Prosper.com - Be a Banker

[Jeb-NY]

If this has been discussed I couldn't find it. Saw an article in the December Money magazine on prosper.com that uses the eBay model for loaning money. You can apply for a loan but we don't need that on this board, the interesting thing is you can buy loans, lend out money and become a banker.

The loans are for a maximum of $25,000 and 3 years. Prosper adds a percent to the loan for their share and takes care of the actual loan and payments. You bid the interest you are willing to loan at, based on the persons credit rating and story. Their over all default rate looks pretty good, only .05% of the total loans ($23 million loaned so far). All the defaults were in the 2 worse rating groups and even in those it was only a .35% default rate.

You can loan in as small as $50 increments to as many different people as you want to spread out the risk. Prosper pulls all the funds together and distributes all the payments.

What do you all think? A fairly safe way to make a higher interest rate? Scam?

Fun to look around the site.

Jeb

 

[brewer12345]

I think it will end in tears.

 

[pfpelican]

Has been discussed....

http://early-retirement.org/forums/index.php?topic=7678.0

 

[Baxter]

I liked the idea, but I got the feeling there wasn't much recourse if the borrower defaulted, not a lot of information available to decide credit-worthiness, and that doing the research to feel comfortable with the loan would be a fair amount of work for not a lot of extra income.

Plus, with the possibility of a housing-led slump in the near horizon, high risk consumer lending may not be a good place to be right now...

 

[brewer12345]

I liked the idea, but I got the feeling there wasn't much recourse if the borrower defaulted, not a lot of information available to decide credit-worthiness, and that doing the research to feel comfortable with the loan would be a fair amount of work for not a lot of extra income.

Plus, with the possibility of a housing-led slump in the near horizon, high risk consumer lending may not be a good place to be right now...

That is a good summary of my feelings about prosper. The only thing you left out was "there's a sucker born every minute."

 

[poboy]

Can we evict a widow woman and her kids on Christmas Eve?

 

[mathjak107]

Can we evict a widow woman and her kids on Christmas Eve?

AHHHHHH puts the fun back in landlording.

 

[retire@40]

I wouldn't loan my money to anyone on prosper.com even if they assigned me their first born with a perfected first-security interest.

Just think of how low you need to be to go to a website and pay double-digit interest to borrow a few hundred dollars. Who knows what they will do with the money and if they will ever pay you back on an uncollateralized loan.

I'd rather buy dinner for a bum on the street (did that once for a total stranger sleeping on the street in Boston). At least I can feel good about giving up some of my money knowing it went to feed someone.

 

[BigMoneyJim]

I found it intriguing at first, but all the potential headaches and regulatory problems combined with the re-realization that high-yield low-grade credit is doable through traditional bonds made me purge the site from my knowledge.

 

[rogersteciak]

What do you all think? A fairly safe way to make a higher interest rate? Scam?

I've been lending on Prosper.com since last summer. I've made over 200 loans at $50 a loan. The loans are unsecured and risky, which is why I have well under 5% of my net worth there. Prosper just held their Prosper Days Conference in San Francisco last month to celebrate their first year anniversary of being in business. This people-to-people lending platform is not a scam, but you can lose money if you are not careful.

 

[Texas Proud]

I had the fun of looking at the site....

Lets see... "I need money to pay of my credit card debt"... now THERE is a credit worthy guy...

"I need money to buy food"... another great one...

"I need money to pay medical bills"... now come ON... almost all hospitals etc. will let you ride interest free as long as you are making payments...

 

[frequencydip]

I have also been a lender with prosper for over a year, at first I did not do so well but I learned from my mistakes and haven't had any loans that I made in the last 6 months go late much less default..

 

[Peaceful_Warrior]

So far I've been doing well. Only one loan is late, and that's because the person lost her job (she also sent everyone a message along with her resume and apologized for missing the payments).

So far an average return of about 18%, not including the one loan mentioned above. I also recently started my own group.

I like prosper.com as another way of diversifying investments. Though I must admit, I started with about $1200... just enough to test it out and get the ball rolling, but not enough that I'd be upset if I lost it all.

I have also been a lender with prosper for over a year, at first I did not do so well but I learned from my mistakes and haven't had any loans that I made in the last 6 months go late much less default..