Prosper.com

[mountaintosea]

Anybody try this new website. Heard this on NPR. The founder is hoping it becomes the next Ebay. Interesting concept. prosper.com

 

[FinanceDude]

Scary............

 

[dumpster56]

Anybody try this new website. Heard this on NPR. The founder is hoping it becomes the next Ebay. Interesting concept. prosper.com

Wow

What a train wreck!

We get to see people who are totally screwed.

Look at that guy who needs 15K and someone will give him a 24% interest rate!

Is this stuff legal??

 

[REWahoo]

There have been a couple of discussion threads on prosper. Here is one from last year:

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

 

[mountaintosea]

Thanks for the thread. They claim they are doing quite well. They collect 1% from the borrower and 1/2 % from the lender. They recommend spreading your money around. He said that they have the ability to collect like the credit card companies do. The tutorial is interesting also.

 

[Peaceful_Warrior]

I've been investing through prosper for a few months now, and so far am impressed overall with the system and the returns.

It may very well become the next ebay -- it has the right technology and it's got a niche market. Even if it doesn't get as big as ebay, it is sheer profit for the company.

 

[mountaintosea]

I've been investing through prosper for a few months now, and so far am impressed overall with the system and the returns.

How much do you invest at a time? Have you received any payments yet?

 

[brewer12345]

He said that they have the ability to collect like the credit card companies do. The tutorial is interesting also.

Heheheh, go look at what happaned to credit card lenders in 2002. Ka-boom! And they are professionals at this.

 

[laurence]

If the company itself is well managed, and you spread your money around to multiple borrowers, it might be worth it. I'm not about to throw money at it, but wow, this could be pretty amazing! If this managed to crush those evil pay-day loan places, the owner goes straight to heaven just for that!

 

[Sam]

I had a lot of doubts about EBay too when it first came out, now I buy most stuff from there.

Prosper does not appear to be a public company now. I'd be watching for the IPO.

 

[laurence]

Wow, there are a lot of people willing to shell out some serious interest %. I could make my own risk diversified basket of 100 borrowers at $100 each and make sure each is 12% or higher....hmm.....

 

[CCdaCE]

Then, are the interest payments to the lender taxed as income?

-CC

 

[laurence]

Not if you use off shore accounts!!!

Hey, what's up with everybody trying to sound like a good guy on this site? I get the borrrowers sucking up, but why is every lender trying to make it sound like they are there to help people and love humanity etc. Get real! You are there to make money on people with poor credit!

 

[Peaceful_Warrior]

How much do you invest at a time? Have you received any payments yet?

I have about $1,300 I put in there just to play around with and see what happens. I figure if I lose it, small price to pay for the reward of potentially huge gains.

I have received payments so far, and have not had any delinquincies. One loan was paid off early.

Then, are the interest payments to the lender taxed as income?

Yes.

Hey, what's up with everybody trying to sound like a good guy on this site? I get the borrrowers sucking up, but why is every lender trying to make it sound like they are there to help people and love humanity etc. Get real! You are there to make money on people with poor credit!

I actually do want to help people out. I vary my investments from people with very poor credit who want to improve it, to people who want to start new businesses like the Montessori School I invested in (even with very good credit), people who want to expand existing businesses, as well as people who just want to consolidate loans whom I can make a good return on since the 15% they pay me is better than the 25% they are currently paying.

I tend to spread my investments around in increments of $50 per lender to minimize risk, with the occasional $100 or $150 going to a single lender (often a socially minded business being started by a AA-B rated lender) to help balance out some of the risk.

I'm also considering taking a loan out, just so I can use my good credit to get a good rate that I can then lend the money to others without having any more additional outlay on my own.

I will probably do that, along with floating credit card balances on 0% BT after I sell my current place and move into the next one (family is looking to move in the next 1-2 years so I'd rather keep my credit score maximally intact until then).

 

[Alex]

I looked into it and even went so far as to have my 'lender' status confirmed. In the end I realized that I didn't want that kind of risk for such a relativley low 'after tax' return. I am in the 35% bracket , plus state at 9.3%, so it simply wasn't worth it. Personally I keep almost all of my 'fixed income' investments in tax deffered accounts (I keep some in tax free Ca Muni funds).

 

[Texas Proud]

I agree with most of the people here...

I can't see spending a lot of time looking for 'good' loans at $100 a pop.. with what appeared to be in the 9 to 12% range for someone I am willing to lend (C or better).. and giving more to one person is even a bigger risk... I will just send it in to the Vanguard funds..

Also as someone said.. 7% for HY with no time spent looks good..

 

[ERD50]

If this managed to crush those evil pay-day loan places, the owner goes straight to heaven just for that!

What makes a pay-day loan place 'evil'? They offer a service, if you don't like the terms go somewhere else.

Now, if they *misrepresent* the terms - that is evil. It is also illegal, so lock 'em up for breaking the law.

-ERD50

 

[clifp]

I have $2,500 invested since Aug and at this point have no intention of increasing that amount. (Although I am re-loaning money as it gets paid back.)

The positive points for Prosper from the point of view of an Early Retiree

1. Credit Card debt and unsecured loans are some of the most profitable areas for banks and other. By cutting out the banks and replacing it with a pretty slim overhead (Prosper charges 1% origination fee and .5%/year to the lender) it should be possible for both borrowers and lenders to come out ahead.
2. Relatively easy to create a highly diversified a portfolio of 100+ loans.
3. I believe that as an asset class peer to peer lending will not be highly correlated with other investments, a recession will hurt default rates, and returns will drop when short-term interest rates fall but basically I expect the returns to be to low double digits with low volatility.

That is the good news the bad news is why I like the concept very much I am not particularly impressed with the way Prosper is implementing P2P lending.

1. There is significant chance the Prosper will go out of business leaving our loans in a precarious state
2. The default rates are much higher than expected according to the data Prosper and Experian gave us. In my case 4 of my 35 loans (average C- credit rating) are late including my largest loan. Now I maybe doing a bit worse than average but not horrible so.
3. The system is highly tilted to borrowers, yet most of Prospers marketing efforts have been successful at bring in new lenders not borrowers. As a result interest rates are falling. Today is a classic example. I heard the promo for Prosper being discussed on NPR's Talk of the Nation. (I missed the actually segment). Knowing the demographics of NPR I assumed I'd see a thread on retiree discussion boards, and guess what I did. Prosper needs to be marketing it services to recent graduates and working blue collar folks and does not seem to have a clue how to reach them.
4. The time required to loan money isn't worth the return. Essentially they are a two ways to lend money at Prosper combing through hundreds of listing to find the gem in the rough and than loan a $50-500 to the person. Or develop standing order to automatically loan to people based on their credit scores. The first method is fine if you only have a couple of thousand to loan and are willing to read through a lot garbage loan applications. I spent as much time investing my$2500 as I have made for any individual stock position, (eventhough a typical stock purchase for me is 10-20K) The 2nd method is relatively easy to do but you are in essence replicating how a bank loans money, i.e base the loan strictly on the numbers. I have done both and AFAIK, there doesn't seem to be a statistical benefit to hand picking the loans vs establishing a standing orderl

 

[laurence]

What makes a pay-day loan place 'evil'? They offer a service, if you don't like the terms go somewhere else.

Now, if they *misrepresent* the terms - that is evil. It is also illegal, so lock 'em up for breaking the law.

-ERD50

Just like a crack dealer! Most of the Marines around here get stuck in a cycle they can't break out of, paying the usery rates with a larger and larger percentage of their paycheck, and having to take out more loans because they run out of money even earlier in the month. Many are losing their clearances and can't serve overseas. You can blame the Marines, but the bottom line is these "lenders" leave carnage in their wake.

 

[dmpi]

I've looked at this for a while. Some of the stories of why people need money are pretty intersting. I'm leary of people who can't (or won't) qualify for a loan at a bank. Also there are a lot of people borrow money to loan to others on Prosper! I'm not sure what's going on here, but I would say all-in-all the risk for bad loans is too great for my taste.

 

[ERD50]

Quote from: ERD50 on Today at 07:31:53 PM
What makes a pay-day loan place 'evil'? They offer a service, if you don't like the terms go somewhere else.

Now, if they *misrepresent* the terms - that is evil. It is also illegal, so lock 'em up for breaking the law.

-ERD50

Just like a crack dealer! Most of the Marines around here get stuck in a cycle they can't break out of, paying the usery rates with a larger and larger percentage of their paycheck, and having to take out more loans because they run out of money even earlier in the month. Many are losing their clearances and can't serve overseas. You can blame the Marines, but the bottom line is these "lenders" leave carnage in their wake.

Well, I don't like crack dealers, that's for sure. But, I think people need to take responsibility for their actions. If people get stuck in a cycle of borrowing, they have a problem. I'm not sure I want to blame the loan makers for that (again, unless they misrepresent the terms). In theory, a pay-day loan could be a very useful thing for a poor person in a bind. Maybe they need it to get their car fixed so they can go to work to earn that next paycheck. Taking away the pay-day loan would send these people where - to 'mob money', or, they lose their job? But certainly, reliance on loans will be an ugly downward spiral.

I see the real problem in your example, is those Marines that want to spend more than they have. Are you saying the availability of the loans increase that behavior? Those people are acting stupid - can you fix 'stupid'?

I don't think prohibition is the answer to these kind of problems. It didn't work in the US in the 20's and 30's. Education, and 'truth-in-labeling' laws can help. Then, people need to make a choice.

-ERD50

 

[jazz4cash]

The Washington Post covered them recently:
"Want to Lend Me Money? Here's a Picture of My Dog"
http://tinyurl.com/2y6kzy

The site is interesting, but I think the least risky thing to do is borrow, not lend. I am a little surprised this group is so negative. I do think the Payday Loans are abusive, if not evil.

 

[ERD50]

I do think the Payday Loans are abusive, if not evil.

I guess I would only consider them abusive if they misrepresent the terms (and some probably do, and should be shut down). I'm not real big on trying to protect people from themselves if the facts are in front of them. They need to learn to make a decision.

I do think there should be some limit (maybe there is?), so that people can't just keep cycling through it - it should be for an emergency only thing. Yes, I don't think you can protect people from themselves, but I guess I don't want to see the govt 'condone' bad debt (ironic statement, isn't it?). But, a very occasional pay-day loan might be needed by some people, so I'm not sure they should be made illegal.

And the 'usary' rates I've heard mentioned before - well, IIRC, they don't really stand up to scrutiny. I mean, if you are going to make a single $200 loan to someone for 1 week, you need to charge, say $20 or so just to cover your cost of doing business. But, that $20 is 10% a week, or 520% a year. Sounds terrible when they report it like that on the news, but...it is $20. Would you do it for less?

From that line of thinking, lotteries should be shut down also. I at least don't think the govt should sponsor/condone them - it is like telling people that gambling is better than working and investing. I think they misrepresent the odds with their glitzy ads (they never mention the odds in the ads - do they?). A pay-day loan actually could serve a purpose for someone. The odds in a lottery are so extreme it is unimaginable to consider anyone having an expectation of being 'served' by it. Even the winners had no right to 'expect' it could help them.

-ERD50

 

[Brat]

Humm, a Marine doesn't want to go to Iraq. All s/he needs is to get behind with a pay-day lender?? If I were their Momma I would say, "Go for it." I would pay the slime-bag back after we are out of there, your life is worth many times that much!!

 

[Nords]

Humm, a Marine doesn't want to go to Iraq. All s/he needs is to get behind with a pay-day lender?? If I were their Momma I would say, "Go for it." I would pay the slime-bag back after we are out of there, your life is worth many times that much!!

Being in debt may remove a Marine's security clearance, but it won' t keep them from being deployed to Iraq.

The gunny sergeants have to assign their Marines to various teams. One team (we'll call it the rapid response team) may get extra schools, extra training, and the privilege of working with other U.S. & allied forces for which they'd need a security clearance.

The other team may be in charge of establishing security perimeters around IEDs. No special training required, just extra body armor (hope they didn't sell their issued armor to a surplus store or a collector for a little extra cash).

Guess which team the indebted Marines will end up on.