We're reader-supported & may earn revenue from some providers listed. Learn more about our mission.

Peer to Peer Loans: A Smart Borrowing Option For Better Approval Odds

illustration showing the cycle of peer to peer borrowing
Long Story Short
Peer-to-peer loans (also known as P2P) let you borrow directly from a person or a group of people instead of a traditional financial institution. The process feels the same as borrowing from a typical online lender, but P2P lenders will have a wider range of approval criteria and risk appetites, potentially improving your approval odds, rates, and loan limits.

By connecting individuals looking for loans with individual investors, peer to peer (P2P) loan platforms have created a new way to access funds. If you are interested in learning more about how P2P loans work or are simply researching different loan options, this article is for you. We will define P2P loans and how to apply, compare P2P loans to traditional loan options, list the pros and cons, and lay out some solid loan alternatives. We also review five of the top P2P loan providers: LendingClub, Prosper, Upstart, Lenme, and Funding Circle.

Read on for the facts you need to make an informed borrowing decision.

Understanding Peer to Peer Loans

woman on sofa using laptop pensively

Peer-to-peer loans, often called P2P, connect individual borrowers with individual investors or small groups of individuals looking to lend money as an investment opportunity. This unique approach eliminates the need for a traditional financial institution, which was always required to serve as the lender in the past.

Instead, financial institutions are replaced by P2P loan platforms. These platforms act as facilitators, providing a marketplace where borrowers and investors can come together to meet their financial needs.

Ideally, this creates a win-win situation for both borrowers and investors. Borrowers with Excellent credit, Good credit, Fair credit, or even Poor credit have a new way to access quality loans because individual investors may offer more favorable terms compared to traditional banks. And investors have the opportunity to potentially earn higher returns on their investments compared to other investment options.

It is important to note that, aside from who funds the loans, a P2P loan is the same as a traditional personal loan. Like a personal loan, P2P loans can be used for a wide variety of purposes, including high-interest debt refinancing and consolidation, large purchases, home improvement projects, and unexpected expenses.

How Do P2P Loans Work?

The process of getting a peer-to-peer loan is very similar to any other online loan:

  1. Pre-qualify. It starts with the borrower submitting an online application on the P2P lending website, including details such as personal information, loan amount requested, and the purpose of the loan. At this stage, the P2P platform will conduct a soft credit check, which does not impact a borrower's credit score.
  2. Apply. Once the loan application is completed, it undergoes a review to assess the borrower's creditworthiness. This includes a hard credit pull, which may temporarily lower a borrower's credit score by a few points. At this point, the borrower's loan request and credit profile become a "loan listing" on the platform.
  3. Review offers. On the other side of the platform, individual investors browse loan listings and decide whether to fund them based on their own risk tolerance and investment strategies. Investors will then send loan offers back to the borrower, including a loan amount, interest rate, fees, and repayment terms. The borrower reviews the different loan offers and chooses the one that works best for them.
  4. Receive funds. Once investors fully fund a loan, the borrower receives the loan proceeds, typically through online transfer, within 1 to 3 days of applying.
  5. Repay. Borrowers begin making monthly payments to repay the loan, including interest. This process will feel the same as a typical online loan: borrowers do not interact with individual investors but instead pay the P2P lending platform directly. These repayments are then distributed to investors, providing them with a return on their investment.

Note that while the process is typically easy and transparent, peer-to-peer lending platforms often charge fees for facilitating these loans. Fees can include origination fees—which range from 1% to 10% of the total loan amount and are charged to cover the platform's operational costs—and servicing fees, which are ongoing fees for managing and servicing the loans. It is important to always carefully review the fees and terms of any loan agreement, including those on P2P lending platforms.

Overall, a peer-to-peer loan offers a legitimate and valid alternative to traditional loan options, providing a streamlined and efficient process for both borrowers and investors to meet their financial goals.

Differences between P2P Loans and Bank Loans

photo of bank signage

Peer-to-peer lending differs from traditional bank loans in several key ways. These include:

  • Individualized loan approvals: Peer-to-peer lending platforms connect individual borrowers to individual investors, eliminating the need for a traditional financial institution as the intermediary. Instead of one large institution deciding whether to approve a loan, a borrower's request is reviewed by many different investors, any of whom may choose to fund the loan.
  • Variety vs. consistency: Peer-to-peer loans may have a wider range of rates, fees, and terms than traditional bank loans, which tend to be more rigid or consistent in terms of what is offered. While this can be a positive, potentially offering borrowers more options to choose from, it is not a given that a P2P loan will offer better rates and terms than a regular bank. As with any loan, it is always important to review every offer carefully to ensure it gives you the best value.
  • Digital Speed: While traditional banks are likely to offer a digital application, there may still be a manual component to the approval and funding process – which can add time. In contrast, P2P loan platforms are fully digital. This means that a borrower can expect the peer to peer process to be clear, smooth, and fast from start to finish. In addition, customer service on P2P platforms tends to offer more digital-based options than a traditional bank, including live chat on their website and even texting. Most traditional banks still require a phone call to resolve issues.
  • Regulatory oversight: Traditional bank loans are subject to strict regulatory oversight, ensuring compliance with financial laws and regulations. Peer-to-peer lending, while growing in popularity, may have less regulatory oversight. That's why it's important to check a P2P lender's customer reviews and credentials, which we cover in our reviews of the top five lenders later in this article.
logos for top peer to peer loan options to consider

Now that we understand the concept of peer-to-peer lending let's take a closer look at some of the top peer-to-peer loan options available in the market. In the next sections, we will review five of the top peer-to-peer loan platforms:

  • LendingClub
  • Prosper
  • Upstart
  • Lenme
  • Funding Circle

Each platform offers its own unique features and benefits, catering to different borrower profiles and needs. Start comparing the different options to see if one stands out for you.

LendingClub: Best Peer to Peer Debt Consolidation Loans

LendingClub is one of the leading peer-to-peer lending platforms for fair to good credit borrowers, offering personal loans for a variety of purposes. While their personal loans can be used for anything including home improvement projects, large purchases, and unexpected emergencies, many people turn to LendingClub to consolidate debt and pay off high interest credit cards. This is because LendingClub has a balance transfer loan option that can save borrowers up to 5% on their interest rate if they authorize LendingClub to pay creditors directly.

Regardless of how borrowers choose to use a LendingClub loan, another of the lender's unique features – which many other lenders do not offer – is a joint application option. Borrowers can co-sign with another qualified borrower in order to increase their approval odds or qualify for a larger loan than they would have on their own. This is a good loan option for borrowers with fair credit, thin or limited credit histories, or limited incomes.

LendingClub Fast Facts

  • Loan sizes offered: $1,000 to $40,000
  • Minimum cedit score requirements: 600
  • Interest rates: 9.57% to 35.99%
  • Fees: Origination fees (3% to 8% of loan total) and late fees (either $15 or 5% of unpaid amount, whichever is greater)
  • Repayment terms: 2 years to 5 years
  • Lender reviews: 4.7/5 stars on Trustpilot with over 5,300 customer reviews. A+ rating on the Better Business Bureau.
  • Standout feature: Rate discounts for using a loan to consolidate or refinance existing debt
  • Watchouts: Origination fees and late fees can become expensive, so make sure to stay current on these loans

Prosper: Best for Multiple Loans

Prosper evaluates creditworthiness using a proprietary formula that takes into account factors such as credit score, credit history, debt-to-income ratio, employment history, and recent financial information. The benefit of this more well-rounded approach is that even borrowers with lower credit scores have a better chance of putting their best foot forward with potential investors -- and as a result may get larger loans or better rates offered to them.

In fact, one of the unique benefits of Prosper is that borrowers who prove their reliability in repaying can take out up to two loans at once from the platform. Keep in mind that a borrower must first establish six months of on-time payment history with one loan on Prosper before they can apply for a second loan. This unique feature can provide extra flexibility for people in need of additional funds.

Read our full review of Prosper here.

Prosper Fast Facts

  • Loan sizes offered: $2,000 to $50,000
  • Minimum credit score requirements: 560
  • Interest rates: 8.99% to 35.99%
  • Fees: Origination fees (1% to 8% of loan total) and late fees (either $15 or 5% of unpaid amount, whichever is greater)
  • Repayment terms: 2 years to 5 years
  • Lender reviews: 4.6/5 stars on Trustpilot with over 12,500 customer reviews. A+ rating on the Better Business Bureau
  • Standout feature: Borrowers who demonstrate on-time repayments can take up to two loans out at the same time
  • Watchouts: While Prosper's origination fees and late fees are in-line with other P2P platforms, they can add up fast if you fall behind on repayments

Upstart: Best Peer to Peer Loans Bad Credit

Although other P2P lenders use their own models to assess a borrower's creditworthiness, Upstart's AI-driven approval process stands in a league of its own. It is one of the few P2P lenders that don't rely heavily on credit scores to assess creditworthiness; in fact, it has no minimum credit score requirement at all. Instead, it reviews over 1,500 other data points on each borrower to determine creditworthiness, including when and where a borrower graduated college, employment history, income, location, etc.

As a result, Upstart claims that it offers a 44% higher approval rate for borrowers than comparable lenders and that borrowers end up paying an average of 36% lower annual percentage rates. This kind of more inclusive borrower assessment can be a game-changer for those with limited credit histories or whose credit scores don't show the full picture of their financial profile.

Read our full review on Upstart here.

Upstart Fast Facts

  • Loan sizes offered: $1,000 to $50,000
  • Minimum cedit score requirements: No minimum score requirement
  • Interest rates: 7.8% to 35.99%
  • Fees: Origination fees (0% to 12% of loan total) and late fees (either $15 or 5% of unpaid amount, whichever is greater)
  • Repayment terms: 3 years or 5 years
  • Lender reviews: 4.6/5 stars on Trustpilot with over 12,500 customer reviews. A+ rating on the Better Business Bureau
  • Standout feature: Upstart's nontraditional, AI-driven approval process means that more borrowers are likely to be approved for better rates -- even with imperfect or limited credit histories
  • Watchouts: This lender has fairly limited repayment terms of either 3 years or 5 years, limiting the flexibility of those who want to repay over a longer period

Lenme: Great for Small Loans

Not all borrowers require large loans, and Lenme could be a good choice for people seeking $50 to $5,000. This lender is entirely app-based and is designed to facilitate quick and small peer-to-peer loans between borrowers and individual investors. Unlike other P2P platforms, which can take several days to process and fund, Lenme can get you the quick cash you need in your bank account in 1 to 2 business days.

There are two other benefits that come with Lenme because of its focus on smaller loans: better approval odds, and lower fees. Borrowers with lower credit scores can still get approved for a loan, and as they build a positive repayment history, they can qualify for larger loans on the Lenme platform over time. And no matter your credit score, borrowing on Lenme is likely to mean lower fees than other P2P lenders. Instead of charging hefty origination and late fees, Lenme's model is a flat subscription fee starting at just $1 per month, plus a modest $3 fee for each loan a borrower takes out.

Read our full review on Lenme here.

Lenme Fast Facts

  • Loan sizes offered: $50 to $5,000
  • Minimum cedit score requirements: No minimum score requirement
  • Interest rates: 3% to 200%
  • Fees: Monthly subscription fee starting at $1, plus a $3 fee for every new loan
  • Repayment terms: Up to 1 year
  • Lender reviews: 3.2/5 stars on Trustpilot with over 12,500 customer reviews. F rating on the Better Business Bureau (lower rating is from investors due to a higher-than-expected default rate on loan payments)
  • Standout feature: With Lenme's smaller loan sizes come faster funding periods, lower fees, and higher approval odds
  • Watchouts: Though Lenme has a lower rating than other peer-to-peer loan platforms, this is primarily driven by frustrated investors who didn't get repaid after funding a loan, not by issues that borrowers face on the platform. Still, it may be worth testing out Lenme using a smaller loan size at first

Funding Circle: Best for Small Business Loans

Although most peer-to-peer lenders provide personal loans, Funding Circle is designed specifically for established small businesses looking to grow with a business loan of up to $500,000. The major benefits of working with Funding Circle are competitive rates and speed. The application and approval process is easier than with a traditional business loan provider, and business borrowers can receive their funds within two days.

Keep in mind that Funding Circle is best for more established businesses rather than a brand-new enterprise. Their approval requirements include a business that is a minimum of two years old, a business lien, and a personal guarantee. For businesses with an established track record, this business P2P loan could be a great alternative to more traditional lending options, which tend to be slower and have a more frustrating underwriting process.

Funding Circle Fast Facts

  • Loan sizes offered: $25,000 to $500,000
  • Minimum cedit score requirements: 660
  • Interest rates: 15% to 45%
  • Fees: Origination fees (4.5% to 8.5% of loan total) and late fees (5% of unpaid amount)
  • Repayment terms: Up to 7 years
  • Lender reviews: 4.6/5 stars on Trustpilot with over 14,600 customer reviews. A+ rating on the Better Business Bureau
  • Standout feature: Business loans up to $500,000 have no minimum revenue requirements
  • Watchouts: Because of its personal guarantee requirements and minimum business age requirements, Funding Circle is best for well established businesses that are likely to continue scaling

Read more on peer-to-peer business loans

Pros & Cons of Peer-to-Peer Loans

Like any financial option, peer-to-peer loans have advantages and disadvantages. Now that we have explored some of the top P2P loan options let's dive deeper into their pros and cons. Understanding these can help you make informed decisions about whether peer-to-peer loans are the right choice for your financial needs.


  • Competitive interest rates: Peer-to-peer loans often provide borrowers with competitive interest rates because the investors funding the loans may offer better rates and terms. This can result in significant savings compared to traditional lending options.
  • Quick process: Unlike traditional lenders, which may use a mix of digital and manual processes, peer-to-peer lending platforms are digital from start to finish. This means a streamlined application and approval process, easy repayment options, and customer service reachable by app, text, or chat -- making for an overall high-quality experience for borrowers.
  • Fixed rates: Many peer-to-peer loans come with fixed interest rates, which means monthly payments remain the same throughout the loan term. This provides borrowers with stability and predictability, allowing for better financial planning.
  • Lower fees: Some traditional loans impose penalties for prepayment, meaning borrowers are charged extra fees for paying off their loans early. In P2P, prepayment penalties are often absent, giving borrowers the flexibility to pay off their loans ahead of schedule without additional charges.
  • Flexible loan options: Peer to peer loans are usually personal loans, which are highly versatile in terms of how borrowers can use them. Whether borrowers need to consolidate or refinance credit card debt, finance home improvements, or fund a small business, there are peer-to-peer loans available to meet those needs.


  • Less regulatory oversight: Peer-to-peer loan platforms may have less regulatory oversight than traditional financial institutions. This can pose risks for borrowers and investors, as there may be less protection in case of fraudulent activities or platform insolvency. However, it is worth noting that in most cases, the investor - and not the borrower- who assumes the most risk with a peer-to-peer loan.
  • Market demand & loan availability: Unlike large financial institutions, which tend to remain consistent in their lending approach, peer-to-peer lending operates based on market demand and the availability of investors willing to fund loans. This means loan availability may fluctuate, and borrowers may face challenges securing loans during low investor interest.

Getting the Best Out of Peer-to-Peer Loans

While peer to peer loans offer competitive rates and flexible repayment terms, borrowers can take certain steps to maximize the benefits of peer-to-peer lending. By following these tips, borrowers can ensure they secure the best rates and terms for their financial needs.

Tips to Maximize the Benefits of P2P Borrowing

  • Consider your credit score: Your credit score is likely to play a significant role in the interest rates you qualify for. Before applying for a peer-to-peer loan, review your credit report to ensure accuracy and take steps to improve your credit score if necessary. A higher credit score will increase your chances of securing better rates.
  • Research different peer lending sites: Do your due diligence and research different peer-to-peer lending sites to find the one that best fits your financial needs. Each platform may offer different interest rates, loan options, and borrower requirements, so comparing and choosing wisely is important.
  • Understand the interest rates and fees involved: Before committing to a peer-to-peer loan, carefully review the interest rates and fees associated with the loan. Use tools like a personal loan calculator to understand a potential loan's monthly and total costs. Compare these costs to traditional loans to ensure you get the best deal for your financial situation.
  • Utilize peer-to-peer loans for debt consolidation: Peer-to-peer loans can be an excellent option for consolidating high-interest debt. Taking out a peer-to-peer loan to pay off multiple debts can lower your overall interest rate and simplify your monthly payment obligations.
  • Stay informed about your credit report: Monitoring your credit report regularly can help you better understand your creditworthiness and potentially qualify for better rates in the future. By staying on top of your credit report, you can take the necessary steps to correct any errors and improve your credit score over time.

Alternatives to Peer-to-Peer Loans

logos of lenders to consider instead of p2p loans

It's always a good idea to consider alternative borrowing options to ensure you choose the best finance solution for your needs. Let's explore two strong alternatives to peer-to-peer loans for borrowers:

AmONE: Best for Multiple Loan Offers at Once

AmONE is a leading online lending marketplace, which means they connect borrowers to a number of high-quality loan offers up to $50,000 based on a borrower's profile. AmONE works with a range of different credit types and offers both personal loans and small business loans. A lending marketplace like AmONE is a great way to receive multiple loan offers at once and a comparison shop to find the best rate and option for you with only one application.

AmONE Fast Facts:

  • Loan sizes offered: $1,000 to $50,000
  • Minimum credit score requirements: No minimum credit score requirement
  • Interest rates/fees: Varies depending on lenders you match with
  • Repayment terms: Varies depending on lenders you match with
Read our full AmONE review here.

Best Egg: Direct Lender for Secured & Unsecured Personal Loans

Best Egg offers secured and unsecured loans from $2,000 to $35,000 to borrowers with Fair or better credit. Secured loans can help borrowers with lower incomes or lower credit scores get approved for a loan by using collateral as a loan repayment guarantee. Best Egg is known for having competitive rates, flexible approval and repayment criteria, and a great digital experience, which makes it a smart choice to consider if you are looking for a fast and reputable loan.

Best Egg Fast Facts:

  • Loan sizes offered: $2,000 to $35,000
  • Minimum credit score requirements: 600
  • Interest rates/fees: APR is 8.99% to 35.99%, plus an origination fee
  • Repayment terms: 3 to 7 years
Read our full Best Egg review here.

The Bottom Line

Peer-to-peer loans offer a unique and convenient way to borrow money by connecting borrowers to individual investors instead of traditional financial institutions. This can mean accessing a larger pool of loan options and more competitive rates for the average borrower. While peer-to-peer loans can be a smart move for those seeking a fast and flexible borrowing solution, like any financial product, P2P loans have benefits and drawbacks that should be fully understood before making a decision. Exploring top peer-to-peer loans and comparing them to alternatives helps ensure that you are choosing the best option suited to your financial needs.

Frequently Asked Questions

Are Peer-to-Peer Loans Safe?

Peer-to-peer loans can be a safe option for borrowers and investors, but it also comes with risks. To minimize these risks, choosing reputable peer-to-peer lending platforms and thoroughly researching them before participating is important. Reputable platforms provide excellent customer service, have a track record of successfully facilitating loan transactions, and take necessary measures to safeguard customer information.

How Hard is it to Get a Peer-to-Peer Loan?

One of the benefits of P2P loans is that borrowers are connected to individual investors who may be more willing to approve and fund a loan than traditional financial institutions. However, most of the time a Fair credit score of around 600 and a steady source of income are required to get approved for a larger loan. It is easier to qualify for smaller P2P loans than larger loans, so if your credit score is on the lower end, it may be worth starting with a P2P app that specializes in micro-loans, such as Lenme.

What is a Peer-to-Peer Loan?

Peer-to-peer loans, also known as P2P, let you borrow directly from a person or a group of people instead of a traditional financial institution. The process feels the same as borrowing from a typical online lender, but P2P lenders will have a wider range of approval criteria and risk appetites, potentially improving your approval odds, rates, and loan limits.

Zach Robbins

Zach has over ten years of experience in financial services, recognized on Inc. 500 lists & recently featured in ConsumerAffairs, Forbes, GoBankingRates, Huffington Post, and U.S. News & World Report.

View articles
Checked by
Editorial Staff

The editorial team applies their decades of experience in financial services & customer experience to develop research aligned with our editorial pillars of Integrity, Transparency, & User-centricity.

View articles

Great! You’ve successfully signed up.

Welcome back! You've successfully signed in.

You've successfully subscribed to Loanfolk.

Success! Check your email for magic link to sign-in.

Success! Your billing info has been updated.

Your billing was not updated.