Best Peer-To-Peer Lenders

Compare our top peer-to-peer lenders

When you’re looking for a P2P lender, it’s crucial to find one that has a good reputation and is simple to use. We looked at online reputation, availability, annual percentage rates (APRs) and fees before making our top picks. For more information, read our methodology.

Our picks may be Authorized Partners who compensate us. This doesn’t affect our recommendations or evaluations, but it may affect the order in which the companies appear.

Our top picks for the best peer-to-peer lenders are:

• Prosper
• iBusiness Funding

What is peer-to-peer lending?

Peer-to-peer lending, also known as P2P lending, is a way for borrowers who need loans to connect with investors who can fund those loans. Borrowers and lenders are brought together through online platforms, also called marketplaces.

Most loans offered on P2P sites are unsecured personal loans, which are loans that don’t require collateral. These loans can be used for a variety of purposes, including debt consolidation, medical expenses, weddings and other big purchases. Some P2P platforms also help borrowers find secured loans for auto refinancing and business loans.

How P2P lending works

From a borrower's perspective, using a peer-to-peer lender marketplace is similar to applying for a loan with a bank, credit union or online lender. The application process requires many of the same documents and information. P2P lenders also allow you to become an investor, help fund loans and earn returns.

Borrowing money with P2P

To get a P2P loan, you’ll generally apply on a P2P company’s website by submitting information like your name, date of birth, address, email address, phone number, Social Security number, income, monthly rent or mortgage payment and how you plan to use the funds. The company then runs a soft credit check to show you offers.

From there, you’ll choose the offer you want. The company will run a hard credit inquiry to formally approve you for a loan. It may also require additional documentation. At this point, the P2P company looks for an investor or multiple investors to fund your loan. Once this process is complete, you’ll sign for the loan. You can usually get funding within one to three business days.

Investing with P2P

Each company’s process for approving investors is different. You'll likely have to create an account, which you’ll use to manage funds and select investments. Once you’re approved as an investor, you can choose the loans you want to fund.

Some companies assign grades to loans so the investor is aware of the risks involved. As a borrower makes payments back on a loan, the P2P company allocates a portion to you based on your investment.

Pros and cons of peer-to-peer lending

While applying for a P2P loan is similar to applying for a personal loan, there are some pros and cons to consider.

How to choose a peer-to-peer lender

Choosing the right peer-to-peer lender requires a careful evaluation of your personal needs and a thorough comparison of different lending platforms.

1. Figure out needs and requirements

Start by understanding your loan requirements. Consider factors like the size of the loan you need, your credit score and how quickly you need the funds. You can typically check your credit score for free through an online bank account.

2. Compare lenders and offers

Compare lenders based on their APRs, loan terms, loan amounts and fees. Ensure you meet the lender's eligibility criteria, including minimum credit score, income requirements and employment status.

3. Research lenders and read reviews

Read online reviews and testimonials to get a sense of other borrowers' experiences with each lender. Also, a lender with responsive, helpful customer service can make your borrowing experience much smoother.

The decline of peer-to-peer lending

Peer-to-peer lending has fallen out of popularity in recent years due to strict, but necessary, regulations on lenders. This is the main reason why we only have two legitimate P2P lenders included on our list.

“In the early days, peer-to-peer lending held immense promise as a disruptive force in the finance industry, enabling individuals to directly lend and borrow from each other, bypassing traditional intermediaries,” said Tarek El Ali, founder of Smart Insurance Agents.

Tarek El Ali said many challenges led to the decline of P2P popularity, including the following:

• Regulatory hurdles
• Raised concerns about investor protection and transparency
• Issues related to credit quality and default rates
• The lack of a centralized secondary market for trading these loans

While P2P lending still exists with a limited few lenders, we’ll be monitoring what happens to the industry in the months and years to come.

» MORE: Best ways to borrow money

Alternatives to P2P lending

Whether you need financing for an emergency or to fund a new business, P2P lending isn’t your only option. Consider these alternatives:

Crowdfunding

Crowdfunding sites allow you to raise funds from a large number of individuals either for personal expenses or for a business venture. Each site will have different fees and restrictions, so make sure to research the companies before choosing.

Buy now, pay later

Buy now, pay later (BNPL) is a payment option that allows consumers to pay for purchases in installments over time. Typically these are offered through merchants directly, though some companies will allow you to access funds for medical or veterinarian bills.

BNPL can be costly if you don’t repay the total amount borrowed in the promotional period, but it can be an easier way to access financing when you have poor credit.

Michael, a reviewer from Alaska, said that they were happy with the BNPL service they chose.

“[The BNPL service was] the first to give me a chance,” Michael said. “My credit score was bad. But they gave me a small credit line, $250. That was [two] years ago, my available credit with them is now [$1,300].”

Personal loans

Personal loans can be used for a variety of purposes, from consolidating debt to funding a home renovation project. Depending on the lender, credit score and income requirements can be stricter with personal loans than with P2P lenders.

Luis, a reviewer from New Jersey, was able to get a good rate with an online bank versus other lenders, including a P2P lender.

“I got a [$50,000] personal loan and was funded in less than [three] business days,” Luis said. “My FICO score was good but not excellent. I was even able to speak to a live human when I had a question. [...] The site itself is a pleasure to use.”

Home equity loans

A home equity loan or home equity line of credit (HELOC) can be a good option for borrowers who need to borrow a large amount of money at a low interest rate, using home equity as collateral. It can be helpful to have a line of credit for unpredictable home renovation projects.

The main risk to be aware of before tapping into your equity is that defaulting on your payments can put your homeownership at risk.

Credit cards

Credit cards can be helpful in a financial pinch, but most come with high APRs, and debt can build quickly if you’re only paying the minimum monthly bill.

Beth, a reviewer from Wisconsin, was out of luck with their credit card bill when they fell into financial hardship. The credit card company told them it couldn’t offer a lower monthly payment amount and it ended up filing a small claims case against them.

If you need to use a credit card for a large bill, see if you’re eligible for a credit card with a 0% introductory APR offer since that will give you up to 21 months to pay off your bill without interest. However, keep in mind that the regular APR will kick in after the intro APR offer expires, which will apply to any balance you’re carrying.

FAQ

Bottom line

P2P lending is an appealing choice for some borrowers because of the fast and convenient application and funding process. The borrowing requirements are sometimes less strict than with traditional lenders, so you may want to explore P2P options if you have a lower credit score.

Even if you have a good credit history, it's in your best interest to gather multiple loan quotes,  including quotes from P2P lenders, so you can find the best deal. Most P2P sites allow you to check offers without any impact to your credit score.

Methodology

To make our top picks for best peer-to-peer lenders, we considered lenders that offer peer-to-peer loans. We then compared them on features including:

• Online reputation: We compared ratings and user reviews from a variety of sites, including ConsumerAffairs. We also reviewed for government or legal actions related to marketplace misconduct within the last three years.
• Rates and fees: We gave preference to lenders with lower minimum loan amounts, lower origination fees and no prepayment penalties. We also gave preference to companies with clear rates and easy-to-access information about fees.
• Availability: We confirmed that all of our picks for peer-to-peer lenders are currently available and accepting applications, and eliminated lead generators or companies that are only licensed in a few states.

Since customer feedback is a critical indicator when evaluating companies, this was an important consideration when selecting our top picks. However, for those companies on our list with no ratings on ConsumerAffairs, there were other variables that made them stand out as good options for peer-to-peer lending, and we factored those into our decisions.