Foo - Prosper, Lending Money

Has anyone here heard of Prosper.com (http://www.prosper.com/). It looks very interesting from the lending aspect. I thinking about signing up as a lender.

Any opinions?

I only lend money to people I know. Short term only @ 10% interest per month. Surprisingly, a lot of people don't mind paying this much interest. Typically, I would loan $500 to someone I know and receive $550 in 30 days.

I only lend money to people I know. Short term only @ 10% interest per month. Surprisingly, a lot of people don't mind paying this much interest. Typically, I would loan $500 to someone I know and receive $550 in 30 days.

People on there are will to play up to 30% on a loan, and they aren't considered high risk, by Prospers standards. If I diversify enough I would sell money at that rate all day long. If and when borrower defaults remains unknown.

I just looked at the site. It seems like some other things I've seen bouncing around on the internet. Basically, you are providing a personal loan to an individual, with a contractual agreement that they will pay you back with interest. I think this is a good way to lose your money. Here's why.

Most borrowers on that kind of site can't obtain a loan through conventional methods. They either have bad credit, a business idea that no banker is buying, etc.. Credit is still relatively easy to obtain in the United States, so inability to obtain a bank loan or credit card is a big red flag.

And don't tell me that it's those awesome interest rates that bring them in. I saw the teaser rate up on the front page, and I'm willing to bet most borrowers there are paying much higher rates since they have lousy credit. And the lenders are out there, licking their lips at the prospect of getting a "guaranteed 10%return" or something like that. Truth is that the lenders will be lucky to get their money back at all.

What are you going to do when one of these people defaults on you? Do you really want to be going through the legal collection process, which still may get you nothing back?

My advice is this. If you're reading a story there that touches your heart, and you really want to give that person money, give it to them with the expectation that you will be writing it off as bad debt or charitable donation. If you're actually looking at this as an investment vehicle, try stocks, bonds, precious metals, real estate, or a good ole savings account. If you really like the concept of lenders and borrowers helping each other, open your savings account at a credit union instead of a bank.

I just looked at the site. It seems like some other things I've seen bouncing around on the internet. Basically, you are providing a personal loan to an individual, with a contractual agreement that they will pay you back with interest. I think this is a good way to lose your money. Here's why.

Most borrowers on that kind of site can't obtain a loan through conventional methods. They either have bad credit, a business idea that no banker is buying, etc.. Credit is still relatively easy to obtain in the United States, so inability to obtain a bank loan or credit card is a big red flag.

And don't tell me that it's those awesome interest rates that bring them in. I saw the teaser rate up on the front page, and I'm willing to bet most borrowers there are paying much higher rates since they have lousy credit. And the lenders are out there, licking their lips at the prospect of getting a "guaranteed 10%return" or something like that. Truth is that the lenders will be lucky to get their money back at all.

What are you going to do when one of these people defaults on you? Do you really want to be going through the legal collection process, which still may get you nothing back?

My advice is this. If you're reading a story there that touches your heart, and you really want to give that person money, give it to them with the expectation that you will be writing it off as bad debt or charitable donation. If you're actually looking at this as an investment vehicle, try stocks, bonds, precious metals, real estate, or a good ole savings account. If you really like the concept of lenders and borrowers helping each other, open your savings account at a credit union instead of a bank.


That is good sound advice, but it sooooo tempting and sooooo easy (to throw money away). :D

I appreciate your input, Thanks

10% interest per month

Usury is illegal in most states. That is like 120%/year. A sucker is born every minute. Ever break any arms/legs?????

someone pointed me to prosper a few months back when i asked about basic investing/money management. i recently read a time magazine article, i think it was about prosper. i think the article reccomended lending like $100 to each person. so if you wanted to lend out $1000, loan 100 dollars to 10 different ppl instead of 1000 to one.

someone pointed me to prosper a few months back when i asked about basic investing/money management. i recently read a time magazine article, i think it was about prosper. i think the article reccomended lending like $100 to each person. so if you wanted to lend out $1000, loan 100 dollars to 10 different ppl instead of 1000 to one.

Yeah, you want to diversify and hopefully you will earn enough to cover any hits you may take. I think the pay back rate is about 90-95 percent which is pretty good.

Here is the performance chart (http://www.prosper.com/lend/performance.aspx)

.......is illegal in most states. That is like 120%/year.

Yeah, but it's not a business. These are private transactions.

Yeah, you want to diversify and hopefully you will earn enough to cover any hits you may take. I think the pay back rate is about 90-95 percent which is pretty good.

Here is the performance chart (http://www.prosper.com/lend/performance.aspx)

If you get a 90% pay back rate and charge a flat 10% interest, you break even. That's it.

I'm not sure if they are doing compounding rates or anything, but that (if done legally) is only going to put you up less than 1 percent. (I'm basing this on the home mortgage compounding stuff that I see in the newspaper.) So you might earn $10 on $1000 if everything goes well, which it might not. With the 95% payback rate, you're getting a 5% return, plus maybe one more percent for compounding. ...And this is all assuming that the website is posting legitimate information.

It just doesn't seem worth the risk when there are so many other historically proven alternatives that can get a bigger payoff in the long run. Personally, I think it's a great time to buy stock/ stock mutual funds, if you're willing to wait a few years to see returns.

I have a Prosper account, so Ill tell you what I know.

It is a way people can get loans, and you as a lender can provide a portion of those loans.
Applicants must provide all of the necessary information that they do for any other loan.
Like employment info, credit rating, etc. What is good about Prosper is you can become
very diversified by loaning as little as $50. Right now I have 58 loans. You'll have some late
payers and a default occasionally, but your safety is in the higher numbers of loans.

When people list a loan, its kind of like the opposite of ebay- they offer a high interest
rate and after the full amount of the loan has been bid on by lenders, and additional bids
will gradually bring down the interest rate until the time has run out (about a week). The
borrowers are clearly classified by credit grade: AA A B C D E HR, you see a description
of their plans for the money, and how they will be able to pay it back. You'll see their
debt to income ratio, weather or not they own their home, and also the percent rate of
default of someone in their category. I think it's great, and highly recommend it.

Usury is illegal in most states. That is like 120%/year. A sucker is born every minute. Ever break any arms/legs?????
yes

hell of a way to make friends

Usury is illegal in most states. That is like 120%/year. A sucker is born every minute. Ever break any arms/legs?????

That's not quite usury. GILA (Georgia Industril Loan Act) actually permits interest rates on small loans in excess of 400% APR. I don't remember the exact rate as its been quite a few years since I spent my time in that industry (absolute hell!). The real kicker is the addition of closing fees which get rolled into the loan and the reulting interest rates are way up there.

That's not quite usury. GILA (Georgia Industril Loan Act) actually permits interest rates on small loans in excess of 400% APR. I don't remember the exact rate as its been quite a few years since I spent my time in that industry (absolute hell!). The real kicker is the addition of closing fees which get rolled into the loan and the reulting interest rates are way up there.

Payday loans have a nasty interest rate.

Payday loans have a nasty interest rate.

Nah, this was one of those other lending places that make loans to people banks don't want to deal with.

Nah, this was one of those other lending places that make loans to people banks don't want to deal with.


Who did you work for again :D

http://www.cbc.ca/gfx/photos/brando_cp_2920257.jpg

I have a Prosper account, so Ill tell you what I know.

It is a way people can get loans, and you as a lender can provide a portion of those loans.
Applicants must provide all of the necessary information that they do for any other loan.
Like employment info, credit rating, etc. What is good about Prosper is you can become
very diversified by loaning as little as $50. Right now I have 58 loans. You'll have some late
payers and a default occasionally, but your safety is in the higher numbers of loans.

When people list a loan, its kind of like the opposite of ebay- they offer a high interest
rate and after the full amount of the loan has been bid on by lenders, and additional bids
will gradually bring down the interest rate until the time has run out (about a week). The
borrowers are clearly classified by credit grade: AA A B C D E HR, you see a description
of their plans for the money, and how they will be able to pay it back. You'll see their
debt to income ratio, weather or not they own their home, and also the percent rate of
default of someone in their category. I think it's great, and highly recommend it.

Thanks for your insight, I was hoping someone here had some experience with it. What kind of interest rates are you getting on your loans?

Thanks for your insight, I was hoping someone here had some experience with it. What kind of interest rates are you getting on your loans?

My average interest rate for the whole portfolio is about 20%.
The number of loans spread over the credit categories looks like a bell curve:
Very few AA and As since their credit is so good, their interest rates are really low.
Many Bs and Cs, since its a good balance of risk and return.
Very few Ds, and Es since they are very risky, although high in interest return.
no HRs since they are completely unpredictable.

I have a Prosper account, so Ill tell you what I know.

It is a way people can get loans, and you as a lender can provide a portion of those loans.
Applicants must provide all of the necessary information that they do for any other loan.
Like employment info, credit rating, etc. What is good about Prosper is you can become
very diversified by loaning as little as $50. Right now I have 58 loans. You'll have some late
payers and a default occasionally, but your safety is in the higher numbers of loans.

When people list a loan, its kind of like the opposite of ebay- they offer a high interest
rate and after the full amount of the loan has been bid on by lenders, and additional bids
will gradually bring down the interest rate until the time has run out (about a week). The
borrowers are clearly classified by credit grade: AA A B C D E HR, you see a description
of their plans for the money, and how they will be able to pay it back. You'll see their
debt to income ratio, weather or not they own their home, and also the percent rate of
default of someone in their category. I think it's great, and highly recommend it.

please report back in a few months or so and tell us how the whole prosper thing works out for you.

as with anything, start off small and only with money that you can afford to lose. once you start too see a track record, then consider lending a little more.

I'd consider spending money on other things, preferably stuff you can liquidate in a hurry, like stocks.

These loans may be decent as part of an investment portfolio, but they are very risky, and you can't get your money out in a hurry should some need arise.

I have a Prosper account, so Ill tell you what I know.

It is a way people can get loans, and you as a lender can provide a portion of those loans.
Applicants must provide all of the necessary information that they do for any other loan.
Like employment info, credit rating, etc. What is good about Prosper is you can become
very diversified by loaning as little as $50. Right now I have 58 loans. You'll have some late
payers and a default occasionally, but your safety is in the higher numbers of loans.

When people list a loan, its kind of like the opposite of ebay- they offer a high interest
rate and after the full amount of the loan has been bid on by lenders, and additional bids
will gradually bring down the interest rate until the time has run out (about a week). The
borrowers are clearly classified by credit grade: AA A B C D E HR, you see a description
of their plans for the money, and how they will be able to pay it back. You'll see their
debt to income ratio, weather or not they own their home, and also the percent rate of
default of someone in their category. I think it's great, and highly recommend it.

How long have you been doing this? Also, why do people with good credit ratings go to the site for a loan, in your opinion?

I know I made a pretty strong argument against this earlier, but I am curious, since you're saying that it's working for you. I honestly didn't expect anyone to come on with a positive experience.

How long have you been doing this? Also, why do people with good credit ratings go to the site for a loan, in your opinion?

I know I made a pretty strong argument against this earlier, but I am curious, since you're saying that it's working for you. I honestly didn't expect anyone to come on with a positive experience.

Ive done this since january

These are all 3-year loans. Its not a very liquid investment- you cant get all your money back early.





These loans may be decent as part of an investment portfolio, but they are very risky, and you can't get your money out in a hurry should some need arise.

Its only as risky as you make it. A borrower with AA credit is not likely to default. A whole portfolio of loans to all AA borrowers is pretty safe. You'll hardly make anything since they are so safe, they attract
a lot of bids. After the whole loan amount is covered by enough bids, additional bids are for lower
and lower interest rates.

Example of an AA person:
All bids for this can be made at 16.94% until its 100% funded. After that, you can bid lower and replace a person's higher bid with your own.
http://www.geocities.com/kungpowsounds/prosperAA.JPG

Example of a C person:

Note- his credit report shows some delinquencies.
However- he's offering a good rate which is attracting bids. He's already 100% funded, so any bids from here on will lower the interest rate.

I would NOT bid on this person. He explains a reduction in income got him into financial trouble. I wouldn't want to get stuck in that.

http://www.geocities.com/kungpowsounds/prosperC.JPG

I forgot to add- to answer the question of why people with good credit borrow from prosper:

Everyone is happier to pay interest to real individual people rather than cold, indifferent lending institutions. If you're lucky, you could get a better rate than from a bank too.

At what interest rates do people with a AA rating usually get?

That one you post was at over 16% for 25k, seems pretty high for someone with good credit, although I assume as bidding picks up the rate will go down? What did it end up at?


And just because you scratched out the listing ID in a few spots, I'll mention that you can still see it in the URL. Uff da

anyone can look at the prospective loans, no need to blank them out

anyone can look at the prospective loans, no need to blank them out

Just trying to protect people. Members are able to see some credit info about the applicants that the general public cant see.

16% for 25k???? Holy macaroni! My credit score is about 700 and I had never any loans higher than 7%.

The AA I showed has completed, and the rate had gone down to 13.93%

He probably started his % too high.There are some AAs who are borrowing just a couple thousand who get under 6%.

Im interested in it as a lender. Id be pleased as punch to lend money
at 13.39% to someone with AA credit. Id still only lend them $50 though.

I only lend money to people I know. Short term only @ 10% interest per month. Surprisingly, a lot of people don't mind paying this much interest. Typically, I would loan $500 to someone I know and receive $550 in 30 days.

That would be illegal in Canada. %10 /mnth is 120% APR. In Canada the max you can loan money for is 60% APR.

I'm pretty sure loan sharking is also illegal in the U.S.

What i think is interesting with Prosper- Their database will not let listings appear in
states where the APR exceeds the legal limit.

How is pre-payment handled? Or is that just part of diversification, you're not supposed to have too much sunk into any one loan anyway?

borrowers are allowed to pay off the loan ahead of time. The remaining balance they owe is put into
your account if they do this.

The biggest draw to me is the diversification. I put in a bit over $2500 and lent the whole amount
to over 50 borrowers in small $50 pieces. It can be time consuming to bid on so many loans but I think that
much diversification is really worth it.

Interesting. I see lots of AA people looking for loans to reinvest in prosper, they must have big portfolios to make the return worth it!

Yeah- I cant make any money loaning to those re-investors, so I tweak my searches to leave them out.

borrow money at a high interest rate to lend out at a slightly higher interest rate while taking on more risk? sounds ******** to me. i know there are easier ways to make money.

borrowers are allowed to pay off the loan ahead of time. The remaining balance they owe is put into
your account if they do this.

The biggest draw to me is the diversification. I put in a bit over $2500 and lent the whole amount
to over 50 borrowers in small $50 pieces. It can be time consuming to bid on so many loans but I think that
much diversification is really worth it.

Have you had any borrowers pay a loan off ahead of schedule?

I did two test loans 2 years ago to people with good credit scores and they both defaulted. I lost some money and there are not many people who make money on the site thanks to rampant fraud.

Don't waste your money.

Have you had any borrowers pay a loan off ahead of schedule?

Just one.