Prosper operates on a completely different basis than banks. It is a peer-to-peer lender which means that people lend money to other people. The fact that individuals are doing the lending has made the unsecured loans market vastly more efficient.
Chris Larsen, co-founder of Prosper, stated that “This previously one-sided control has bred inefficiencies and excessive margins — leading to higher rates for borrowers, and restricting people who have money to lend from entering and generating income from this vital and lucrative market.”
Advantages of Prosper Unsecured Loans
- Unsecured loans for any purpose. Prosper unsecured loans can be used for any purpose, including debt consolidation, home improvements, vehicles, baby expenses, college fees and to help people finance their businesses;
- Low APR. Lenders bid on unsecured loans, thus creating a more efficient market for those who wish to inexpensively borrow money;
- Unsecured loans for up to $25,000. Those hoping to borrow money can get a Prosper unsecured loan for between $1,000 and $25,000, provided that they have a good credit rating;
- Repay at any time. Prosper unsecured loans have a 3-year term, but borrowers can repay their debt consolidation loans and home improvement loans at any time without penalty;
- Community groups. Prosper encourages its members to join community groups based around a specific area of interest, such as family members or college. Community leaders help people seeking to borrow money write out listings to attract bids from lenders.
Disadvantages of Prosper Unsecured Loans
- Bad credit rating. Those that don’t keep up with repayments on their Prosper unsecured loans will find that this is reported to credit reference agencies, leading to a bad credit rating. This can make it difficult to borrow money or get a remortgage in the future;
- Personal information. There is a requirement that all those applying for an unsecured loan post private information about their reasons for doing so. This includes figures based around peoples’ income to debt ratio and even a picture;
- Answering questions to lenders. Lenders will ask Prosper borrowers questions that need to be responded to quickly and accurately;
- No guarantee that the full loan will be met in full. Those on the periphery of affordability may find that they experience difficulty getting a Prosper unsecured loan completely filled, especially at a low APR.
Prosper unsecured loans provide comprehensive service, although it does have its critics, especially on the lending side. They allow people with good credit to secure a low APR in relation to their personal circumstances. People struggling with affordability should seriously consider a debt solution, such as a debt management plan.