Prosper.com
 

The site fascinates me both because I love to read some of the stupid reasons people give for borrowing money and also because I don't understand the lenders.

Can anyone explain why someone would think making many small loans to individuals with bad credit at 13-20% is a good investment?

Re: Prosper.com
 

Does anyone have any experience with this site?

After a brief look through, I feel there are probably good opportunities available, especially since such a site strikes me as more inefficient than a lot of other investment options available. That said, you probably need to be very selective and filter through a lot of BS to reap good rewards.

Re: Prosper.com
 

Years ago a classmate in law school tried to pitch me on this idea. I thought it was retarded. I still think it is stupid.

Say you average 15%-16%. If 1 loan out of 7 defaults you are back to even. These people are borrowing at higher rates because they can't get money from a legitimate source. I think the default rate would me much higher then 1 out of 7.

Re: Prosper.com
 

Yeah, not necessarily. Like I said, finds can probably be made, but it takes a good eye to spot them. A few months ago I had a market opportunity that I believed would yield me 10% in 3 months. I have 740 credit and a ton of assets - I'm not a credit risk. But all of my assets are tied up, and I have loans and personal loans outstanding.

Thus, I would have gladly taken out a 25k loan at a higher rate from prosper, because all of my other lending options are exhausted and it would still be profitable for me. So if you found me on prosper, you would prosper, and I would prosper, DUCY?

That said, I'm in a rather unique position, and it probably is retarded for most situations.

Re: Prosper.com
 

Prosper.com is a better idea then my friend's idea since he wanted to set something up at a much larger scale. Hooking up corporations with lenders.

With individuals there is some people in your situation but they are rare. Almost all the ads are for people trying to live outside their means. Lend me money for my wedding or for a new car etc.

Re: Prosper.com
 

[ QUOTE ]
Years ago a classmate in law school tried to pitch me on this idea. I thought it was retarded. I still think it is stupid.

Say you average 15%-16%. If 1 loan out of 7 defaults you are back to even. These people are borrowing at higher rates because they can't get money from a legitimate source. I think the default rate would me much higher then 1 out of 7.

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No, you only are back to even if 1/7 defaults immediately.

Re: Prosper.com
 

I figure if someone is going to default they will do it in the first few payments.

Most of the people have awful credit. They got that by not paying back credit. I honestly think the default rate must be in the 40%+ rate. Esp since I figure the site is probably easier to dodge then legitimate creditors or at least will be perceived that way by borrowers.

Re: Prosper.com
 

I have loaned on Prosper on a small scale. I have put about $600 on the site. I have 7 loans that I have help fund for almost $700 dollars (reinvest earlier payments accounts for the extra $100). I have not had 1 default and my average rate is 20.62% . 1 of the loans is actually being paid off in full right now and had been open for 16 months (prosper loans are for 36 months).

I would not put a major part of my portfolio on Prosper, and I have not funded a loan in almost a year. I want to see how these loans finish out before I do anything else with the site.

The only hiccup I have had has been one loan is an occasional slow payer and I believe one payment was NSF, but they have since been back on track.

FWIW you always see people on there with great credit wanting to play loan shark. Borrow money at 9% and loan out to others at higher rates. I loaned money to one A rated borrower who stated that as his plan. All of the other loans I went for high rates as this was my "play money."

Re: Prosper.com
 

I put $1k into prosper in April; I've been reinvesting the profits as they come.

Of the 12 loans I've made, one was late for a few months and actually went to collections but is now back to on time, and the others have consistently been on time. So far I'm up $79, lending at an average rate of 16.4%. So, a nice 8% profit in half a year. If that one loan had just defaulted, though, instead of getting back on track, I'd be basically breaking even so far, or slightly down. I have my own system for picking people I think will pay the money back, though.

Re: Prosper.com
 

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I honestly think the default rate must be in the 40%+ rate.

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I don't know if 40% default rate is true or not, but I believe that they make an enormous data file of past loans avaiable. i downloaded it once and then never really did anything with it. That was a while ago though, so I don't know if its still available or not.

Re: Prosper.com
 

the search button is not that hard to use

Re: Prosper.com
 

I think once the idea of prosper matures a little, it may become a legitimate place to put money. The problem now is that too many lenders aren't using enough discretion and drive rates too low. It is definitely a better deal for the borrowers at this time. If I were going to do it, I would look for borrowers who have a reason to pay the money back. You want to find people who want uncollateralized debt for some reason, not the folks who have no where to go but prosper.

Re: Prosper.com
 

I have dabbled a bit at prosper.

I have made a total of 6 loans for ~ $400.

So far.

1 loan is paid off early.
1 loan is in collections (~ 2 months)
4 loans are still current.

I can't remember my average loan %, but I believe it is around 16%. If the rest of my loans don't default I will come out just barely ahead, otherwise I will be down. Considering other places I could have put my money, I definitely could have made more money elsewhere.

Prosper CAN be a place to earn a decent return on a small amount of money, if you research your loans properly. But if you are only willing to invest $50 - $100 per loan, it is not even worth your time to research that loan. I have done some analysis on the loan data they provide (I think it is called prosper marketplace performance or something like that), and for the most part, as long as you only select loans from people who do not currently have any delinquencies, have not had any delinquencies in the last 7 years, and do not include auto-fund loans, you lower your expected default rate by almost as much as possible. You might be able to tweak the system a bit more, but those are the only searchable options I found to make a statistically significant difference. However, those loans also get bid down like crazy now a days.

I also try to avoid any sob stories (sob as in crying/whining). If you try to bail someone out who can't currently make their payments for reason x, they are just going to give you another sob story in a couple months. Try to find people who really seem to be on the right track (although of course you can't tell if they are telling the truth or not).

I personally believe you are much better off investing in the stock market. Much higher potential rewards, with less risk, while at the same time having more liquidity (you can't sell your prosper loan if you need the cash -- you are potentially stuck receving the minimum payments for the next 3 years)

All that being said, if you decide to invest in Prosper, I wish you the best of luck.

Re: Prosper.com
 

[ QUOTE ]

I personally believe you are much better off investing in the stock market. Much higher potential rewards, with less risk, while at the same time having more liquidity (you can't sell your prosper loan if you need the cash -- you are potentially stuck receving the minimum payments for the next 3 years)



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eh?

Re: Prosper.com
 

[ QUOTE ]
Prosper CAN be a place to earn a decent return on a small amount of money, if you research your loans properly. But if you are only willing to invest $50 - $100 per loan, it is not even worth your time to research that loan.

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That was one of the first things that hit me. $100 at 20% is $20. If you need to read 5 profiles to find one that is good you have waste 30 minutes. If I wanted to make $40/hr I'd get a job. At least with a job you don't have to worry about defaults nor wait a year to get your $20. I figure Prosper.com is more for people with limited cash who want to feel like they are "wheelers and dealers".

I personally enjoy reading the sob stories. I wanted to start a site BegForMoney.com where I'd offer people the option to present their sob story and give money to the best sob story of the month but my GF thinks I'm mean to poor people and wouldn't be happy.

Re: Prosper.com
 

the 20% is semi-misleading. They are principal paydown loans so that 20% that first year might get you $18 in earnings.

Re: Prosper.com
 

[ QUOTE ]
[ QUOTE ]

I personally believe you are much better off investing in the stock market. Much higher potential rewards, with less risk, while at the same time having more liquidity (you can't sell your prosper loan if you need the cash -- you are potentially stuck receving the minimum payments for the next 3 years)



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eh?

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eh?

Loaning money on prosper is a form of investing.

I think the stock market is less risky than giving out unsecured loans to poor credit risks over the internet.

You can sell your stocks if you get in a pinch for cash. You can't sell your prosper loan.