I kinda missed the boat last Thursday 2/17 because peer-to-peer lending site Prosper.com had a promotion going on for borrowers that stated that they would make a entire month’s loan payment for you. A quote from their e-mail:
It’s our fifth birthday, and to celebrate we have a special gift just for you! If you apply for a loan and submit a listing on our site today, February 17th, we will make your second loan payment (up to $300)*!
Astute borrowers realized that they could simply take out a loan and pay it back after 2-3 months since there was no pre-payment penalty. After all loan initiation and other fees, the borrower could still net a little over a hundred bucks. Not bad for “borrowing” money!
However, this also meant that somebody had to fund their loans. I’m sure some potential investors found it weird that Prosper suddenly had a lot of AA-rated loans from folks with very good credit and peculiar descriptions like “I really don’t need this money for anything, and intend to pay this loan off in 3 months.” The requested loan amounts will also be very close to $3,500, the ideal amount for profit maximization.
To top it off, I just got this e-mail from Prosper regarding getting 1% cash back on any bids placed on Monday, February 21, 2011. Here’s the e-mail text. No special link or promo code was given, so I can only assume it is open to all.
This offer is as straight-forward as they come: invest in any listing on the site today, and you’ll earn 1.0% cash back*! With a cash back offer and returns averaging 10.1%**, why wait?
* The promotional period begins at 12:01 AM PT and ends at 11:59 PM PT on Monday, February 21, 2011. 1.0% cash back will be paid on all bids placed during the promotional period that ultimately become funded loans. Cash bonus will be deposited to your Prosper account by March 31, 2011.
Update: Promotion extended to end of 2/23:
* The promotional period began at 12:01 AM PT on Monday, February 21, and will end at 11:59 PM PT on Wednesday, February 23, 2011. 1.00% cash back will be paid on all bids placed during the promotional period that ultimately become funded loans. Cash bonus will be deposited to your Prosper account by March 31, 2011.
Now, if you could technically find and fund several of these high-quality borrowers who have an incentive to pay off their loan in 3 months, you could have an investment that would return around 1% in interest + 1% cash back over a period of just around 3 months. That’s a lot better than a savings account.
I know that some of you readers got in on this. If you’re still looking to get funded, share your loan listing below using your usual commenter e-mail. This is not risk-free as you are still lending money to strangers, but if you’re an AA borrower on Prosper who initiated a loan listing on 1/17th or shows as early on 1/18th for ~$3,500, then I am more willing to take the risk. I am relatively comfortable with P2P lending with certain criteria, and already have over a few thousand dollars in highly-rated loans on LendingClub.
By Jonathan Ping | Investing | 2/21/11, 12:48am