Should you borrow money to get up to 35,000 United miles from Prosper?

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Yesterday morning, I received an offer to get up to 35,000 United miles with a personal loan from Prosper.  The offer is for 1 mile for each dollar borrowed.  Is that a good deal?  Is it worth it to take out a loan just to get the miles?  Could I take out a $35,000 loan, get 35,000 miles, and pay back the loan immediately so as to avoid interest payments?  Let’s see…

35000 United Miles from Prosper

Soft Pull

Applying for a loan from Prosper doesn’t lead to a hard pull on your credit report.  Splashed all over the Prosper website are assurances that “Checking your rate will not affect your credit score.”  However, according to forum posts found here, accepting the loan does affect your credit score.  OK, so we can at least click through and see what the deal is…

What does it cost?

Most loans have closing fees.  Prosper is no different.  On their help page, found here, they list the following closing fees:

Prosper Rating Closing Fee
AA 0.50%
A,B 3.95%
C-HR 4.95%

If no other costs were involved, then one might consider paying a 0.5% fee to get miles.  That would be like paying half a cent per mile.  I would never suggest paying 3.95% or more, though.  That would be like paying 4 cents or more per mile, plus you would incur a hard inquiry on your credit report.  That’s a terrible deal.

My Experiment

I was curious if I could qualify for that Prosper AA rating, so I clicked through to check my rate.  Look how easy it is:

Check Your Rate 35000 United Miles from Prosper

Oh, wait, there’s a bit more, but not much:

Check Your Rate Mileage Plus Info 35000 United Miles from Prosper

Then, “Get a Custom Rate in 1 Click”.  Make sure to use the Tab key to go from one text box to another because if you use a mouse you will click more than once, and that would make a liar out of them:

Check Your Rate Get a Custom Rate in 1 Click 35000 United Miles from Prosper

Then, finally, this:

You Qualify for 15000 United Miles from Prosper

OK, so they’ll loan me $15K instead of $35K.  But, they still don’t show the closing fee!

Not to be daunted, I clicked “Get this loan”.

A few text boxes and clicks later, I finally got the answer I was looking for:

Origination Fee: $750, Amount Financed: $14,250

If we calculate the fee as a percentage of total ($15K), we get a rate of 5%.  However, if we calculate it as a percent of the amount financed ($14,250), we get a rate of 5.26%.  Either way, that’s a ridiculous amount to pay for a loan, especially if you’re just in it for the miles.

If I were stupid enough to go forward with this, I’m unclear whether I would get 15,000 United miles or 14,250.  If we assume that I would get 15,000 miles, and that I would turn around and pay off the loan immediately so as to avoid interest charges, then my total cost per mile would be:

$750 / 15,000 miles = 5 cents per mile

Summary

Unless you somehow qualify for a Prosper AA rating, this is a terrible deal.

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