any personal expirience with prosper.com?

Question

i have an extra 10k, im thinkin about becoming a lender through prosper.com....any advice?

Answer 1

Copied from:
http://www.finance-weblog.com/50226711/why_prospercom_will_fail.php

It's really an exciting idea. Unfortunately, it will fail.

Here's why:

1. Scammers - The Internet provides excellent anonymity. While Prosper does do credit checks of those seeking loans and puts a credit rating for them right on the site, that doesn't stop those looking for money from creating elaborate scenarios as to why their credit is so bad (job loss, hospital bills, etc.) and why you should take a chance on lending to them. Sure, some people get into money trouble because of job loss and unexpected hospital bills, but others get into money trouble because they gamble, drink, or just plain like to shop and are happy to find a sucker who will feed the habit.

And you know there are already teen hackers in the Ukraine who are looking for ways to use the identities they stole this morning to nab some money from gullible Americans.

Be softhearted and you could see your money go bye-bye.

2. People with good credit don't need it, people with bad credit have nothing to lose. Look on Prosper and you will see that many of these loans are going for interest rates of 15% and more. The only people getting decent rates are those who have good credit, and there aren't nearly as many of them.

Why? Because people with good credit can get comparable or cheaper rates with a credit card, home equity loan, or small business loan if need be. They don't need this service, although a few may try it out to see what they can get.

If you have bad credit, however, why not use Prosper? You've got nothing to lose, because your credit's already shot and you might be able to get some money at a better rate than the payday loan lender is giving.

If you're a lender on Prosper, the promise of loaning your money out at 17% sounds great, until the loans start defaulting. Prosper's in its honeymoon period now, but when those high-interest loans come due, you'll see why the lendees have the credit ratings they do.

Which brings me to my next point:

3. Lenders will leave after getting burned or getting bored. Because the number of decent credit customers will be low, Prosper lenders will either tire of the site because their only potential lendees have horrible credit, or they will start making riskier loans in search of higher returns, and will leave after getting burned one too many times.

It's very tempting to lend at the rates you see on Prosper, especially when the stock market's unstable. But whole companies, made up of smart people with financial expertise, have been set up to offer loans to bad credit customers, and many of those companies have folded after too many defaults.

Anyone remember NextCard, the Internet credit card of a few years back? They offered easy credit and the government had to shut them down when they lost millions and millions of dollars. Other credit card companies serving the "subprime" customer have seen humongous losses, especially in economic downturns.

Maybe Prosper's lenders are smarter than these companies and will loan to only the right people. But how likely does it seem that a nation of lenders doling out money from their computers are going to have the expertise to outwit banks and other lending institutions?

Lenders who stick around are going to get burned and the downward spiral will be inevitable.

4. It's not an eBay of loans. BusinessWeek used the "eBay of loans?" headline to give a quick take on what Prosper could be. But where eBay uses its feedback feature to keep people honest (although of course not everyone is), Prosper can't really do the same. Many people on eBay are repeat customers--they want to play fair so they can keep playing. The only people likely to be repeat customers of Prosper are going to be those with financial trouble. Really, how many times do most of us need a $1000 loan if we have control of our finances?

So there is no real incentive to pay these Prosper loans back, especially if your credit record is already in shambles, because you don't need to worry about how you'll look to Prosper lenders later on.



You are better off investing in the stock market, CDs or open a high interest savings/money market account.

Answer 2

Hello. I like the idea of the site, and I can see why it is appealing to debtors, but in the same thought as the other comments, why is a person with high income and credit going to use this site. They get calls, emails, letters etc offering home equity loans, low rate balcance transfers, etc every day. That is the maco economic side. I could write more about credit scoring models, approval rates, non-score related decline reasons, etc, but those are related to getting the right approvals. On Prosper, what ever the default rate is, it is.

OK set that aside as the concept can work, it is just a matter of finding a balance between the rate lenders demand, the rate customers will pay, the default rate, and the ease of use for both parties.

My question for lenders is that they may not fully calculate to impact and chance of a total loss. And that is normal, as given any type of risk situation, the tendancy is to underestimate the total risk. Just look at the news, ....Ice Storm in Oklahoma, thousands of people got in their cars after being warned to stay home, then ended up in trouble.

So if you lent 2k to five people, are you prepared for the chance that all five default and you lose 10k? Or even if 1 defaults you lose 2k.

The other approach is simply shopping around, just like buying gas or computer. If a big mutual fund company (I just looked at the web site) has two high yield bond funds (FAGIX) that have given returns of 10% and 13% over the last 1 year and 10 years, would that be a better option?
Good luck.

Answer 3

California, specifically the ones driving through the San Joauquin Valley in the fog. They have 300 car pile-ups from the idiots driving 90 miles an hour through the fog and into an accident they couldn't see because the FOG IS TOO THICK to drive that fast. Morons.

Answer 4

Ya what he said, I wouldnt do it!