Ok, I thought I would post this in case anyone else has thought about using Prosper.com. I made several loans to people on Prosper.com and wanted to share my experience. First let me give you a quick rundown of what Prosper is, in case you are not familair with it. I found out about Prosper.com a few months back. Basically it is like eBay for loans. People put loans that they need filled up for bid. Then other people offer to loan the money at certain percentage rates. So if the loan starts out at say $2500 and 15%, people can bid (usually in increments of $100) and lower the interest rate.. so people compete to get in on another persons loan. Every borrower is ran through a credit check and there are collections agencies on file for each loan. So it really depends on how credible you fell the borrower is. Borrowers can also join groups to gain credibility. A group has a leader and that person checks out the borrowers who joing their group and vouches for them. The whole group is then hampered if a borrower is late or defaults. So now we have peer pressure on those who are not paying their loans back. This is a powerful thing. They would also get a negative score on their credit report if they default. There's more to it of course, for all details go to their site and read up on it. Most loans have a 3 year repayment schedule. So I decided to play with a small amount. I transfered $1,000 to Prosper.com and began searching for loans to bid on. I ended up bidding on 6 different loans, ranging from $100-200 each. Interest rates on these loans varied from 9%-15%.. I loaned to some people with very strong credit and homes, and also to a few people with not so good credit but who would pay a higher interest rate. It's been 3 months since I started and all loans are on time. My average interest rate, for all 6 loans, is 11.5% which is not bad. Sure they could all default and I would be out my $1,000. However, I believe that if you pick the loans just right, the chances are greatly diminished. I supposed if you wanted to put a lot of money into this, you could earn a nice return. Anyhow, hope this sheds some light for some of you interested in Prosper. I've had no issues so far.
How do you receive your payments? Do you receive the money all at once or do you receive a few dollars a month per loan?
When I last visited the site a couple of months ago it seemed like many lenders were chasing the really high yield loans to people with REALLY bad credit. For those situations it looked to me like most lenders did not really understand the risk they were taking.
Yeah you get it a few bucks at a time.. I just wanted to try it and see.. I only put in $1,000, so for me it was an amount I was willing to lose to see how it worked. But I researched it enough, and picked good loans to be sure I had very good chances. So far so good... Yes, I noticed that too.. I took a few higher risk people as well. I mixed it up, so I have some low risk and some high risk. I think this is a great idea what they have set up with Prosper.com
How do the people owning pay back the loan? Is it through Paypal or some escrow service? I'm curious because if they are paying back a bit at a time and using a service like Paypal the fees must eat up a chunk of it.
They are paying Prosper.com back via automatic monthly withdrawals from their checking accounts. They have it all figured out pretty well.
I've looked at that for some time. I thought of playing around. Is it just people paying back debt or are there people looking for biz loans and stuff?
Yes and yes.. there are all sorts of people on there. From perfect credit to horrid credit to no credit. For me it was just something to play with. I doubt I will sink more than a few grand in loans on it. Just part of diversified investing. Serg
Yeah, it's a nice idea. I thought of taking some "play" money and getting into it. I heard a radio interview the other day with a guy that started with a couple hundred and is doing well. He's doing more now I guess and most of his people are on-time.
I wonder if this would work in a developing country like the Philippines. "Grameen Bank" type microfinance institutions really help families out of poverty. However, due to the technical and infrastructure issues involved I doubt it would work here in the Philippines.
There is something for those countries as well. It is a no interest deal, so basically you loan money, but there is no interest. It is a microfinance setup to basically help people.. It's called Kiva It's a really great idea... so if you have some money (even $50 will help) you would like to loan to some small businesses in poor parts of the world, check it out.