Hi Fools!It's been a while since I've been on these boards. But I have a question:What is your opinion of lending to prospective borrowers on Prosper.com? I know that some time ago, some Fools had said that it was too new and they wanted to wait and see how stable it would be before becoming a Prosper lender.So what is the judgment in Fooldom? I'm not sure that I'm ready to become a Prosper lender just yet, but I'm doing some research on it.Also, does anybody have experience in lending to businesses in third-world countries through sites like Kiva.org?Thanks,Michelle
I looked into it a while back, there's Prosper.com forum on the boards, too. http://boards.fool.com/Messages.asp?bid=117775I remember a lot of people were uncomfortable with what I believe were a high number of defaults, and didn't think the risk was worth the return. Apparently, Prosper wasn't or was unable to go after defaulters as aggressively as they needed to be.Also, if people repay their loans early, you're not going to be seeing the returns you expected.
RUN AWAY DO NOT WALK RUN AWAY!!!!!!!!If you want enjoyment just hand me a few hundred so I can set fire to it and dance naked around in the smoke. It will be less scary and safer in the long run than lending to people who, IMHO have little if any desire to repay you.Ex17Only lost 3100 in Prosper so far.
Only lost 3100 in Prosper so far.Was that in a single transaction/loan? Did Prosper.com go after the defaulters? What was the credit rating of the people you loaned money to?
Run away from Prosper.There is a reason that payday loan joints charge 80-300%+ interest on their loans to the same type of people that want money on Prosper. There is tremendous competition in the payday loan business but no one offers loans at less than 80% or so because you can't make money lending to this type of borrower for less.Prosper loans at 9-25% are nearly guaranteed to lose money in the long run. The good borrowers pay their loans back promptly generating small returns for lenders while the bad borrowers default promptly after 0-3 payments.
Good Lord! How do they stay in business?
My opinion, stay away unless you'd like to become sympathetic to credit card companies and payday lenders. Your trying to lend money to people who fall into two buckets. 1. Those that large banks with hundreds of people, years of experence, and lots of resources don't want to lend to OR2. People banks WILL lend to who are not clued in enough to borrow from them or won't spend the time energy to use the normal banking system. A sliver of bucket 1 are people who are safe to make loans to, but you have to spend the time and energy to hunt them down. Prosper will quickly get you to understand why you can charge people 29% interest and STILL lose money. Prosper doesn't have the resources to really run down deadbeats, they simply sell the loans to collection agencies for pennies on the dollar. They are very weak at getting people to make their payments.
Prospers default chaser people suck. Its was 43 separate loans of 50 or 100.Some of then didn't even make ANY payments so I am led to think it was outright fraud.Prosper is a bad news....my group leader left due to the games Prosper played. An expensive, well learnt lesson for me.
Thanks for the feedback Fools! I appreciate it.I hadn't been on their site in some time, but was reading through some of the potential borrower's profiles. I'm shocked at how many people are willing to post their debts and other personal/financial info for all the world to see. :PAlso, it seemed a little fishy that in their profiles prospective borrowers describe themselves as "nice, kind, take my obligations seriously", etc. (Like your own opinion of yourself is a valid reference when applying for a loan... :( )I will definitely stay away from Prosper.com!Michelle
I looked into for requesting a loan after reading about it on MSNBC but decided that it probably isn't good for even a borrower after looking them up with the Better Business Bureau. The current standing is unsatisfactory.
One should keep in mind, in addition to the above, that all the problems that people have already experienced with Prosper have taken place during a positive credit cycle. Starting a few months ago, the USA embarked on a negative cycle. When foreclosures are up, GDP is down, unemployment starts ticking up, manufacturing and retail sales start going down... all of those things add up to more defaults, especially on the lower end of the credit spectrum.That's apart from yet another risk that is not already baked into the cake, namely risk to Prosper itself. People can argue about what the consequences would be if Prosper failed as a business, but it surely would not be good for the lenders, and lets face it, Prosper is a relatively small internet startup.Remember that most applying for loans on prosper have substantially weaker credit profiles than all these subprime borrowers who are allegedly going to ruin the economy via mass defaults.
Actually, on average, Prosper does return a modest profit:http://www.prosper.com/lend/performance.aspx(unless there's some flaw with those numbers, and, if so, please chime in)But it is *not* risk free by any means. And remember that your returns are taxed at your full rate. I see nothing wrong with trying it with a little play money, should you wish to diversify your investments, but no matter what, realize that, just like with stocks, much of it can disappear quickly.Note that those numbers are designed to show you the better borrowers by default (no delinquencies and < 2 inquiries). By expanding those maxes to 10, the 'HR' borrowers have an average turn of -21% and grade E is -8%.Taking out the better end showing only people with 3+ in each, you get rates of returns for C to HR of: -7.00%, -10.98%, -23.32%, and -33.38% .So also understand that this is not a passive investment. Care needs to had to understand the profile of the borrowers you are lending too, and what their historic rate of return is. Nevermind the typical disclaimer, that past results is no guarantee of future performance ;)
I put $1000 into prosper in March. I've done mostly A-Bs, but did a few D-Es. I've made $80! but that doesn't count the $50 that have defaulted (didn't even make one payment) and the other $50 that is now late so as of today I am down about $20 and wouldn't be surprised to see more defaults. I decided to keep my money in as I'll see how it goes, but I'm not putting in any more money. I've also wondered what would happen to my money if they went belly-up, but I was prepared to write off my initial investment when I started and have had fun being Mr. Banker. My AAs-Bs have held up well (so far).
Ok...I've run a portfolio on Prosper.com that went from AA to D with 0-1 Deliquincies and some other criteria I used. Basically the historical portfolio results on my portfolio were about a 12% return according to some tables I used. Until the past month or so I was doing fairly well. But over the past 40 days I've seen.Current:32 Loans (each $50 (except for 1)1 late less than 15 days2 Late (over 15 days less than a month)1 1 month late28 current loansTo date I've "made" $89.83 in interest received in hand. I've got $45.83 in cash that I'm debating on putting back in or cashing out.If all the loans above go bad I'll be in the hole a bit. Before the last 40 days I had 1 loan go late that was brought back up to date. (I also had one fraud that I got the principle back from prosper)My overall portfolio was NOT subprime by most standards but my defaults suggest that things are rough out there.If the banks are experiencing similiar results as the above there will be more pain to feel when 4th quarter results are announced.(cross posted to the METAR Board)
>>Also, does anybody have experience in lending to businesses in third-world countries through sites like Kiva.org?<<Yep. I've had a cool $100 (w00t!) floating around in Kiva for over a year, sponsoring four borrowers (@ $25 apiece) at any given time. Nobody's defaulted and two have completed their repayments, allowing me to pick two new "microbusinesses" to loan to. I recommend it, but of course, you don't make money on Kiva like you're supposed to on Prosper. But it's a cool concept, and I'm thinking of staking my nieces out with $25 gift certifiates on kiva (on top of their "real" Christmas presents) to get them interested in thinking about other little businesses and people around the world. :-)Soooz
I toyed in Prosper for a bit until 50% of my loans defaulted within like, the first 3 months -- meaning the people got the loan funded and basically made one payment at the most before just defaulting.There's a reason people are on Prosper: they don't pay their bills.I second and third the recommendation to RUN AWAY.~dswing
...I can set fire to it and dance naked around in the smoke. It will be less scary...If I did that, it would be MORE scary! 8-)foolazis
Think about it.What kind of borrowers can't get a credit card? Or apparently have maxed out those they already have, yet still want to borrow more?What kind of borrowers apparently don't have friends/family able or willing to loan them money to "tide them over" for a while, and therefore must turn to strangers on the internet?I believe, but obviously this is just speculation, that the original business model of Prosper--that is, for the people running Prosper, not for its "lenders"--was to get it up and running to the extent where they could do an IPO and "cash out" in the public equity market. Something about it strikes me as being designed to appeal to religious people who might be more generous, less business-oriented, and more likely to lend money to strangers on an unsecured basis over the internet.
Apparently you..nevermind =)
I've been lending on Prosper since May of 2005 and have seen Prosper go through a lot changes both good and bad. I have stopped lending because Prosper's collections are very weak. Currently, I do not feel I have a reasonable expectation of being paid once a loan goes 1 month late. Out of 60 loans I've had 8 defaults, and currently have another 8 in some form of late. I've also had 3 loans pay early and have another 3 in the process of paying off. If collections is strengthened I'll start lending again.My suggestion is now that you've been around the Propser.com site, visit the unofficial Prosper forums at www.Prospers.org. You'll find uncensored discussion of the Prosper platform (unlike Prosper's new heavily moderated forums).Prospers.org is also expanding it's knowledge into other P2P sites like LendingClub, Zopa, Kiva, MyC4 and any new sites as they develop.I post under DebInVenice on Prospers.org as well so look for me if you drop by. Good luck to you!
OCD: I've been lending on Prosper since May 2006 (but it seems so much longer :) )
I've been a Prosper lender for almost two years I think. I did stop actively lending because of the high number of defaults. I put in about $6,000 in total.At this moment, despite defaults totaling just over $700, I have a net gain of $330. That's not a great return, but at least I'm above the water, so I'm not crying yet. More defaults appear to be upcoming which will probably put me close to break-even, or even under water.I think it's a great experiment. I think the model is fascinating. I really wish it was working out better for me.On a personal note, there was one loan that I took a great interest in because the borrower was in my state and we had similar career paths. He was on the way up, but needed a helping hand. I investigated his loan and situation, and talked with him a few times. Because of our state cap, and his credit rating, he was very unlikely to be funded. Because I validated him and had some standing on the Prosper boards, his loan was funded.He was able to dig himself out of the hole he was in and ended up paying back his loan in full and early. It was a very happy ending for all involved and it made me feel good to be able to help him. When he was doing his final payment, he contacted me to let me know how much he appreciated my help and that he was doing very well.
Fair warning: this thread was linked on a Prosper-related forum where the overall mood is overwhelmingly negative. I'm not QUITE that negative.What I feel about Prosper as an (ex-)borrower: it is just amazing for a certain segment of borrowers who, *despite being objectively good credit risks*, are not able to access traditional banking for whatever reason. In my case, it was the fact that I spend time in two countries on a regular basis and this just screams "Egads, run away, run away!" to bankers in both countries. (Although I have been slowly reducing their reluctance to issue me credit.) I was able to help my little brother on college expenses with a Prosper loan for $5k at 13.9%, which beat the heck out of the cash advance rate I would otherwise have been taking. (Cosigning regular student loans is not an option when you're 14 timezones away, sadly, or we could have beaten that by at least 5%.) Similarly, borrowing for small business on instruments which are not credit cards or lines secured by real estate is more difficult than it needs to be, and if I my small business had cash flow issues that lasted longer than a credit card billing cycle I'd go to Prosper without hesitation. A major portion of the reason why I succeeded on Prosper as a borrower, though, is that folks knew me from the forums. It was the 2007 equivalent of having a lending officer who actually knew your name without reference to a computer, excepting the fact that nobody actually knew my name.What I feel about Prosper as a small lender: I pick based on a combination of the numbers (you really can't afford to do anything else) and focus my bidding on borrowers who I see a bit of myself in. I've been bidding for something like 8 months now, have 4 loans, and have never had a late payment (owing to both the fact that I bid in not-too-risky categories and the luck of the draw). Prosper has gotten me a 16% return, which is phenomenal relative to most people, who are clustered at or around 5%. As an investment, I don't think I can recommend Prosper to people over buy&hold in the stock market (for long term investing) or Internet money market accounts (for short term investing). The main reason isn't the defaults, or the lack of collections, or the business model. The main reason is the sheer amount of time you have to invest to get that 16% return that you almost certainly won't be able to sustain or scale. I've spend hundreds of hours on the Prosper forums to become smart enough to get 16% on $250 worth of loans -- do the math on my dollars per hour, it isn't great. Prosper has some choices which automate your investing for you, but I think you end up choosing the average that way, and while choosing the average on the stock market is incredibly intelligent because that average is 8-10% over time choosing the average on Prosper gets you a product which is inferior to a money market account at ING in every way I could possibly enumerate.You are almost certainly going to be better rewarded by sending a check for $X,000 to your index fund of choice and then forgetting about it for 5+ years. It takes literally seconds and scales to infinity. Similarly, if you want to park money for 3 years while waiting on a home purchase, wedding, college, whatever, just plonk it into a money market account with a competitive rate at your institution of choice.
Fair warning: this thread was linked on a Prosper-related forum where the overall mood is overwhelmingly negative. I'm not QUITE that negative.I linked this thread to Prospers.org over a week ago. As you can see, no one has come to inundate this thread with negative comments on Prosper, so I don't think a "warning" was really necessary. If the boards were still viewable only to paid subscribers I would not have made the link.So far, the link has mainly severed to get new people to join TMF (I've already sent out a few invitations upon request). It's all good. :)
Thanks so much for your input Fools! I appreciate it.Michelle
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