[Nomad84]

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To you Rico - OP mentioned using this as a savings scheme. So his non-invested money that he is using to pay off this loan is the money that he would be investing on a monthly basis (had he not taken the loan). So essentially he is trading a 25k lump sum to invest now in lieu of saving/investing 830.36 a month for the next 3 years and hoping that after 36 months his stock account is over $29,892.89 (cost of borrowing at 12% on Prosper).

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But this is not the correct way of looking at it, as numerous others have already mentioned. $830.36/month for 36 months is $29892.89. OK...big deal. Would you keep $30k in a non-interest bearing account? I hope not. The figure he has to beat to come out ahead is at least the amount he could get risk free by depositing $830.36/month into a money market fund or similar vehicle that carries virtually zero risk, yet yields 5% or more. Taking the low side estimate of 5%, after three years, you'd have $32,272.68. This is ignoring taxes, which in this case is not really correct since the gains will be taxed at your marginal rate, but I'm really just trying to illustrate the point that the money has opportunity cost. He'd have to get better than about 8.9% returns on his portfolio in order to end up better by taking the loan. But that's ignoring the fact that he is taking on risk to get 8.9% when he could make the same returns, essentially risk free, by setting up an automatic transfer each month into a high yield savings account or money market fund. More importantly (at least in explaining why this idea sucks), if he can get 8.9% on the lump sum, then in theory he should be able to get roughly 8.9% on monthly investments too. That changes the break-even point to approximately $34,165.22. Obviously, it requires higher returns (about 11%) on the loaned amount to match this final result. As you can see, you can bounce back and forth between calculating "targets" and "target returns" for a little while before converging on the true breakeven return. It turns out that the "true" breakeven point (assuming that he can get the same returns regardless of whether he takes the loan or not) is going to be above 12%, so stating that getting 6% or 8% or whatever is "like breaking even" is just plain wrong. Whatever that breakeven point is (I don't have excel or I'd figure it out), if he can truely beat that return, it would be better to take the loan. If not, and most of us believe this to be the case, he should just set up automatic transfers every month into his brokerage account.