After a number of competitors have tried to enter the peer-to-peer lending space, the name of the game is still Lending Club Vs. Prosper. Both Lending Club and Prosper have done a fantastic job of increasing their loan volume every month, indicating that there are all sorts of people that are interested in taking out the low-interest loans that Prosper and Lending Club offer. Both Prosper and Lending Club know that they are competing for investor dollars and borrowers that want to take out loans and have taken steps to try to win the hearts and minds of those shopping for a loan.
Prosper has been extremely aggressive in recruiting borrowers. They have made a number of deals in which they will pay a borrower’s second payment for them, which can be several hundred dollars on a decent sized loan. Lending Club hasn’t been as aggressive in recruiting borrowers, primarily because they’re doing a heck of a job at it. Lending Club recently announced that they had setup more than $400 million in loans between borrowers and lenders.
The two companies use slightly different credit models to determine who qualifies for a loan and what interest rate they can get a loan at. Prosper and Lending Club both charge an origination fee, but that fee is much lower if you have a good credit score. Since the company’s don’t publish the exact credit model they use, we recommend applying at both places and seeing which company provides the better offer.
The battle of Lending Club Vs. Prosper is also taking place on the investor side. Lending Club used to offer great cash bonuses on loans, but have since scaled back and have only offered significant bonuses to investors that make large investments (at least $50,000). Prosper frequently offers loan bonuses to investors that put money into featured loans, often as high as 4%. Prosper had a huge hit when it offered a $104 cash bonus to investors that opened a new account on a specific day. Both companies will tell you that they offer the best rate of return, but they each use a different calculation which makes their loans look better. The reality is that if you invest your money well, you can get a great rate of return at either company.
Lending Club currently has the lead in its battle versus Prosper in terms of total monthly loan originations, but Prosper has been coming back strong. Prosper has added a number of great new features for investors and borrowers that is turning their offering into a really compelling product. Both companies are on track for profitability and will likely succeed, but you should take out a loan from the company that gives you the best deal.