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#1
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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? |
#2
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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. |
#3
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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. |
#4
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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. |
#5
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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. |
#6
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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. [/ QUOTE ] No, you only are back to even if 1/7 defaults immediately. |
#7
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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. |
#8
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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." |
#9
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Re: Prosper.com
[ QUOTE ]
I honestly think the default rate must be in the 40%+ rate. [/ QUOTE ] 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. |
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