This year I decided to enhance my backyard by extending the patio and putting in an outdoor kitchen. The drought last year also did some damage to my landscaping, so I need to do some replanting. I put together my budget and got bids from a few contractors. This will be a pretty sizable investment and while I have the cash on hand to pay for it, I really don’t want to have to let go of that much cash in one transaction. Over the past few months I have been really diving into investing in P2P loans, so I decided to make this an opportunity to see what the borrowing experience was like.
First, I got my free annual credit report. I didn’t want any incorrect information on my record to cause me to not get the best rate when applying for the loan. For $8 I got my FICO score and was happy to see it is now over 850. Over the past few years I focused on paying down debt, so now all I have is a mortgage. Everything looked fine, so it was time to apply for the loan.
So far all of my P2P loans are invested through Lending Club, so that’s where I went first. Their website was advertising rates as low as 6.78%. Lending Club made me create a new borrower account with a different email address to apply for the loan, instead of allowing me to use my existing lender account. That’s seemed a bit goofy, but not a big deal. They asked how much I wanted to borrow, the purpose, and my credit score range. Then they asked for my contact info, date of birth and income. When I submitted everything they gave me confirmation of being pre-approved and offered a 8.99% rate for a 3 year loan or 12.12% for a 5 year loan. I was disappointed to not get their advertised best rate, but I’m sure their rates differ according to loan purpose. Most folks borrowing money from P2P sites are requesting debt consolidation loans, while mine was for home improvement. The rate seemed OK for an unsecured home improvement loan, but I wanted to see if I could do better.
I went and created a Prosper account, filled out the basic information just like on Lending Club and they offered me 6.49% on the three year loan. That was good enough for me, so I went ahead and continued to the next step. I filled out a description to include on my listing for investors to read. Prosper prompted to to supply extra information to convince lenders this would be a worthwhile investment. Prosper then asked for my bank account information to make sure when the loan funded they knew where to send the money.
The loan listing includes a metric called Verification Stage, which signifies how much information about myself I have provided to the service. The more information you provide, the higher the stage, and the more likely your will gain investor trust and have your loan fund. Your loan listing is given 14 days to reach 70% funding for the loan to originate. The listing has to go through a manual review before it is made live, so I’ll give an update once that is complete.
So far the process has been fairly simple and it looks like I’ll be able to get a reasonable rate for an unsecured home improvement loan without having to deal with a bank.
*Update March 26, 2012*
So, it has been almost two weeks after submitting my application for a loan on P2P lending site Prosper and have a few updates to share. First, I received an email the afternoon after applying for the loan stating the following:
Thank you for posting your loan listing on Prosper.
To ensure compliance with fair lending laws, we do not allow borrowers to include references in their loan listings to their race, color, religion, national origin, sex, marital status, age, sexual orientation, military status, source of income, immigration / residency status or plans for having a family. We have removed your listing description because it contained one or more of these prohibited references.
You can view your listing by signing in to your account. https://www.prosper.com/account/common/login.aspx Although the description has been removed, your loan listing’s other details will be available for viewing.
I’m trying to think about what I wrote and it must have been that I referred to “my wife’s” income in the description, presumably giving away my sexual orientation. Unfortunately, I was not given an opportunity to resubmit an edited version, so my listing was posted with no description at all. I’m guessing that may give me less of chance of having my loan fully funded within the 14 day posting period. Guess we’ll have to see how it goes.
The same day I received another email requesting additional documentation:
- Valid Government Identification Card with Picture (Driver’s License, State ID or Passport)
- Voided check or a statement from the bank account you entered on Prosper
- Form W-2 and pay stub
By submitting this information, my Verification Stage would improve, indicating to interested investors that I have provided additional documentation to back up the claims in my listing. The email said I could just reply with scanned copies of the requested documentation, so that was easy enough.
The next day I received an email stating they needed a “current Pay Stub dated in the last 30 days, including your name, the business name, and both pay period totals and year-to-date totals”. Well, that’s odd. I went ahead and just sent it over again. Later that week I received a post card with a secret code on it which I was told to go and enter onto the site as verification of address.
While your listing is in the funding stage, it is actually sort of fun to check it every once and while and watch the investors offer you their money for the loan. You’re shown who offered to fund the loan, when they made the offer, and how much they committed. Most of the usernames are nicknames so you don’t know who they are, but the site still has a social network feel, where you can visit their page and even “friend” them.
Well, here it is on day 13 and my loan is only 44% funded. I doubt I’m going to get the loan since it has to reach at least 70% in the first 14 days. Looking at my listing, it showing I’m still only at Verification Stage 2, but since I’ve submitted everything that has been requested, I should be at 3. I’m sure that’s why a lot of people haven’t committed their funds to the loan. Unfortunately, there is no checklist showing me the required documentation and what has been received versus what is outstanding. So, I have no way of knowing what documentation is missing. I’m going to have to call Prosper during business hours tomorrow and figure it out.
The help page says I will be able to resubmit the listing after the 14 days expires for no additional charge. Fair enough, but that’s sort of a pain. I’d recommend to anyone trying to get a loan on Prosper to make sure their verification stage hits 3 after they submit all of the documentation during the first 5 days or so after their loan is posted. If it doesn’t call up there and figure out what’s going on. I should have been more proactive to make sure of this.
I’ll throw up another post to update how this turns out.
So, I called Prosper yesterday about why my verification stage was still 2 and they basically said the verification staff was overrun with reviews and was not able to get to it yet. They recommended that I withdraw the current listing and just put it back up again, which I have done. I still have my verification stage 2 status and I see a lot of people jumping on funding the loan today. I suppose the lesson is if you need the money quickly, this may put you in a crunch.
*Update April 6, 2012*
I’m excited to report I was able to finally get my first peer to peer loan funded through Prosper. As discussed previously, my Verification Stage was stuck at 2 for more than two weeks. I called Prosper support for a second time and the analyst told me they were missing one of my verification documents. The frustrating part for me was I had already sent it to them 3 times, including the first time they asked for it a few days after I applied for the loan. He stayed on the phone with me and had me send it again and verified receipt while on the phone. Within a half hour my Verification Stage moved up to 3.
The rate of investments in my loan increased pretty dramatically once that happened and within a few days my loan reached 100% funding. I also noticed some investors start making heavier investments in the loan ($1,000+), so presumably these are investors with pretty large sums of money on the platform.
After reaching 100% funding, the money only took a couple of days to reach my bank account, minus a $60 origination fee, via electronic transfer. By default, Prosper set me it so that every month my payment will be automatically drafted from my checking account. Undoubtedly this helps to reduce to their loan delinquencies, and something I liked to see as a p2p loan investor.
Overall, I was pretty satisfied with my experience borrowing money from Prosper and would recommend this service to others who are seeking a small to mid-sized loan. Of course things would have gone a lot smoother if they would have processed my verification documents faster. I found it sort of fun to be able to login and watch investors bid on my loan during the listing period. Prosper’s website was intuitive and I found their communications via email stepping me through the loan process easy to follow. Both times I called into their help desk the support analysts were friendly, though the second person I talked to seemed much more helpful. Now I’m excited to complete my home improvement project, which should be done by the end of the month.