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Lending Club vs. Prosper – Which Is Better For Investing?

Investors looking to take advantage of the great returns offered by peer-to-peer (P2P) lending have two choices: Lending Club or Prosper. Both offer excellent potential returns for investors, but they do operate slightly differently.

Let’s battle it out: Lending Club vs. Prosper. Which would you rather invest with and why? What follows is a guide that will help investors understand the differences between these two companies.

Prosper (see my Prosper review) was the first P2P lending company, launched in February 2006. This was during the debt bubble of the 2000s, and they quickly gained a large number of investors and borrowers.

Lending Club launched 18 months later in mid 2007 — on Facebook originally. Today both remain the only two real choices for peer-to-peer investors.

In my opinion, one of the more important metrics is the investing returns of each. Does Lending Club or Prosper give you better returns?

Prosper changed their risk model and underwriting in July 2009. They became much more like Lending Club. Without question, previous performance with Prosper was poor and would have been a terrible choice to invest with.

Statistics are courtesy of Data is accurate as of September 2015. This chart is collectively all outstanding loans at each lender, and breaks down performance for each year.

The results are somewhat surprising to me. Prosper edged out Lending Club for five of six years and tied with it the other year. While that’s not the complete picture of returns, it’s interesting that Prosper shows you would more than likely get better returns.

The first thing for P2P investors to consider is whether or not P2P lending is available in their state. Even though both Lending Club and Prosper are regulated by the Securities and Exchange Commission (SEC), it is still up to the individual states whether or not to allow these companies to solicit for investors in their state.

Lending Club is available to new investors in all states (including District of Columbia) except the following: Alaska, Maryland, New Mexico, North Carolina, North Dakota, Ohio and Pennsylvania.

However, there is an additional list of states available for investors via the Lending Club trading platform FolioFN. This is where investors trade in existing loans and this has a much broader acceptance with the states. The additional states available here are: Alaska, New Mexico, North Carolina, North Dakota and Pennsylvania.

Prosper has a slightly different list of states available for new investors. It’s available to investors in all states (including District of Columbia) except the following: Iowa, Maine, North Dakota, Pennsylvania and Vermont. Prosper does not allow any additional states on their trading platform.

The interest rates charged to borrowers change regularly, but as of this writing, Lending Club interest rates range from 5.32 percent up to 28.99 percent.

Lending Club uses a somewhat complex formula that takes into account various factors that appear on a borrower’s credit report, such as FICO score, number of recent credit inquiries, length of credit history, total number of open credit accounts and revolving credit, to name a few. Most borrowers will also end up paying a higher interest rate the higher the loan amount and for 60-month loan terms versus 36 months.

Prosper has slightly higher rates and also allows borrowers with lower credit scores onto their platform. Their interest rates range from a low 5.99 percent up to 36 percent.

There is no public information as to how Prosper calculates their interest rates, but we do know they take into account credit data such as number of inquiries, available credit, credit card utilization, and recent delinquencies.

Prosper and Lending Club both allow investors to invest a minimum of $25 per note, but Prosper gives a little more flexibility here. With Lending Club you must invest in multiples of $25, whereas Prosper allows any amount of at least $25. The minimum needed to open an account is just $25 with either company.

Both companies will help take the legwork out of investing for you. At any one time there are hundreds of loans available for investors on either platform. But investors wanting just a broad cross-section of loans can invest their available cash in just a few clicks.

Lending Club always provides three options when you invest in this semi-automated way: High, Medium and Low risk loans. Enter the amount you want to invest (or just let them invest your available cash) and just a couple of clicks later you are done.

Prosper has a Quick Invest feature that allows investors to put new money to work very quickly. With Quick Invest you can choose the loan grade or other filtering criteria, and you can invest any amount greater than $25 in just four clicks.

For those investors who like P2P lending but don’t want to manage their investments at all, there are “managed account” options at both companies. Lending Club PRIME has a minimum investment of $5,000 and is subject to a one-time 0.8 percent fee.

PRIME accounts are fully hands off — the investor provides some initial direction (as in what interest rates to invest in) and then the Lending Club takes care of the rest. Prosper has something similar called their “Concierge Service” that starts at $25,000 but has no fee attached to it.

Both companies allow fully manual investing for those who want to select their own investments. You can filter the loans on the platform according to interest rate, loan term, and loan purpose, as well as a whole range of data pulled from borrower’s credit reports.

Lending Club allows the added benefit of being able to download the spreadsheet of all available loans on the platform, and then you can do analysis on these loans in Excel. Prosper doesn’t allow a download, but it does have superior filtering capability on their platform.

One little trick for Prosper investors: if you use Google Chrome you can get a plugin called Prosperity that will display the credit data for each loan on the page (as long as you are logged in to your Prosper account). I use this feature all the time and have found it to be very helpful.

Both companies have strict underwriting standards, and a borrower must have decent credit before obtaining a loan from either company. Lending Club uses Transunion to pull credit data, and they allow borrowers with a minimum credit score of 660. Prosper uses the Experian Scorex credit score and allows borrowers with a minimum credit score of 640. (This minimum score is reduced to 600 for borrowers taking out a second loan.)

Defaults are a big concern for every P2P investor. When comparing the defaults from all loans that originated in 2010, we can see Lending Club had a lower default rate of 3.2 percent versus Prosper’s 5.7 percent, but in 2014, the reverse was true, with Prosper having a lower default rate of 3.6 percent, compared to Lending Club’s 8.7 percent (data from This highlights the importance of doing your own due diligence, both into the company and into the individual loans.

I am not going to make a recommendation between Lending Club or Prosper.

I originally started with just Lending Club and was hesitant to invest with Prosper based upon previous performance. As I discuss in my Prosper review, they’ve made dramatic changes in their underwriting process. From the statistics, Prosper offers similar, if not slightly better, performance and risk profile to Lending Club.

I now have accounts at both companies, and I continue to add new money to my investments in each. I encourage every peer-to-peer investor to research each company, take a look at their platforms and get a feel for which one you prefer.

New investors should also take a look at the prospectuses of both Lending Club and Prosper; you should always know the risks involved. Also the entire loan history for both companies is available for download online.

My opinion is new investors have two great choices. If you can’t decide between the two companies, then do what I did and open up accounts at both companies.

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Prosper has some issues with its site; I’ve tried to register as an investor multiple times before and it always fails due to some technical error. Never had a problem with Lending Club, though their processing of IRA payments is a bit awkward.

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[July 04, 2017] I just tried to setup an investor account in Prosper from NC, and it halted me… You need to add NC to the exclusion list of states prohibiting investments in prosper. Such non-sense….

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I echo Damien’s comments and share the same experiences. I have been with Prosper since the beginning and have achieved much better returns versus Lending Club. However, the number of quality loans on Prosper has declined significantly over the past year. I am going to look into Upstart as LC loans from my experience have had a much higher default rate,

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I just wanted to let you know that the information you provide on the peer to peer lending and the crowdfunding of real estate has been wonderful. I’ve found everything I needed to make decisions on this type of investing from your articles. Keep up the great work, and than you.

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I have account at Prosper and can’t wait to get what little money I can back. Even though the loans state 12% and greater, my returns are 3% and lower. Prosper is the only one who makes money on these loans. In the future I will avoid all P2P lenders at all costs. Sticking the money in a passbook account generates better returns. Been investing with Prosper for 5 years and so far my returns are MINUS 25%. Please learn from my mistakes!

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This data is consistent with my returns. That being said I invest is mostly D/E/F loans in LC and C/D in Prosper. My advice is I wish I did the opposite. I would recommend for any new investor to go to Prosper for D/E/F and Lending Club B/C or some similar combination. I still think there’s some luck involved and I now stay away from the Jumbo Loans as much as I can >20K.

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Hi, would it be possible to also compare Upstart to Lending Club and Prosper? It would be interesting to see how Upstart compares to these companies as it’s ranked #1 here:, but I don’t see it at all mentioned on this site.

I’ll add it to our list.

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I have been investing in LC for over two yrs now – first in a taxable acct and then later in an IRA acct. I invest manually and selectively in both accounts, using the exact same criteria. For some reason, the later acct has been yielding MUCH lower returns than the earlier one. I would have expected the opposite. More success as I gained experience with note selection. The explanation seems to be very high default rates on notes in the last year, some after only a couple of payments. I fear that LC is making a huge mistake on underwriting procedures OR it’s being targeted for large scale fraud. At investor expense. Also, in the past few months, higher rate notes have become almost impossible to find for investment. Some days there are practically zero new notes added to the platform. It’s becoming a waste of time to log on to the site at the designated time to invest new funds. When I called them to question it, their response was that it was no more than the usual ebb and flow of borrower demand. Nonsense – it has never been like this before. Furthermore, now I’m seeing some days the only “new” notes added to the platform are not really new. The issue dates are actually many days old, and they’re only masquerading as new. It’s likely these are notes that languished with the wholesale investors that LC has been cultivating recently, and then the rejects are tossed onto the retail platform as “new”. So all in all, I’m becoming seriously disillusioned with Lending Club. Something needs to be fixed quickly.

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I went to setup an account with Prosper only to be informed that I cannot create an account since I live in Kansas. Perhaps I read it wrong, but I was under the impression that Kansas was included as a state where Prosper is allowed. Then I looked at their site: “Prosper is currently available only to lenders who reside in the following states: Alaska, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Louisiana, Maine, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New York, Oregon, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin and Wyoming.” Kansas isn’t listed, but Maine is.

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I’ve been investing in LendingClub for close to a year, and everything is running smoothly.

On the other hand, I’ve tried to invest with Prosper, but talking with their customer service reps on the phone really shook my confidence in the company. They simply were not good at answering my questions, whereas LendingClub phone reps are much more intelligent and courteous. Call both companies and you’ll see the difference. Also check out the reviews for each company on

It seems to me that LendingClub has a much brighter future.

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Prosper have generally more predictive data and this have a better resource for setting interest rates and completing risk management. It not much better but marginally. They probably why you have better returns.

I pulled down their data and designed models on both data sets. Prosper data predictors were bette on univariate and multivariate. There was however significant overlap.

From the theory of risk based pricing ideally it doesn’t matter what the interest rate is if the risk is managed properly the return should be uniform across all classes. The issue is volatility.

It is evident that lending club has invested a lot of effort in the last several years to improve their algorithms. The number of variables in their data set has dramatically increased but it takes time for historical data to develop. In time LC will out perform prosper in underwriting unless Prosper act to increase their predictor set.

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I’ve had accounts at both for a couple years. My observation is that I NEVER had any issue with a note on Prosper. Not one single default, maybe a couple of payments within grace period (few days late), that’s about it. Works like a charm. And I targeted the highest interest rate notes (nothing under 15%), which means that I am, to date, able to generate over 18% ROI with Prosper, which is awesome.

The main downside, is that recently (in the past year) and all of a sudden, they stopped having high interest notes available (to the general public at least) and started having way fewer notes available in general. As a result, I rarely buy new notes on Prosper, because I very, very rarely find anything that fits my investment strategy anymore.

On the other hand, Lending Club has notes for everybody. Hundreds. Thousands. I could invest 4 times a day (they release new notes 4 times a day) even with my very picky high return selection criteria. They also have interests much higher than in Prosper. With Prosper, if you manage to find a 17% interest note, don’t let it go, grab it, it might not happen again for weeks. On LC, you find everyday notes going above 25%. BUT. Of course, there is a but. My experience with defaults and bad payers at LC has been quite worrying. Over 2% of the notes NEVER made a payment. Default from the beginning. And I never saw the money back, not a penny of it (I wonder why LC who just gave them like 20k couldn’t just cancel the loan and get back, at least some of it? How can someone take a loan, never make a payment, and get away with it?).

Also, late payments are common. Defaults aren’t unusual. Negotiations between LC and the borrower happen more than you think (resulting in them paying less than they were supposed to).

As a direct result, my ROI in LC is constantly dropping, and the question of where it will end remains open. It is still above Prosper, but statistics and projections are telling me that it won’t stay there for long, and in the long run I expect it to drop from above 23% to the 12-15% range. That is still a good ROI, but 1- it is way less than Prosper, 2- it is a projection, and anything could happen and 3- it is not reassuring to see it going down everyday.

Bottom line: if there were more notes on Prosper, I would favor Prosper. I trust their strategy way more than LC, which seems to be aiming at initiating more and more loans, checking less and less the profiles, at the expense of the investor.

N.B: it is worth mentioning that as time goes by, LC is REMOVING investing tools. The investor gets less and less information, and they make it easier and easier on the borrower. I am sure they know what they are doing, and I even think I know what they are doing: they are shifting from the small individual investors who select carefully their notes like me trying to achieve very high returns, to the corporate investors who will inject millions in the business, and just want the guarantee of a decent return (6-8%). As a result, they favor quantity over quality. I don’t have millions, and I have time. I prefer to spend time on selection and get a 20% ROI. I am not their target customer anymore.

If you don’t have time to manage your money and are interested in getting a 6%+ return, then you might as well join. If you want to get a 15% + ROI, I don’t know if LC or Prosper are the place anymore. I am still buying new notes here and there, but I’m actively looking for the next big thing, as ROI under 12% are not interesting to me.

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This content is not provided or commissioned by the bank advertiser. Opinions expressed here are author’s alone, not those of the bank advertiser, and have not been reviewed, approved or otherwise endorsed by the bank advertiser. This site may be compensated through the bank advertiser Affiliate Program.

Lending Club Review – Shopping For Loans at Lending Club

Lending Club is the “Amazon of Person to Person Lending” sites. Why is that? Well, partially because last week I referred to Prosper as the Ebay of Lending. The other reason I refer to Lending Club as the Amazon of P2P Loans is because of their lending process. Making loans through Lending Club is set up like an on-line store – you find a loan and you “buy it.”

To fund a loan, you first select the loan you wish to fund. Then click the loan button and it updates your portfolio (just like your shopping cart). When you review your portfolio, you have the option to Start Over (empty cart), Add More Loans (continue shopping), or Check Out (check out). OK, I bet you didn’t need that last one! As long as you are familiar with on-line shopping, you can use Lending Club to make loans. Now let’s look at the details.

There are two methods for making loans with Lending Club:

  1. Individual loans selected by the lender.
  2. Lendingmatch™, Lending Club’s target portfolio composition.

1. Individual loans selected by the lender. I chose to make loans with Lending Club using this method because there is more long term flexibility in selecting my own loan and the minimum loan is only $25. It is very easy to fund a loan at $25, in fact, if you use this link to sign up, Lending Club will give you your first $25 that you can use to fund a loan.

2. Lendingmatch™, Lending Club’s target portfolio composition. This method preselects the loan allocation for the lender based upon their selected risk level. There are 9 risk levels lenders can choose, each with an interest rate corresponding to the level of risk. This method is good because it allows lenders to select a target and forget it. However, there is a $500 minimum to lend with this method. I chose not to lend using this method because my current Lending Club portfolio is $100. I hope to grow that over time, but as for now, I chose individual loans.

I made three loans with Lending Club, each at $25. The blended return rate for those loans is 9.70%, which certainly isn’t the highest possible rate, but is still a nice return on investment if everything goes to plan. The loans I funded had a high rating and have a good chance of being paid in full.

As mentioned above, making a loan with Lending Club is much like making an on-line purchase. The first thing you do is select an individual loan or portfolio plan, then click the “Loan” button. It will take you to a screen that displays the loan in your portfolio. My first impression was that there was no confirmation page, but in fact, there are two more steps to go before the loan is official. The first is to click the “Check Out” button, then you need to confirm the loan once you check out. Much like shopping with Amazon, you can’t “accidentally” fund a loan. You must consciously select the loan to make it happen.

I think Lending Club is providing a good service to lenders and borrowers alike. Borrowers have the opportunity to get a better interest rate on loans, and lenders have the opportunity to “be the bank,” and earn more interest on their money than it would earn in a regular bank account or CD.

The lending process is easy to understand, secure, and offers a good reward for the risk you take. I currently have $100 in my account and plan on growing that as time and moey allow.

If P2P lending intrigues you, now is a great time to try it out with little to no risk on your end.

$25 New Lender Referral Bonus from Lending Club. Lending Club is currently offering new lenders a $25 bonus for signing up. All you need to do is register your account and make your first deposit and you will receive the $25 bonus. You must use this special link to receive the bonus money: $25 Lending Club new lender bonus.

Prosper is also giving new lenders $25 to sign up, but you have to fund a loan before you get the bonus, and the minimum loan is $50. So, it will only cost $25 to try the lending process. Prosper also has a referral program, so you can again refer people and make money. Keep in mind the bonus is not paid unless the person you refer either makes a loan or borrows money.

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