The other day I read a post over at Living Off Dividends about Prosper.com. I had heard of Prosper before and I had even looked them over. After reading LOD’s rules for not lending, I decided to dig a little deeper. Can you prosper on Prosper.com?
The Basics
Prosper.com is an online auction for loans. You can be a lender or a borrower on the site. If you are a borrower, then you make your case to the potential lenders and your credit rating is displayed along with your submission. Lenders can post questions and decide to fund the loan. From the lender side, you can choose how much money to lend for a particular loan.
The Upside
From a lender’s perspective, the upside of Prosper.com is that you can spread your money across many different loans. You can choose loans based on the credit rating of the individual as well. Prosper.com has recently started Portfolio Plans that will select a group of loans based on credit risk for you. The other advantage is that you can earn a rate of return much higher than other investments, but as with anything there is also higher risk associated with that return.
The Downside
The potential pitfalls of Prosper.com are plentiful. Prosper.com only allows three year loans which seems like a long time to me, although people can pay them off early without penalty. The second problem is that people borrowing money on the site are doing so because they can’t get loans elsewhere at decent rates. Lastly, the site started up in late 2005, so even the earliest loans haven’t run through a complete cycle yet. Therefore, we don’t have a very good long-term statistical viewpoint of the service.
The Statistics
I did find a very useful site for the current statistics, LendingStats. This site allows you to sort through all kinds of information from membership growth to delinquent loans. The current statistics show 75% loans are paid on time and 10% have been paid off. A little over 5% of loans default and the remaining 10% or so are late.
Conclusion
Well, I decided to give her a go. I don’t want to be a loan shark, but I do want to help people that otherwise can’t obtain funding. I saw quite a few loans for business expansion and personal debt consolidation. I believe people need opportunity and if I can facilitate that in some small way while making a few bucks, then so be it. It will be a fun (and risky) experiment anyway.
If you would like to sign up for Prosper.com, then use my link below. New borrowers receive $35 and new lenders receive $25. I will receive matching funds for the referral.
Recent Comments