Prosper.com is
a financial website that connects private
investors with individual loan seekers in
the first US based peer-to-peer lending
service. The allure of this type of
lending system is that borrowers with poor
credit scores can obtain loans at much lower
interest rates than they could get from
banks or mainstream lenders.
Conversely, lenders are presented with an
opportunity to earn substantial returns on
their loaned funds. As a lender
Prosper.com allows you to set your own
interest rates based on your calculation
of a risk/return ratio (Max 29% or State
Max). To facilitate this process each
borrower is given a credit grade based on
their Experian credit report.
In addition, Prosper provides a borrower
feedback system much like in eBay, so for
instance a borrower that defaults on a loan
will have a poor score. You can also
engage the borrower in a Q&A to find out
their reasons for needing the loan and their
plans upon receiving it. This helps
lenders get an overall picture of the amount
of risk they're dealing with.
Overall, there are pros and cons to the
Prosper.com lending system. The
pros are that investors can potentially get
over 10% on their investments while helping
everyday people start businesses, flip
properties, or resolve debts.
The downside is that despite credit checks
the system has some potential for fraud,
abuse, and loss of capital. Furthermore, there's such a high demand for
grade A borrowers that lender competition
forces their rates below profitable margins.
This pushes investors to seek profits from
less secure borrowers.
However, there are methods for greatly
limiting your risks when lending at
Prosper.com. One strategy that limits
risk is diversification, if you spread your
loans out then even if one happens to be
late or defaults you can recoup your losses
from better loans. Also, you can lend
to borrower groups which tend to have much
higher scores and great payback histories.
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Customer Reviews for 'Prosper.com'
Comments to date: 1. Page 1 of 1. Average Rating:
Tom, New York
Posted at 8:11pm on Tuesday, April 1st, 2008
Don't bother borrowing with Prosper unless you have perfect or near perfect credit. All the lenders that would lend to "less than perfect credit" individuals are gone because of the fraud and the number of lenders is decreasing. If you are lender, be careful because even the A and B credit individuals are defaulting on their loans.
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