So, what do you think of prosper.com?

In My Humble Opinion
21

kittenblue. . .

I’m sorry to say, but there’s not a chance you’ll get funded. Zero. I think your write up is OK, but you’re asking to borrow at WAY too low a rate.

People who are “HR” get funded at 25% and up.

People who are AA rated get funded at around 8-10%. You’re asking for 7.75%. Don’t enter a rate you don’t want to pay, but if people like your loan, they’ll bid your rate down to its “fair market value” (at least in theory).

Also, people get funded more easily if they’re in a group.

A couple words of advice: if you decide to re-list, don’t change your story dramatically. Don’t say, “Oh, I want the money for a home improvement” or “I want the money to start a business”.

Keep in mind, It IS people loaning to people, but you’re still a statistic. You could be the most sincere person in the world and you’re going to sell a kidney to pay this loan back if you have to, but all that the lenders have to go on is that people with an HR rating historically default at a rate of about 20%.

Look around the message boards there (click “help” then “discussion forums”). Look at “review my listing” and at the “borrowers” and “lenders” forums. Good luck with it.

That’s what I’ve done. I’ve loaned out $200 and I’ve already recieved one payment. If all goes according to plan, I’ll have enough to loan out the minimum again in about 10 months. If you like to “play” a little with your money, it’s a cool way to invest. You’re helping people out. You have an idea what your money is doing. You can easily calculate your expected returns.

There is a person there who has already loaned out $241,000 at a risk-adjusted return of over 13%.

Fortune favors the bold!

A web site called “ericscc.com” has tons of information about lenders and borrowers and groups.

22

I tried to enter a higher rate, but a message kept popping up telling me I had to enter a rate of 7.75 or below because of state regulations. When I entered a higher rate it kicked me back out and said try again. The process was a bit confusing.

And yes, you can cancel out on the listing any time before it’s fully funded and the listing ends, but I think once you are funded and the listing closes, they automatically deposit the money. Your only recourse then would be to pay it back immediately, but then you’d still pay the fees and interest. No early payback penalty, though!

23

I thought the site was called prosper.com, not loanshark.com.

24

A 25% APR is an order of magnitude better than the annualized interest some people pay at paycheck loan stores. An HR borrower with a realistic rate can do quite well using a Prosper loan to pay off those guys. (And in fact, many people have done just that.)

25

A 25% APR would get the lender done for usury in Wisconsin.

26

Ah yes. . .the state regulations.

There are several states that cap the rate at which a person is allowed to borrow money. I don’t think there’s a good way around that.

For a class of borrowers with an expected default rate of 20% or so, that’s the kind of rate at which a person will loan to feel comfortable with that much risk.

If you’ve got a shitty credit history, then you got a choice. . .don’t get a loan, or get a loan at 25%.

It’s still better than you get at payday loan places – the real sharks.

27

Well yeah, and getting punched in the face is better than being stabbed in the chest, thst doesn’t mean I’d recommend either one.

28

Basically it’s an unsecured loan with only a credit rating as your diligence? Sounds far too risky to be worth anything. Companies that make unsecured loans tend to be able to collect on them due to their ability to weather defaults and to get bulk rates on collection. An individual lender just doesn’t have that kind of leverage.

29

I believe that Prosper forwards defaulting loans to collections on behalf of the loan-buyers, so they can probably get bulk rates, too. Not so much right now, while they’re small, but better than individuals purely would.

30

So, lenders, how’s it working out? Borrowers, any luck getting your debt taken care of?

Something Awful has a group over there, maybe we should start up Friends of Cecil.

31

Funny you should ask. In January, I had a loan go bad for the first time. If the rest of my loans pay off as they should (and I don’t see a cent from that loan) I’ll wind up a little better than even on my money over about 3 years. My loans still have a year or so left.

I stopped lending after a while. I kept getting outbid, but I had a number I didn’t want to go below. There are two equally “distasteful” solutions to lending there. You can either put in a ton of work checking every angle on the person you want to fund, or you can select auto-fund so that it just funds any loan for a particular risk at a specified rate, but that seems to really be leaving yourself open.

One of the “risks” associated with loans, however, was made clear to me. . .the risk of early repayment. I had a few loans that I made early at a good interest rate to good borrowers. However, the good borrowers are exactly the kind of people who seem to be likely to be half-way through a loan, and just say “fuck it. I’m paying it all off instead of paying interest.” That’s a killer for MY returns.

My loan that went bad was one I had an issue with from the start, but I funded it anyway. She was borrowing for an addition to her house, and I inquired as to why she wasn’t using a HELOC, and she said she was already tapped on that because of her business.

But, she was a homeowner, had AA credit, and it was a good rate. She responded intelligently to a question I had. She tried to borrow again in november of 2007. She now had an “E” credit rating, and didn’t get funded. Collection agency is on it.

32

Aaach! Zombie!

33

Yes, but an appropriate one.

IMO.

It’s a followup to a question that can only be answered a couple years down the road with the early mindset given in the early posts. As the OP, I don’t care if the mods let it ride (or kill it).

34

Hey, thanks for bumping this, Trunk. It’s been an interesting experience.

In the beginning, I tried to base my lending portfolio on a rough bell curve centered around C. The default rates were just too high, even with loans that had no prior delinquencies on their credit reports. I radically readjusted my strategy and now I’m pretty much only lending to B’s and above. The returns at that rate are more stable but the interest is obviously lower. For 2007 I had about $900 in interest, but a large amount of defaults to offset that – so very little profit overall.

When I started bidding I would also put $200 or more in each loan. That’s way too risky. I now bid the minimum ($50) on each one.

I haven’t put any new money in for over a year and a half. I’ve been seeing how much I can grow my existing portfolio by reinvesting interest payments instead.

The one that really hurt was the very first loan I bid on, a B who stopped paying after 17 months of perfect payment history. :mad: (She’s still got another month to go before defaulting, I hope she gets it together in time, but I fear not.)

35

I was totally unaware of that site.

me

Obviously, I’ve lent a lot less than you. Do you try to research every one of your loans? Or do you auto-fund?

I see your ROI is 5.5% or so. See, I don’t think the amount of work is worth that, especially when I can expect better from the market and in the market I tend to “set it and forget it”.

You can see I’ve only won 1/3 of the loans I’ve bid on.

I’ve thought I needed to put in about $5000 to really diversify, but I found it to be more stressful than the market without much greater returns.

36

In the very beginning I had some standing orders configured, but I don’t use them any more. I spend maybe an hour a week searching listings and placing a few $50 bids from however much I’ve received in payments recently. I don’t do a huge amount of research, just look at the credit data (any current delinquencies or huge revolving debt load or DTI is out) and look at the descriptions and Q&As and see if it sounds reasonable. I also will not bid on anyone who plans to reinvest the principal into Prosper loans – there’s just no way they can earn a high-enough return to make that investment safe on my end. Plus, why should I fund my own competition?

Over the past couple years, Prosper has greatly expanded the amount of data you get in each listing, which makes it a lot easier. Also, in the past six months, I’ve been restricting my search criteria to verified homeowners, since their loans sell for almost ten-times as much on the junk debt market if they default. (Dimes on the dollar instead of pennies on the dollar! w00t!)

Very true. That’s part of the reason I stopped putting money in a long time ago. I can do better with my online savings and a lot better with my index funds over the long term.

37

Where?

I just set myself up as a lender on prosper this past week in my search for alternative markets to play in. I had supposed there would be opportunity here given current US credit metrics.

38

Well, I currently have a Citibank e-savings account which pays in the neighborhood of five and an eighth. Considering the risk of default with Prosper loans, even a conservative estimated ROI can’t be relied upon.

It is a fun experiment, but there’s just not enough high quality debt on the market there yet to be viable as a major investment. But at the rate they’re growing, I think their future looks bright. Especially if they start getting into serious debt business like corporate loans, secured loans, and revolving products.

There’s also no liquidity. I can withdraw from my savings any time, but I can’t sell my Prosper loans. The promise of a secondary market has been on the horizon for years, but it doesn’t seem like they’re planning to launch it anytime soon.

39

I understand that completely. My sense was that since typical credit markets are contracting, savvy people would drift to Prosper to satisfy some of their credit needs.

The idea of a serious debt business would be incredible. But the amount of due diligence I would really need would be high, perhaps too high to justify the relatively small capital I would be willing to risk. If they can make the economics work, I would be all for it.

Well, except perhaps revolving products. I work in finance for a credit card company, and we have enough competition already. :wink:

These topics come up from time to time now at the SDMB. I know this is not exactly the first place to turn to for investment strategies, but it might be fun (and profitable) to have a little SDMB money roundtable. It would be a little more personal than FatWallet, Motley Fool, or Yahoo Finance.

40

Does anyone really see this growing into someplace that will see much high quality debt? I thought the borrowers were most coming to Prosper.com as lenders of last resort. If the borrowers have a good enough credit history to be considered high quality, then they would be going to a more traditional lender, like a bank.