Peer to peer lending gets more and more popular with every passing day. The simple fact is, consumers and small businesses enjoy the low cost loans, and investors really seem to love the returns offered through this kind of investment.
So, today, we’re going to do a comparison of the two best peer to peer lending sites to see how they stack up against each other. Those giants are Prosper and Lending Club.
This review is focused on using peer to peer for investing. If you are looking to borrow money with peer to peer lending, I highly recommend you check out this Prosper review.
Let’s Start By Comparing Overall Services
|Loans To Consumers||Yes||Yes|
|Secondary Trade Market||Yes||Yes|
As you can see, the services offered by both of these options are just about the same. Of course, these are overall services, not minor changes within each service. We’ll go over costs and tracking later.
What About The Yields?
If you’re an investor, this is going to be one of the most important questions for you to ask. Let’s face it, if you can invest your money elsewhere and make more, chances are, that will be your better option. However, when it comes to peer to peer lending, the yields are pretty high. Here are the spreads on the yields with both Lending Club and Prosper…
|Option||Low Yield Average||High Yield Average|
The numbers listed above are not publicized by Prosper nor Lending Club. I came to these averages by reading several articles and averaging the percentage yields on a high and low range. As with any investment, there is no guarantee what your yield may, or may not be. However, by what I’ve been able to dig out, if you’re willing to risk a possible 1% in order to earn a possible 2% more, Prosper is looking like your option. However, if you’d like to stay on the safe side in case you end on the lower end of the chart, Lending Club may be best for you.
Total Dollar Amount In Facilitated Loans
The amount of loans that have been granted tells you a lot about the company. The more money that has been invested through their platform, the more popular they are. Generally, products and services only become popular if they’re good. So, lets take a look to see which option has provided more loans.
|Option||Total Facilitated Loans|
Although these numbers may seem drastically different, the truth is, Prosper is a very low estimate. Prosper has been in business since well before 2005, however, they only report total facilitated loans since 2005. Nonetheless, from all of the information I could find around the web, dollar for dollar, Lending Club facilitates more loans on an annual basis than Prosper. However, they both have an incredibly sizable audience.
Pros & Cons of the Best Peer to Peer Lending Sites
Prosper Pros – Prosper comes with incredibly high yields. They also have a secondary market to sell loans that either are not performing well or you no longer want. Another thing that I like a lot about Prosper is their online platform. Their reporting is detailed and easy to use.
Lending Club Pros – Lending Club also provides incredibly high yields. They also offer a secondary market, and an amazing online platform. What makes Lending Club unique is the risk management tools they provide. They make it easy to set a level of risk that you’re comfortable with when searching for loans. Although prosper does make it possible, it doesn’t seem to be as easy in their system as it does in Lending Club.
Prosper Cons – Risk of loss is a huge con to both Prosper and Lending Club. The bottom line is, some consumers will decide not to pay their loans. A con for borrowers is that you must have a 640 credit score or better to ask for loans. However, that negative aspect for borrowers is definitely a positive for lenders.
Lending Club Cons – As with Prosper, risk of loss is a major downside to Lending Club, as with any company in the peer to peer lending industry. Another downside to Lending Club is that it tends to take longer to find loans that are worth funding as they don’t have as strict of restrictions as Prosper has.
So, Which Option Is Better?
Truth be told, that’s a question that I can’t answer. Both of these options are very similar as far as services, yields, cost, anything you can think of. However, subtle changes in service may make it so that one option meets your unique needs better than another. Personally, If I had to pick one, I’d go with Lending Club.
However, I personally like to stay on the safe side of risks, as a company, they’ve funded more loans and their lowest returns tend to be higher than the lowest returns offered by Prosper. You have your own unique needs with investing. That being said, the final decision is yours to make.