calculated using a variety of factors, including your credit score. Your grade can be anywhere from “A” through “G.” The “Interest rate” column will show that rates can vary from a very affordable rate of 5.32% on a Category A loan to a high rate of 32.99% on a 36-month loan. Graded “G.”

The moral of the story is Your credit score matters when you take out P2P loans.

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It is easy to apply for a consolidation loan. You can quickly check the interest rate with Prosper and LendingClub without having to affect your credit score. You can also check your eligibility for both services within minutes.

Prosper took only 2 minutes to calculate the rate for a $ 10,000 consolidation loan. These are my results.

Rates may vary depending on your situation.

LendingClub was equally fast. Here are the rates that LendingClub offered to consolidate my debt after entering the same information as Prosper.

LendingClub rates may differ from mine, just like Prosper.

It is important to understand the terms of your loan.

The loan terms for P2P lending platforms are usually only five years. The rates for 5-year loans are more expensive, as you can see by the rates. The good news is that the difference in interest rates between the 36-month and 60-month loans will not be substantial over the long term.

However, interest rates will be lower if you can make the monthly payments on a 3-year loan.

Here are some options to consolidate your debt.

Prosperity Club for Loans
Maximum loan amount $ 40,000 $ 40,000
term for the loan 3 to 5 Years 3 to 5 Years
Minimum FICO score 640 600
Interest Rate Ensemble by Prosper LendingClub defines it
Prepayment penalty Nothing Nothing
Fresh Maximum 5.0% Maximum 6.00%
The maximum amount of loans that can be approved at any given time 2 2
Official site Prosperity Loan Club