The best peer-to-peer lending sites help people get loans from their peers instead of traditional bank loans. The reasons why a person might turn to peer-to-peer lending sites fall into two categories: A they can get a better rate or terms, or they cannot get a loan from a traditional bank. Either way, the best peer-to-peer lending sites offer a valuable alternative. Many entrepreneurs have built peer-to-peer marketplaces, and you can benefit from their insightful work.
On this page, we will go over how to choose among P2P lending websites and then how to make your pitch. We will also discuss the possible terms of your peer-to-peer loans and how to negotiate that part. We will use some of the best peer-to-peer lending websites as examples you can check out, but we are not an affiliate site, so we are not promoting any product or website and have no stake in what you choose. We also cover the risks, rates, and returns of peer-to-peer lending elsewhere.
Choosing the Best Peer-to-Peer Lending Sites
There are many potential best peer-to-peer lending websites, and narrowing things down can be challenging. That said, there are four main qualifiers you might want to use to check your initial choices, including:
1. Look for a website that has been around for a while and has successfully offered peer-to-peer loans for some time. See if there are similar purposes to yours and whether people seem to be getting funded. A peer-to-peer lending site should be well-established and able to generate a volume of successful business to keep people coming back.
2. Notice the quality of the website and the seeming degree of customer service and attention. Whether you are an investor or looking for peer-to-peer loans, you will find that the best P2P lending sites offer responsiveness and awareness to help you get what you need. Peer-to-peer loans should come with exceptional customer service.
3. Find independent forums for advice and guidance about the best peer-to-peer lending websites. Look out for posters using affiliate links to get paid when someone clicks, but otherwise, forums can be a great way to get advice from others about potential peer-to-peer lending websites that they like.
4. Watch a few of the best peer-to-peer lending websites. See whether there seems to be a lot of action at each one. Does there seem to be a lot of traffic and projects being funded, or does the site, despite looking good, seem to fail to attract visitors? Notice not just whether projects are being supported but whether they are being funded 100%
Best Peer-to-Peer Lending Sites Examples
We try to remain fully unbiased and independent here, but at the same time, we know that our visitors would like practical information. Since a limited number of peer-to-peer lending sites are available, we do not provide a matching service, and therefore, we are comfortable giving you some examples. Here are some of the best peer-to-peer lending sites – those websites that you may want to check out first in your quest for peer-to-peer loans:
Prosper Site was one of the first peer-to-peer lending websites and continues to do well. Prosper has an exciting feature for investors that is an automated option that can benefit those looking for an investment and investors. Proper has tended to receive high ratings from those sites that give reviews. You might want to check out the blog at Prosper, which has beneficial information and advice whether you are a potential investor or looking for peer-to-peer loans.
Prosper was first to the market and has stayed strong, with over 2 million members and over $1,000,000,000 in loans that have been funded. Prosper does an excellent job ensuring that the investor is rewarded financially and socially – emphasizing the good they are doing in a person-to-person way by investing in other people. With a minimum loan of $2,000, a maximum of $35,000, and a minimum of $25 per listing for investors, Prosper has many opportunities on both sides of the equation. You can research everything from borrowers’ credit scores and histories to personal loan descriptions and endorsements from friends. All of these features make Prosper one of the best peer-to-peer lending sites.
Lending Club is probably the largest peer-to-peer lending website out there, for good reason. Many people have found success with this website which is easy to use and has excellent traffic. If you want to start with the biggest of all your choices with the hope that volume is critical to getting your promising pitch funded, this is a great place to start. The blog at the Lending Club is also worth looking at and searching. There is much helpful information; many wise investors are willing to share their experiences.
Lending Club opened in 2007 and has been one of the top interfaces since then with an efficient and customer-friendly interface. They have successfully leveraged technology to make the user experience smooth and easy, whether you are looking for a loan or a potential investor. As a borrower, you can get a fast response to your request for a loan. However, Lending Club is no longer signing up individual investors. For a borrower, the choice between Lending Club and Prosper often comes down to their slightly different features, but they are both easily among the best peer-to-peer lending sites available.
Other Potential Peer-to-Peer Lending Sites
While these two sites are probably the best-known and most established person-to-person lending sites, others exist. You may find another one that fits your style or tends to have the types of requests you want to fund if you are an investor or the types of requests like yours get financed if you are looking for a loan. Make sure you do your homework and choose a site that has been around long enough to give expected returns and results. Business Insider also has an article on selecting the best P2P Lending sites.
Best Peer-to-Peer Lending Websites for Investors
If you have come to this page because you are a potential investor looking for the best peer-to-peer lending sites, we have some specific advice (hint to those looking for peer-to-peer loans, it may be worth reading this section, too!). You will have some choices with your person to personal loans investment, and here is our guidance:
1. Decide, first of all, whether you are looking to fund one or only a handful of peer-to-peer loans or whether you are looking for an aggregation site that will pull together a lot of requests so that you can spread the risk. The former may seem more personal and allow you to fund projects or purposes close to your mission, while the latter allows for less risk and a more guaranteed return.
2. They decide your risk level. Most peer-to-peer lending websites structure things so you can choose the risk level you are willing to take. Take on more risk, and you can get a higher return but lower your risk profile if you want a higher return guarantee. In this process, ensure you understand how your chosen peer-to-peer lending websites measure risk – are they using credit score, other aspects of the person’s credit history, etc?
3. Next, decide how you will invest – will you put smaller amounts of money across various risk levels and even peer-to-peer lending websites, or will you choose the best site and best level and put all your money there? Maybe you’ll fund one particular loan request with some of your investment and a heavily pooled request with the rest.
4. Finally, make your initial investment and learn how to keep track of how it is doing – make sure you check back to your chosen site and, if possible, sign up for automated statements. Maybe you have decided to invest only a portion of what you will eventually put in, so you’ll need to determine when you are satisfied and ready to reinvest.
Determining the best peer-to-peer lending for investors is not a simple equation. A lot must go into deciding whether to become a peer investor, and we will cover as much of it as we can here.
Best Peer-to-Peer Lending for Investors: Time Horizons
Of course, the fact that you cannot immediately get your money out does not in any way affect your peer-to-peer lending returns – as people are paying back their loans, you are making the return that equals the interest rate they were changed, minus any defaults, minus any fees the website charges. If you don’t reinvest the money, you can take it out as you go, take the return, and then decide what to do with it. Of course, many people reinvest those returns in new peer-to-peer loans, and many websites allow for that to be done automatically – a convenience because otherwise, you will have money frequently freed up, and you’ll have to remember to go back to the site.
Bottom line: You need to carefully assess when you will need any significant portion of the money you have invested in peer-to-peer lending and ensure you do not reinvest for a certain period so that that money is freed up when you need it.
Deeper Dive: Returns
The best peer-to-peer lending for investors, in terms of a percentage return, is easy. Instead of figuring out where you hope to be with your portfolio and hoping an external market leads you there, peer-to-peer lending returns are what they are – the percentage the borrower is being charged minus any rate the best peer-to-peer lending for investors. This allows you to figure out with some certainty, based on previous default histories, a range in which best peer-to-peer lending for investors strategy is best.
This relative certainty opens up peer-to-peer loans to a group of investors who trade, waiting until they are paid back to have some confidence about their returns. Those who have extra money now but need to know it will be free whenever they need it might choose another option, such as stocks.
Time Frame
The usual length of peer-to-peer loans is between three and five years. Often, the shorter the period until maturity, the higher the risk because this puts pressure on the borrower in the form of higher payments (though they also usually get a lower rate). Projects that take longer often have a higher overall payback because a higher rate is charged, and the chances of default may be lower.
Strategy
While external factors such as the state of the economy may also affect the best peer-to-peer lending for investors strategy, those factors will likely affect almost any investment. Thus, the most important steps to focus on are using historical data to research your best peer-to-peer lending for investors strategy over time and making decisions about the length of the investments that balance interest rates with financial flexibility.
As an investor, you want the highest return on your investment in P2P lending. As with any other investment, the higher the risk, the higher the potential return. In this case, you will get two lines of information.
Information About the Investor
You will get information about the investor. What is their credit score? How long have they been at their current job, do they own their home, how much revolving credit they have out, etc.? This information can help you decide whether to invest in the person or group. And, of course, the higher their risk profile, the more interest they will have to pay, so the higher the potential return. Then again, the higher their risk profile, the more likely they will default, and your returns may be lessened or stopped.
Purpose of the Loan
You will also get information about the purpose of the loan. They may be consolidating higher-interest debt, using the money for home improvement, using it for a family celebration such as a wedding, or starting a business. Whatever the purpose, you will need to consider the inherent risk, and again, you may get higher peer-to-peer lending rates for higher risk purposes and a higher risk of default. The best peer-to-peer lending for investors strategy will vary depending on the borrower and purpose.
Deeper Dive: Rates
Of course, the first question that any potential investor might ask is the interest rate of return. This is not a question we can specifically answer here, given that all person-to-person loans are unique, and the overall interest rate environment changes all the time. However, we can go over a few factors in the peer-to-peer loan interest rate calculation:
1. Of course, prevailing rates are the most critical factor. As with other types of lending, peer-to-peer loans fluctuate about the rates offered depending on prevailing interest rates.
2. What is the risk involved in the project itself? If the project is risky and carries a higher-than-usual likelihood of default, the investor must hedge by charging a higher rate. In these P2P lending situations, the project may define the rate, though often, the person’s creditworthiness for funding may trump that factor.
3. What is the overall risk in the economic environment? In a poor economy for business, a small business loan may have a higher rate because of the increased risk of default, especially when the nature of the project is risky to the economy.
4. How much is the loan as compared to other financing? A loan that has to cover an entire project may have a higher rate than a loan that subsidizes existing stable money since the latter carries more likelihood of the project being completed.
Peer-to-Peer Lending Websites: Summary
There have been many P2P sites that have recently opened, and over time some may more fully enter the market while others may not. You may want to take a chance on a newer website where your pitch may be more likely to get noticed, but you also take the possibility that the site may not last. We offer a listing the best peer-to-peer lending websites above that includes more established choices that will likely last. We wish you the best of luck whether you are an investor or looking into peer-to-peer loans for your purposes.
See also: Peer-to-peer business lending and Charitable peer-to-peer lending.
We hope that this information about the best peer-to-peer lending sites proves helpful! Once again, we do not provide peer-to-peer lending consultation services, but we cover it in our blog with the hope that you get helpful information.
Dr. Alan Jacobson, Psy.D., MBA is a Certified Foresight Practitioner (TFSX) and licensed psychologist with 25+ years of experience, specializing in the psychology of high performance. He advises and invests in founders across four industries — Healthcare, Housing, Energy, and Independent Film — pairing that clinical training with hands-on board, investor, and producer experience.