Prosper.com Person-to-Person Lending Review, Part 2: The Numbers

To recap the first half of this review, my initial impression of Prosper was that is a somewhat risky investment opportunity with poor liquidity. However, along with the risk of loss comes the potential for a healthy return. Each of us can decide the rates that we wish to lend at. The question is, can I get a return that compensates me adequately for the risk I’m taking? Let’s dig into the numbers and see.

What kind of data do we get? What are the fees?
Again, I will focus only on the lender perspective here. My previous conclusion is that I would rely primarily on the credit information given. This turns out to be a letter credit grade (A,AA,B,C,D,E, or HR) derived from the Experian ScoreX PLUS credit score, not a FICO score. They are similar, but the range for a FICO score is 300-850 and the Experian ScoreX is from 300-900. Here are the relationships, as well as the corresponding historical default rates for borrowers with debt to income ratios of less than 20%.

Scores

As for lender fees, it’s pretty straightforward. You are charged an annual servicing fee of 0.5% for AA/A borrowers, and 1.0% for B-HR borrowers. So whatever your final lender interest rate is, 0.5-1.0% is automatically taken off the top. This was raised recently from the old rate of 0.5% across all loans.

How are the outstanding loans doing so far?
One of the reasons I didn’t loan any money on Prosper initially is because I simply didn’t trust myself or others to set the correct interest rates. All I had was the Experian chart above to try and estimate defaults, and that just didn’t seem enough. Would borrowers treat Prosper with the same respect as Citibank or Bank of America? Would the rates be too low due to an excess of lender money?

The bad news is that Prosper is barely one year old, still too young to make reliable judgments in my opinion. The good news is that Prosper does release what data it has. One thing you have to watch out when looking at the numbers is that many of the loans are so new that there simply hasn’t been time for them to default. A loan originated on January 1st won’t have its first payment due until February 1st, and it won’t be able to be considered late until March 1st. For an official default, it has to be 4 months late, or June 1st! And that’s only if not one single payment is ever made.

Therefore, I want to look at loans that are at least a few months old. I choose two periods to look at – loans originated in the 1st half of 2006, and loans from the 2nd half of 2006. Let’s see how those loans have done as of February 1st, 2007.

Historical Performance Chart
See here for definitions.


Not so good…
From these results, it seems that lenders as whole did a horrible job pricing the sub-sub-prime market. Sure, they charged them a fat 25% interest rate, but the default rate was so high that the net average return on an HR loan was -21% to -31%?!?! Ouch.

I’ve seen a lot of people recommend diversifying their credit pool to include everything from AA to a few HR borrowers. If people lent an equal amount of money to each of the seven grades, their aggregate return would have been a measly 2% – not exactly inspiring.

Although the actual ROI calculation is a complicated formula with different definitions, I think it’s safe to say that the default rates are going to be higher than what Experian predicted (reminder: those stats assume a debt-to-income ratio of 20%). For the HR loans from the 1st half of 2006, already 19% of original loan amounts and 24% of outstanding balances are more than 1 month late. Keep in mind, after one month of being late, the account is sent to collections. According to their own data, only 20% of balances sent to a collection agency are ever recovered. The rest are considered in default and are wholesaled to debt buyers for ~10 cents on the dollar. These loans are only 7 to 13 months old, leaving more than half of the 3-year term left!

On the positive side, the AA through C credit range seems to be the better bet, giving net returns around 10%. Keep in mind that although the C grade has a higher average return, due to the delinquencies the scatter in actual returns will most likely be wider than for an AA loan. Some people might catch a big wave of defaults, while others may get off without a scratch. One will need to get a large number of these loans in order to smooth out the bumps.

Also, I would note that these B-HR loans have the lower 0.5% Prosper servicing fee, while any new B-HR loans will be hit with a 1.0% Prosper servicing fee. Looking at the chart, this actually makes the return for the B loans worse than the A loans. Although the market might react accordingly and raise the B lender rates, I would still personally stick to the AA to A range.

Is that all the bad things? Unfortunately, No.
There is yet another way that your return is lowered. Before you can bid on any loans, you must have the money first sitting in a Prosper account where it is earning zero interest.

Times when you’re not making any interest:

  • From your bank account to Prosper – four business days, which is 4-7 actual days.
  • While waiting to find a good loan to bid on – varies.
  • While waiting for a loan to finish taking bids – some listings close when funded, otherwise they last for up to 10 days.
  • While waiting for selected finished listings to pass “review” – up to 7 business days after the bidding is closed, or up to 9 actual days.
  • Finding out that the listing didn’t pass review, and having to start over again – varies.
  • Time for the borrower’s payment to reflect in your account – another few days
  • From Prosper back to your bank account (if you wish) – another 4-7 actual days.

Depending on how vigilant you are, all this idle time where your cash is just sitting there can easily shave off another 1-2% from your net rate of return. Prosper states that it cannot pay interest for legal reasons, but I think they can work around this by getting rid of the extra accounts and instead making faster, direct ACH transfers from people’s bank accounts. If it’s good enough for the borrowers, why not the lenders?

Another slight concern is prepayment risk, when a borrower pays off the loan ahead of time. For example, interest rates might drop, and the borrower may find a better deal elsewhere. Even though you can reinvest the money, you’re still facing the extra lag time to find another listing, bid on it, pass review, and fund.

Finally, will Prosper be around for the length of your loan? At $40,000,000 in loans, if it makes 2% of that, we’re talking about $800,000 a year gross. There is no way they are profitable right now. I think they will make it, but going out of business remains a possibility.

You’re such a downer. Tell me some positive aspects!
Well, you can also screen loans in a variety of ways in addition to just credit grade. For example, you could allow only a certain number of delinquencies or set a maximum debt-to-income ratio, or allow a group leader you like to do the screening for you. Some people read the listings very carefully and believe they can filter out the good eggs from the bad. Other dig deep into the data and try to find some inefficiencies to exploit. I’m skeptical, but who knows.

In the end, if you stick exclusively to AA-A borrowers, manage your cash carefully, and the default rates don’t keep rising, you may achieve average net returns of about 8%. I would recommend committing at the very least $1,000 (20 loans of $50) to avoid your return being crippled by one or two defaults.

Also, many people seem enjoy the recreational aspect of Prosper. If you get entertainment out of it, more power to you. I personally hate the idea of somebody running off with my money. I’ll stick to skiing – it’s more expensive but it keep me healthier and the scenery is much better ;)

Conclusions
If you are willing to invest a good deal of time and money to analyze the data and make enough loans to spread out the risk, I definitely think there is an opportunity to make positive returns. I have not properly analyzed the volatility, but I think if you understand the risks and still want to lend on Prosper, go for it.

However, I am personally not interested. Given the risk and return information so far, I’d much rather stay with stocks. Prosper simply doesn’t tickle my fancy, I feel it’s far too much work and every time I’d see a late payment I would get annoyed. I do think that Prosper is trying to improve it’s service, and has already made several adjustments since they started. Perhaps someday I’ll change my mind; I’ll check back after another year.

Comments

  1. In addition to the $800K, I am sure the money they hold is sitting in a high interest account earning +5% interests rate. The current economic ‘crisis’ in the sub-prime mortgages will definitely affect their business model. You can expect them to go through a rough patch in the coming months.

  2. Seems like a risky way to make a few bucks. Some banks are offering 5-6% APY (e.g. HSBC, eLoan). And CDs are another option (same or higher return but longer lock-in which can be good).

    I calculate a very small difference in APY between Prosper and other choices. Accouting for defaults and delays, approx 7% with AA Prosper loans and 5-6% outside of Prosper. I don’t like those numbers but, like you stated, Prosper might be good entertainment for some.

    Leanne

  3. You just verified the old lending adage: it’s better to lend money to someone who doesn’t really need it. Nice analysis Jonathan but like you I think I’ll pass.

  4. The ROI numbers probably don’t count the time and effort a lender spends on evaluating the loans. If you are an amateur loan officer, you should at least pay yourself a reasonable salary.

    Back of envelope calculation. Suppose one lends $2,000 on Prosper in 40 loans. For three years, at 10% return, the return is $600. If one spends 15 minutes on each loan, that’s 600 minutes, or 10 hours. At $10/hour, the salary is $100. Now the return becomes $500 / 3 / $2000 = 8.3%. If you spend more than 15 minutes on each loan or you think you should be paid higher than $10/hour, your return will be much lower.

  5. The interest rate spread is tiny these days, even big banks don’t make much money off from mortgage/business loans.

    But when the interest rate heads back down or the stock market sinks, this may become more attractive…

  6. I actually tried out Prosper back in August with $100 (two loans at $50 min.). They were both to AA borrowers and they have never been late. The average interest came out to 9.18% and so far I’ve made $4.11 after service fees which comes out to about 7% annual interest.

    I agree with your negatives. Money is essentially tied up for 3 years (except monthly payments that are sent to you) and money is not earning interest when they’re not in a loan and just in the Prosper system. Also, you cannot transfer any money out until you have $25 to transfer which ties up the money further.

    I have not put in any more money since I first did because I don’t have the time right now. But if I did, I would probably put a couple thousand into it and then just use the continuous payments to continually fund new loans. Then it becomes a sort of self-contained money making machine!

  7. J-
    My biggest concern in reading through the “bids” on Prosper are the “re-invest in prosper” loans.

    People borrowing money to re-invest it at lower tiers seems like the building of a house of cards.

  8. The idea of people with good credit performing arbitrage by borrowing at low rates in order to lend at higher ones seems to be pretty well shattered according to the stats. There is simply no spread available. People already scoff at the 5% rate spread I’m getting from 0% balance transfers.

    I think what the data really supports is that there are already relatively efficient lending programs out there for individuals. You really have to be satisfied with a very small premium for your risk if you’re going to compete with them. And their’s a reason the high-risk people are only given secured or prepaid credit cards.

  9. James W says:

    I “invested”/played with 400 last year. I remember spending about 4 hours scouring loans and placed my bets on 3 loan requests. I am earning 17.5% on a B grade, 22.75% on E, and 15% on A. The E grade spooked me once with being 1.5 months late, but it is currently paying just fine. Although I am happy with my return, these days I am transfering all payments out of prosper. I would rather not have the headache.

    I find it funny that my A and B borrowers arent refinancing to cheaper prosper loans.

  10. I have a couple hundred in there that I dumped in pretty much right when it launched. They’re all to AA borrowers and my average rate is at ~14% (AA borrowers at the time were offering better rates than they are now it seems). I hadn’t looked at it for months. Eveyone’s still current and I have it set to rebid whenever I get $50 available.

    I’m in Texas so I can’t ski.

  11. I had to look this over because you were writing about it — fascinating! A way for sub-prime customers to get their credit back without going through normal lenders. If I were in this situation, I might borrow with a Prosper Loan. But thinking of lending to individuals makes me very suspicious and that voice in my head is screaming “RUN!”. The more I looked though, the more those ‘D’ Loans looked juicy at 19++%. I could see gamblers really enjoying this, another reason to “RUN!”.

    I’m too spoiled by federally insured banks to consider that. The peace of mind wouldn’t be worth it to me.

  12. I was actually considering usiong prosper for a car loan but thought twice about it. I wasnt sure about giving so much peronsal information to a website which basically anyone has access to.
    Had a been in a moer dire situation I probably would have tried it.
    You make a good point abou the length of time the site has been up. Maybe in a year or so I can be on the other side deciding if I should invest my hard earned dollars to help someone get off of their feet.
    I doubt people who actually need the money would treat the site witht he same respect they would a Citibank or even a collection agency.
    Guess we’ll just awit and see

  13. I’ve seen these prosper-reported numbers on ROI, and have always wondered how they can be so low. I know they don’t hold true for me and I read many blogs where lenders are beating those percentages big time. (prosper reports ~10% avg return. I have 16% avg return.)

    Something is not adding up here.

  14. MossySF says:

    The mistake in looking at Prosper is worrying about all the minor details and trying to “win”. Think big picture — it’s a black box machine — spread your money across enough loans to get the average Prosper market return at your risk/reward criteria. It then becomes another arrow in your portfolio — an asset class with ~10% stock-like returns without the correlation to the stock market. You may think “too much worrying for such a small portion of my portfolio” but isn’t that the approach in general of asset allocation? You add a touch of risky but uncorrelated segments to decrease the overall volatility.

  15. This program setup by Prosper is advantageous to borrowers since they don’t have much risk (if they don’t care about credit). It’s great for people that need small loans to get projects done. No hassles with bank applications and all.

    However…one question I tried looking for and couldn’t find:

    If I were a borrower…….would the interest paid to the lender be tax deductible? I’m guessing no since this isn’t a large financial institution but a mere collection of personal loans.

    Can anyone confirm this?

  16. Cooljas says:

    I have been a prosper lender for a year now and right now I have around 40k loaned out. all 180 loans are still current and my avg of return for the first year is 12%. in other word, I was kinda of shocked when I saw your ROI table. I think I will loan less to HR and E now and focus more and the C and the D borrowers. I do think prosper loan are like stocks, you have to do a little bit of research to improve your odds.

  17. One issue I find with the charts presented by Prosper is that they do not indicate the number of loans that fall under each of the credit ratings, so it is difficult to gauge what the numbers really indicate. I would guess that there are more active AA-C loans than there are active D-HR loans because the interest rate spread isn’t much between the different credit ratings. If you only stuck to loaning to AA-rated borrowers, you would be earning yourself a solid 8-9% return after fees, surpassing the current interest rate from the online savings accounts and just about matching the average return from the stock markets over the past few decades. It’s certainly not a risk-free way to generate ROI, but then you’ve also got risk in the financial markets. I’ve had some money in Prosper for the last 6 months as a way to diversify away from the financial markets and make an additional return over the average online savings account.

  18. I have 25 loans out with about half AA, and only one C and one D. Nothing below D. Average interest rate is over 11%. I’m not putting any new money in but I will re-invest when I get $50 in payments back (once every 5 or 6 weeks now). All are current.

    All I’ve done is look at the loans that are completely funded and choose from those. Enough lenders are doing research that I can take advantage of it. ;)

  19. Elizabeth says:

    Prosper sucks. It uses a scoring system that isn’t even available to the consumer. How can you improve your score when don’t even have any idea what it is? Prosper is no different that the traditional banks. They are not out to help people with less than perfect credit. Their goal appears to be to allow independently wealthy individuals to profit by providing loans to the same people that banks would. If a bank won’t give you a loan, then neither will Prosper. Once people figure this out, they will tank.

  20. “Their goal appears to be to allow independently wealthy individuals to profit by providing loans to the same people that banks would.”

    Why is that a bad thing?

  21. JLo – Why would the interest you pay to Prosper lenders be tax deductible? These loans are the same as any other non-mortgage loan and you can NOT deduct the interest from personal income. This is the same as with a car loan, or any credit card or personal (non-mortgage) loan from a bank.

  22. My performance in prosper has been horrendous.

    I put in $500 when they started and spread that over ten loans. I spent several amusing hrs picking out loans over 20% in the C and D range, with no defaults in history.

    Half of the loans have defaulted (3 or more months late). Two of them never made the first payment. One loan paid off early (after 2 months).

    The accounting system used by prosper is bizarre. It tells me my rate of return is over 24% and I’ve made $120 when I’m actually down 40%. Apparently, in their world, I’m making money on fees and such even though I’ve never received the first penny on the loan. I put all their numbers into spreadsheets and nothing adds up. And yes I know the financial calcs.

    For me, I’ll use this system for only one thing – making loans to people I know personally.

  23. Just sayin says:

    To the guy above, well you took the risk, like banks do, of giving money to people with bad credit history. I see plenty of AA, A, B rated borrowers looking for rates of 14%+ on prosper. What happend to you is the reason banks don’t lend people money with bad credit. You to a big risk to make a bigger profit and it didn’t work out. Couldn’t just be happy with an A rated 15% borrower huh?

  24. Nicely written. Gave me a lot to consider.

  25. Stocks? For me, also a lot of fun, but I would envision it being significantly more time consuming for me to be profitable in than Prosper. Certain things about Prosper can be a no-brainer. Stick to A-AA loans with a certain debt to income and you should be able to perform at or near the average.

    The thing I agree with you most on is the lack of data about delinquencies thus far, since Prosper is not old enough to truly judge fairly. In two years however, I think that will change (also the lack of insured funds scares me).

  26. Wow, you’ve dissapointed me. I see this as the future of banking. The people who help these companies out in the early stages are the ones that benefit the most. This is just like eBay, nobody would trust anybody with their money before they got their goods and blablabla and look at them now. It’s the 21st century dude

    Prosper has established a system that works and is relatively safe… if you’re smart about it. Obviously investing in anything below B grade is unsafe and risky and you seem to have figured out that B grade isn’t as “efficient” of a loan as AA and A. If 0.20% and 0.90% of people have defaulted at AA and A grade loans then how is this risky? A lot of the risk you can take away by reading the stories and analyzing their numbers so you minimize the almost non-existent risk right off the bat. A start-up company isn’t something worth investing unless you have lots of information and believe they have a great idea that will be run correctly, however, someone with a 100k income and minimal expenses…. why not??

    I’m putting in all of my savings into Prosper, I’ll leave just enough to manage for just over 2 years, that’s when I’ll be getting my initial investment back! Here’s my start at Prosper: http://www.lendingstats.com/me.....d=xemi1988 You should bring this up next year when you write your “Part 3″

  27. My prosper results have been scary. I put about $5000 into the site, mainly AA, A, and a few B and C grade, mainly $50 – $100 loans. About 10% have defaulted or are more than 3 months late and are headed to default. The worst issue is I’m seeing no correlation between rating and default — most have been AA, A, and B! So far I’m looking at break even or a small loss, considering the capital tie up.

    I’ve stopped new loaning and am now trying to get my money out as soon as it comes due. As other’s here mention, its a semi-broken model and probably not worth the risk.

  28. Susan Dee Condit says:

    Hello Prosper, I haven’t gotten all my computer set up yet to snd photos. But I go into a financial pressure situation this month and I’m hopping you will help me out. My Pension did not come through because I had to change bank accounts because a payday type loan and a credit card that I both refused, took money ou of my account. I’ve been cocerned as you can understand. I cotacted the union with a new back account for direct deposit inthe new account. It should have been here on the 1st, today(2 monthly payments) But no luck. I’ve also had extra expenses since Medicare said I spent the max on the Drug plan and I have to pay for alot of prescriptons myself until January ’08. I am praying that someone at Prosper will help me with a loan to consolidate my credit cards and help me. When I am able I will make a nice profile for you. God bless you if you can give me the $7,500, loan at a reasonable interest rate. Thank You! Susan

  29. I put in 5000 in Prosper. Out of 23 loans 7 loans have defaulted and they are not all HR or E credit risk folks. Collection agency is a joke and has not recovered a penny so far. Accounting system and info sucks. I can’t seem to make any sense of how my overall investments are doing. Once I get whatever I have put in (of course in 3 years), I am done with this. Not worth my time and risking principal.

  30. I sent them this note.

    Dear Prosper:

    After eight months, 25 loans and $2,400 invested, I am writing to tell you that my investment experiment with your company is over and I will be pulling out all of my money as fast as I can. The reasons for this are listed below:

    1) 6 of my loans are failures and they all range from great credit prospects according to the numbers with good endorsements and DTI figures to higher risk borrowers — this has dropped my average ROI to 7.46% and it’s no longer acceptable. Better and faster processes to properly vet borrowers is needed.

    2) My investment money is tied up 7 to 30 days by the time we transfer it, bid, wait for validation and close the deal. About 25% just fall through. Again, better vetting processes would help.

    3) The forums no longer allow any expression of criticism of this processes or exchange of ideas. I understand moderating the insults and flaming messages, but legitimate criticisms are censored completely. I can go to old world Russia to get that kind of treatment…in this day and age of Sarbanes-Oxley and transparent governance, you’ve taken a step back with this move.

    Thank you for the experience and I wish you all the best.

    Regards,

  31. I’ve never put any money in prosper ey (maybe never). But I do have possible answer for those who are puzzled as to why they are showing a double digit return on something they appear to be making single digit or negative returns.

    Prosper is most likely using an accrual accounting system. Meaning it records economic events regardless of cash transactions. If someone has not made payments on there loans they have fees that they are supposed to pay you which have accrued along with the interest in principal in arrears.

    That little detail that they haven’t actually paid you the money yet is ignored in accrual accounting. In accrual accounting say you loan someone (lets use simple interest) $500 @ 10% They make the first 4 payments totalling $440 then they are late on the 5th payment racking up $50 in late fees total. So now you have accrued $160 more dollars when including original payment due.

    Regardless of money changing hands according to accrual accounting you now have a total return of 20% on your original investment. Even though you only have recieved $440 using accrual accounting you have a 20% return.

    Now using the same actual events under Cash based accounting would mean you are at a 12% loss. Thus the descrepency. It should be noted that businesses (that aren’t small partnerships or sole propreitorships) use Accrual based accounting.

  32. prosper sucks says:

    Do NOT invest in prosper. I invested over 35k in prosper – mostly A’s, AAs, B’s a few C’s and A few D’s, all of which had ZERO delinquenices on their credit reports. They squirrel away your late loans after 1 month to little known collection companies that recover almost nothing and their performance data is very fishy. For example, as of today they list the number of loans in the AA grade that are 4+ months late are 3 yet my portfolio shows I own two of them, and my friend’s portfolio has 3!!! Is it a coincidence that two people who know each other own all the defaults in the AA category plus an additional one???My guess is they might be concealing the numbers of lates and defaults which may be way more than what they report in their performance data.

  33. Gotta to wonder, who checks Prosper’s bookkeeping there is as far as I can see, no one. Is there any outside firm doing an accounting? I think I smell something rotten.

    Oud

  34. Has any one considered the possibility that there is room for insider market manipulation at Prosper?

    1. Only Prosper insiders have access to the real identity and financial information of the borrowers and lenders. The rest of us just have to trust what Prosper gives us.

    2. What is Prosper doing to make it self trustworthy as a business?

    3. If we follow the money trail were does it all seem to be leading Prosper?!?!

    4. Could it be possible that Prosper is generating AA and A listings that are from real people but controlled by them? (there friends, business partners, relatives) thus in a sense the funds remain in Prospers control? or people who have an interest in Prosper?

    I think Prosper as it stands right now is nothing more than 21 century horse race betting style company (Gambling Vegas style where the house has the best odds).

    So as a lender you are providing them with cash flow that they have access to weather you bid or not and one could even go as far as to speculate that they could even create listings they now you will bid on for a secure 36 month source cash flow.

    It seems odd that anyone with a AA or A score would put a listing up asking for $25,000.00 at 35% rate (even if Prosper clams it will go lower with the bidding process). and then get funded?!?! Yet many other listings of equal or better rating asking for a loan at a competitive rate 8% or less (which in my book would be the only reason an AA or A rated borrower would even bother with Prosper) does not even get one bid even when they have given data in the listing that lenders can research out side of the prosper system (such as web sites, newspaper articles, etc).

    I agree that prosper is still to new of a company to give it a final judgment, however this company is ether going to have to become totally transparent to everyone (borrowers and lenders) with regards to the money trail and providing more ways to make borrowers accountable as well as including the option for lenders to choose there own collection agency (this is were Prosper has the opportunity to make huge profits if the loans funded by lenders that default were manipulated by Prosper or worse prosper goes bankrupt and we have to use there agreed collection agencies chosen by Prospect)… or it is knowingly building a house of cards and and will file bankruptcy once it starts to fall leaving the collection agency (there real business strategy) to collect all they can giving lenders penny’s on the dollar while they collect huge fees at investors expense. ( after all the agreement the borrowers have is with Prosper not the lenders)

    Time will tell. Till then Prosper sits on my watch list.

  35. Possibly Prosper says:

    Thanks for the research and personal experiences of your readers. It is now 18 months since “part 2″ and I wonder if a part 3 is in the works. I would like more information. Today I set up a profile on Prosper to lend but haven’t funded it yet. As is my nature, I got very excited about the prospects, began the process, and then decided I’d be better served to do some extensive research and see what others are saying about it.
    To me this concept is like an eBay for money lending and embodies all of the same risks and possible rewards for it’s users. One thing I wonder is if there are any similar, competetive services out there. I haven’t seen any, has anyone else? I’m mostly curious because after watching eBay dominate a market by building such a strong network of users (and then raising fees once there was nowhere else to go), I wonder if Prosper will be raising fees once it gets such a strong network of users it can no longer be “challenged”?

    Thanks again for the insight… keep it coming!

  36. the site has been frozen, claiming some kind of securities investigation. Does anyone have any info on that?

  37. Jack Mayhoffer says:

    Prosper attracted the cesspool of borrowers who had no other alternatives. I look at Prosper as no more than a poor man’s wealth-transfer mechanism that moved assets from one class of citizen to another class of citizen. It’s sort of like the government except Uncle Sam didn’t brainstorm the wreck that was Prosper.

    It was ridiculous how attractive women would get funded despite their hopeless cases and how pie-in-the-sky business models were funded in a matter of days. Unsophisticated lenders couldn’t really do their due diligence anyway since Prosper’s vetting mechanism wasn’t exactly up to snuff. But c’mon, common sense would have helped most lenders stay away from 90% of the borrowers who were using it as a last resort.

  38. Seriously, prosper is in the toilet. I invested in A and AA borrowers based on prospers mysterious rankings. Im in the hole. I lost 20% on 5K. WTF?

  39. Prosper sucks at life! All they are there to do is funnel shitty borrowers towards the few collection agencies of their choosing. If the borrowers don’t pay they’re not out anything and the collection agencies that have corralled with prosper.com get to keep half of the lenders money, if they recover any at all.

  40. financenovice says:

    When I make a loan of $1000 @ 10% on prosper.com, does this mean my interest income (assuming no fees for sake of simplicity) is $100 every 12 months or $100 every month? In other words, is 10% annual interest rate or monthly interest rate?

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