Lending Club Vs Prosper the P2P Platform Showdown

The peer to peer (P2P) marketplace has changed how people do business by cutting out the middleman which most of the time makes the process cumbersome while getting the biggest share of the pie. This is why P2P lending sites are all the buzz nowadays. Through this social peer to peer process, borrowers get to enjoy low cost loans and investors get to enjoy maximum returns on their money.

Now, we will take a look at the investing side of the two major P2P lending sites Prosper and Lending Club (LC) and see how they compare with each other.

Services Offered

Service Prosper Lending Club
Loans To Consumers Yes Yes
Investing Opportunities Yes Yes
Secondary Trade Market Yes Yes
High Yields Yes Yes

 

These are the major services available from each company and as you can see both are almost the same. Later we will highlight the differences within each service.

Most Important Are The Yields

P2P lending has been the choice for most investors recently because of the high yields it offers. Based on my computations, here are the yields from the two lending sites.

Option Low Yield Average High Yield Average
Prosper 5% 13%
Lending Club 6% 11%

 

I came up with these numbers by averaging the high and low range yields published in several articles. These are not guaranteed returns on your investment, but based on my research Prosper looks more attractive to investors with a liking for higher risk. For those who like to stay on the safe side and are happy with returns from the lower side, Lending Club may be more suitable for you.

Total Amount In Facilitated Loans

This is the total amount that investors have lent to borrowers. The more money invested means the more trusted the site is for investors and borrowers who do repeat business with the company.

Option Total Facilitated Loans
Lending Club $3,275,469,450
Prosper $389,721,824

 

The history of total facilitated loans reported for Prosper go only up to 2005. Based on the amount of loans annually Lending Club also leads in this segment. Both platforms however have a large number of users.

Pros & Cons of the Two Best Peer to Peer Lending Sites

Prosper Pros – Prosper definitely has the notes with higher interest rates. The secondary market is also very handy for selling loans that are underperforming or those you no longer want. Their online site is also very easy to use and reporting is very detailed.

Lending Club (LC) Pros – LC has more notes available and at different rates. There is also a secondary market and their platform is also user friendly. LC’s edge though is their risk management tools used to filter the loans available.

 

Prosper Cons – Both companies carry the risk of lenders defaulting on their loan payments. Prosper requires at a credit score of 640 for borrowers this is a little lower to the 660 required for Lending Club borrowers.

Lending Club Cons – It takes a longer time to screen loans in LC since they don’t have restrictions as strict as those of Prosper.

The Verdict

Both options provide a very similar business model and platform, but Prosper may come in with slightly higher yields. On the lower end however, LC’s lowest returns tend to be higher than Prosper’s. So it may just boil down to each one’s unique preference in investing. What I recommend is to try open accounts in both and see which one may suite you best.

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