Crowdfunding College Essay

Lending Club and Prosper have been in the news much lately, particularly on the Internet. They are “crowdfunding” loan platforms that match borrowers with willing investors to bypass banks. They are coming up quickly as alternative loan sources to traditional banks. They work more quickly and efficiently than banks, and will often make more cost-effective loans than banks will in certain circumstances.

But like all lenders, Prosper and Lending Club have certain requirements, and you have to know what they are, and be prepared to meet them if you want to to use their loan services to your best advantage.

Check Your Credit Score First

Crowdfunding is widely advertised as an alternative lending source. That refers mostly to the fact that they

Fortunately, crowd-funding lenders typically don't charge such routines fees as application fees or prepayment penalty fees. But that doesn't mean that they don't charge any fees at all.

Common among crowdfunding lenders are origination fees. These fees are expressed as a percentage of the loan amount you are taking. For example, an origination fee of 3 percent will require an upfront payment of $300 on a loan of $10,000. The fee is usually deducted from the loan amount, so it is not a fee that you have to pay out of pocket.

Also common are check processing fees. Since they’re web based, crowdfunding lenders prefer that you pay by some form of automatic draft. Should you decide that you want to pay by check, you'll have to pay a check processing fee that will range anywhere from $7 to $15 per payment.

No matter who the crowdfunding lender is, be sure to read all of the fine print on the website to make sure that you understand exactly what fees you will be paying.

Know the Documentation Requirements and Be

This could be a way to verify your cash flow, or to provide some support for year-to-date financial statements.

There are also compliance documentation requirements. These can include a state issued photo ID, evidence of a valid Social Security number, and proof of residency.

You should be fully prepared to provide all of these documents before making application.

Investigate What Discounts Might Be Available

Generally speaking, rates on any crowdfunding website are standard, and are based on the loan grade you are assigned. Loan grade is calculated using factors such as your credit score, the amount of money that you are looking to borrow, the loan term, your income, and other factors. It's almost impossible to know what you rate you will be paying until you provided such information.

For this reason, the platforms don’t typically offer discounts, other than the obvious lower pricing that is available to people with stronger credit scores and credit profiles.

It is possible however that they will offer discounts on certain websites that advertise or promote their services. Exactly how these promotions will work will vary from one website to another.

Comparing Crowdfunding Loans to Other Loan