eBay for loans

emon87 · #1 12-22-2006, 03:33 AM

http://www.prosper.com/

Saw this in Popular Science this month. It looks interesting... maybe a way to get funding for all these startups!

What do you guys think?

maxtower · #2 12-22-2006, 03:57 AM

I have looked into this. The consensus among the lenders at their lending forums seems to be that the borrowers are getting better deals than the sellers.

PanchoVilla · #3 12-22-2006, 01:10 PM

I have been using this site for about 6 months now, mainly as a test. I put in 1k and started making loans. So far I am getting about a 16% return, but I haven't had any loans go more than 30 days past due yet. I expect that my actual return will be closer to 10% as statistically some of my loans should default.

The hard part is trying to pick out the ones who will default less than their credit rating suggests. This has gotten trickier in the past couple months though. Over time as more lenders come in you get lenders that don't know what they are doing and they then overbid for loans and price them below your minimum. Right now I have maximum diversification. ~22 loans at $50 each. 2 of them have been problematic, ie have gone 15 days late more than once, but so far that just improves the return if they don't default as you get penalties.

I keep track of everything in an excel sheet that I plugged in all the formulas to factor in the default rate, etc. If people want to check it out PM me. I might put it up on my forum project website so people could download it.

Pancho

WarBus · #4 12-22-2006, 03:21 PM

I check out the site from time to time. It isn't worth my time to be a lender. The amount of work involved to diversify and hope to get a decent return isn't worth it.

The site has an ongoing problem with scams and borrower info that has not been properly verified. Maybe down the road it can be a better investment method. For now, I would avoid it as a lender.

As a borrower, it appears to be a good deal. There are lots of lenders giving money to some questionable offers. For example if the loan fills she will have a $903.81 monthly payment for 3 years. A $900 per month payment on top of other expenses would be difficult to maintain for most people.

el adam · #5 12-22-2006, 06:19 PM

When in the process do you have to submit your bank account number? Is that the only way to receive/pay for loans?

Stu Pidasso · #6 12-23-2006, 02:18 AM

The money is in being a group leader. In the example you gave the borrower will pay 18% interest. The lenders recieve 17% and the remaining 1% goes to the group leader.

The problem I have with Prosper is you can't sell the loans you bought. They say they are working on that. A business model I have been thinking about involves becoming a group leader. Help people get loans by vetting them. Bid a portion of thier loan if they seem to be a decent risk. Turn around and sell the loan once there 3 months of good payment history. Continue to collect the group rewards interest off the loan even though you no longer own any of it.

Stu

adanthar · #7 12-27-2006, 10:09 PM

[ QUOTE ]
The problem I have with Prosper is you can't sell the loans you bought.

[/ QUOTE ]

I was really interested in this until I got to that part. This looks like a really good, and profitable, idea, but I don't want to impair my cashflow to that extent. It's a shame, because I have 50K+ I can put in this.

stinkypete · #8 01-02-2007, 07:46 PM

[ QUOTE ]
The money is in being a group leader. In the example you gave the borrower will pay 18% interest. The lenders recieve 17% and the remaining 1% goes to the group leader.

The problem I have with Prosper is you can't sell the loans you bought. They say they are working on that. A business model I have been thinking about involves becoming a group leader. Help people get loans by vetting them. Bid a portion of thier loan if they seem to be a decent risk. Turn around and sell the loan once there 3 months of good payment history. Continue to collect the group rewards interest off the loan even though you no longer own any of it.

[/ QUOTE ]

if they were to allow that, what would stop people from a) getting a loan b) not making payments for a while c) getting their friends to buy out the loans at a cheap rate. i'm sure it would be illegal and all, but is there really anything you can do about it?

Sifmole · #9 12-30-2006, 10:06 PM

[ QUOTE ]
I check out the site from time to time. It isn't worth my time to be a lender. The amount of work involved to diversify and hope to get a decent return isn't worth it.

The site has an ongoing problem with scams and borrower info that has not been properly verified. Maybe down the road it can be a better investment method. For now, I would avoid it as a lender.

As a borrower, it appears to be a good deal. There are lots of lenders giving money to some questionable offers. For example if the loan fills she will have a $903.81 monthly payment for 3 years. A $900 per month payment on top of other expenses would be difficult to maintain for most people.

[/ QUOTE ]

Also, if you follow your example listing to its group, the second listing in the group has the same picture posted as one of its pictures.

prohornblower · #10 01-02-2007, 07:09 PM

[ QUOTE ]
There are lots of lenders giving money to some questionable offers. For example if the loan fills she will have a $903.81 monthly payment for 3 years. A $900 per month payment on top of other expenses would be difficult to maintain for most people.

[/ QUOTE ]

FYI, this loan didn't fill. It only got 44%. Does each loan only have 7 days to fill? I guess this lady just needs to shoot for like a 12K loan instead of 25K? Maybe she'll get it filled.