Prosper Borrower Promotion: 2nd Payment Waived Up To $300

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Offer is back! Person-to-person loan site is having a another one-day promotion for borrowers who submit their loan listing on Friday, February 17th where they will actually make your entire 2nd loan payment (principal and interest) for you, up to $300.

* To be eligible for the offer, you (i) must post a loan listing on between 12:00 am PT and 11:59 pm PT on February 17, 2012; (ii) have to reach Verification Stage 3 within 1 week of posting the loan listing; (iii) cannot have posted a loan listing on within the past 30 days; and (iv) may not withdraw your loan listing. If you meet these criteria, Prosper will credit your second required loan payment up to $300. The credit will be posted to your account within 30 days of Prosper receiving your first payment. This promotion cannot be combined with any other promotional offer from Prosper.

Getting a rate quote is free, as their “soft pull” will not affect your credit score. If your loan does not find enough lenders to fund, then you can walk away with no obligation. If you do end up taking out a loan, then it will show up on your credit report. There are several ways you can use this offer.

The quick loan for profit. If you have an excellent credit score, you can get the AA loan rate of 5.65% for 1 year. Even if you don’t need it, take out a loan for about $3,500, and you would end up with a monthly payment of around $300. Your closing fee would be 0.5%, or $17.50. Your interest for a month at 5.65% would be less than $20. There is no pre-payment penalty, and your second payment is covered at $300. Just pay back the money they lent you after two months, and you’d be looking at over $250 in profit. You don’t need to risk any capital, just pay back the money they lend you and keep the profit. Decide quickly! Get your own rate quote at Prosper here.

Investor opportunity. As a result of the math above, there will be a mysterious surge in listings from AA borrowers for $3,500 loans today. If you like, you can invest in these notes today and tomorrow and earn some decent 4-5% interest for at least a couple months. Yes, there is still risk involved but my view is that people with AA credit scores are unlikely to default over only $3,500. I did this last time around, but didn’t have much money in my Prosper account. Sadly, still true this time. Just don’t be surprised if all your loans end up being paid off early!

Lowering your effective interest rate. If you don’t have an AA loan rating, you can use the free payment to lower your effective interest rate, especially if you pay off the loan early. For a $3,500 loan I got an A rating which meant either a 1-year loan at 6.08% or a 3-year loan at 9.99%. Your closing fee is 3.95% for A & B loans, which for a $3,500 loan that’s $138.25. So the free 2nd payment of up to $300 can knock that out completely and you can use the rest of the money to cover most of the first year’s interest.

(I went ahead and also got a free rate quote from LendingClub – their main competitor – but there all loans from $1,000 to $11,975 are only available with a 3-year term. With the loan rebate, I think Prosper would have had been the best 1-year rate anyway. However, my rate for the 3-year loan was only 6.78% APR (their highest A1 grade), which is much less than the Prosper APR. So it can pay to shop around.)

Bonus credit score. After getting the free rate quote, I was actually sent my credit score of 776 based on my Experian credit report. Prosper uses the Experian ScoreX Plus credit score, which has a range of 300 to 900. FICO range is 300 to 850. I assume this is due to new consumer laws that require them to send me my score if I’m not given the absolute best rate available. Not a bad side perk.

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  1. You should post the senerio of paying loan off after 2nd payment is paid by prosper resulting in less interest and likely profit

  2. I don’t think this is worth it for me. In my case they want to charge more than 30% APR, despite my 778 score (I have low income), and a finance charge of 117 on 2600, which is 4.5%, and then interest on 1st month is about 60. So here 180 gone. From 250 pmt is 2nd month 50 go towoards interest, and I am left with a mere 20 bucks! (If I payoff)

    For the OP case, he pays almost 90 in origination and then 25 in interest first month, than 25 from 250 pmt go towords interest, so he is left with a little over 100. (With full payoff) Which may be worth it.

  3. I’m just curious if your paperwork states the range of 300 to 900 for Experian or if that’s something you verified elsewhere or knew previously. Could they have changed their range recently? I applied for the $100 back on the Bank of America 3-2-1 Visa card recently and recognized the little box you’ve got there. I double-checked the form they sent me and mine also says Experian was the source, but on the back of the page it clearly states the valid range is 300 to 850.
    So, do you think BoA just used a wrong form or has Experian modified their range?
    Thanks, Scott

  4. In the fine print it says a certain amount of investors have to be involved with funding your loan.

    Nothing said about how many exactly. Whats to stop Prosper from stating after the loan is funded that the “# of investors” was not satisfied to meet the promotion, and do not pay the 2nd payment for you.

    Seems a bit too vague for me.

  5. Correction : Im assuming that fine print just means the offer is not eligible unless enough investors fund the complete amount of the loan.

    I pulled the trigger on this deal for about $75.

    $2770 loan for 1 year @14.99%.
    Origination fee was $82.
    2 months of interest is about $90.
    $250-172 = $78

    I know this is their second round of “free monthly payment”, and did notice that they give better ratings for people with previous prosper loans. So, here is my one prosper loan.

    I tried to get a 7900 3-year loan with a AA rating, which would come to a ~$250 monthly payment, with only a $39 origination fee, but I guess my great credit score wasn’t great enough.

  6. I wish they had some kind of a bonus for investing (does anybody knows if they do?), since I bet most of the listings around $250 will be paid off in two months, and this would’ve been a way to score some money quickly.

  7. You guys are quite savvy at this. I wonder if it would be a good idea to be on the other side of the deal, investing in all these 1-year loans.

    @scott – There are many credit scores that are based on the Experian report, they could have any range at all. A FICO based on your Experian report would have a range of 300-850, the Experian ScoreX Plus based on the same report would have a different range, and other one could have yet another range.

    @Joe C – Yes, I think your loan basically just has to fund.

  8. Also, please note:

    An inquiry will be added to your credit report if your loan gets funded and issued.

    “ said:
    Will identity verification affect my credit score?

    Posting a listing will not affect your credit score if you do not receive a loan. An inquiry – which can affect your credit score – will be posted to your credit report only if your listing is funded and you book a borrower loan. If you post a listing and it is not funded and you do not receive a loan, you will not receive an inquiry on your credit report.”

    (Thanks to ColbyS @ FWF)

  9. Yes, asking for a rate quote does not have an official credit pull, and still nothing if you apply and don’t fund, but if you do fully fund a loan, it will show up on your credit report as a loan with corresponding inquiry.

  10. I’ve never done anything with Prosper, but I also got a letter like this in the mail in the last week with my credit score. I did apply for a creit card with Fifth Third Bank within the last 10 days, so it might be related to that. I was pretty surprised to see my score was 785! (Prior to 6 months ago I had been unemployed for 2.5 years so I was expecting to see that have a greater impact on bringing my score down, so I’m glad to see it didn’t.)

  11. This offer is back and improved! The original October 2011 offer was for $250 and AA loans were not allowed. This new February 2012 offer is for $300 and AA *are* allowed, with their low 0.5% closing fee!

  12. there is no mention of this $300 on their website, is it still valid?

  13. Anyone know how to figure out exactly how much this will cost & profit? I’m only interested in potentially doing it to repay the loan in full after 2 months for the profit, if there is potential for that. When I goto the site and start applying for a $3500 loan this is the info I get:

    $3500 @ 6.09% (13.706% APR) for 1 year
    Total Finance Charges: 255.41
    Prepaid Finance Charge: 138.25
    Amount Financed: 3361.75
    Total of Payments 3617.16

    So I interpret this as:

    I get a loan of $3500, but they take a $138.25 fee immediately up-front, so I really get $3361.75. The typical monthly payment is $301.38. So I may the first monthly payment of $301.38. And they credit $300 towards the second monthly payment – I’d pay $1.38 that month. Then I can re-pay the remainder immediately after the second payment w/o paying any further interest or charges.

    I’m having a hard time figuring out if I would actually profit from this without knowing how much of the $301.38 monthly payment is towards principle versus interest. Can anyone help with how to analyze this? Thanks!

  14. jaybirdhgr says:

    Jonathan, I have same questions as Stephen. Seem like the “prepaid” interest really kills the profit in your example. Have you actually done this before? Did it work out as expected?

    I also noted on their website a $100 referral bonus. If anyone does take advantage of this 1-day promo it appears that would be an additional opportunity for easy $ for one spouse to open an account and take out a loan and then refer the other to do the same.

  15. I am a Texan and they still don’t have option to invest in Prosper due to rules and regulations. I check with them long time ago and they said they are working on it. I found this blog if others are looking for answers.

  16. I got $3500 @ 6.08% (13.70% APR) for 1 year.

    I’m interested in doing this but have the same questions as Stephen. Also would there be any problem if I paid off most (say $2000) of the balance with my first payment? Then let them pay their $300 and then finish it off? That would save a bit of interest.

  17. They quoted me at 24.15% for a 1yr 3500 loan but they sent me my experian score and it was 773. How is that possible?

  18. LargeTalons says:

    Their rating system must be very strict. I have always had excellent credit, and even my experian score they sent me (which I assume is what they are using) is > 800, and yet I’m rated as a ‘C’ class loan? Does your credit score have to be off the charts to qualify as AA? A 5% origination fee! LOL! People take loans out on this site? What a joke.

  19. Odd, Mark, they quoted me 6.08% and sent me a credit score of 735.

  20. Still not available in Texas…. (sad trombone…)

  21. Obviously credit score alone is not the best way of deciding someone’s ability to pay off a loan. I think income has to be a major factor in your interest rate. It’s the same reason why people with great credit scores get denied credit cards if they have little to no income.

  22. The offer can be found on the home page. The “prepaid” finance charge is the same as the closing fee which is 3.95% of the loan amount (3500 x 0.0395 = $138.25).

    The payments are amortized, like mortgage loans are over the length of the loan. Here is how the payments would break down for a 12-month loan for $3,500 at 6.08%:

    Payment Principal Interest EndingPrincipalBalance
    1 $301.36 $283.63 $17.73 $3,216.37
    2 $301.36 $285.06 $16.30 $2,931.31
    3 $301.36 $286.51 $14.85 $2,644.80
    4 $301.36 $287.96 $13.40 $2,356.84
    5 $301.36 $289.42 $11.94 $2,067.42
    6 $301.36 $290.89 $10.47 $1,776.53
    7 $301.36 $292.36 $9.00 $1,484.17
    8 $301.36 $293.84 $7.52 $1,190.33
    9 $301.36 $295.33 $6.03 $895.00
    10 $301.36 $296.83 $4.53 $598.17
    11 $301.36 $298.33 $3.03 $299.84
    12 $301.36 $299.84 $1.52 $0.00

    Amortization calculator:

    So the fees would be $138.25 + $17.73 in interest. Your 2nd month’s principal and interest is covered for $300. Total profit is around $128 for this example, if paid off after 2nd month.

  23. Some additional factors: The “reason for loan” may affect your loan rate. I always just choose debt consolidation. Your income as well as employment data (length, self-employed vs. not, etc.) may also affect loan rate, although that is unverified so I’m not sure. After looking at my credit score again, it looks like you need 817+ score on their scale. They may have made the AA loan rate just too hard to get, I got it a couple years ago but haven’t qualified the last two times I tried either.

    By investing in a loan, I mean being an investor in Prosper and actually lending your own money out into notes that are backed by loans to other people.

  24. Just checked, and right now only 3 AA loans that started on 2/17, seems pretty tough to get AA now. I invested the $34 I had sitting in my account in one of them, it really takes too long to transfer in new money when I want to invest.

  25. Howdy Jonathan,
    I did your 0% balance transfer deal in the past, and now I’m on board for this as well. I did qualify for the AA loan rate with 6.59%. I specified the reason for my loan was home improvement, but I do also own my home (ownership status shows up on the loan listing, too). I’ve been employed full-time with my company for 4-5 years. I opened one of those credit card deals in the past few months, that you posted about. I have an 840-850 Experian score. So… dunno how my circumstance is, but the AA rate is not unobtainable.

  26. @Ryan – Thanks for sharing, if you’re the “backyard landscaping project” then I just invested in your loan. I see one other Home Improvement AA loan from Tennessee as well, so maybe that is a better category. I do think you need a credit score 817+ on their scale. Feel free to put down your borrower ID if any readers want to search for it and invest in your loan too.

  27. Jonathan, thanks for the breakdown of the principal/interest info. I got confused because I was trying to compute it based off the amount after the “prepaid finance charge” (3361.75) rather than the original principal amount (3500.00) and I knew things weren’t right, but couldn’t figure out why. So in the case of my loan:

    $3500 @ 6.09% (13.706% APR) for 1 year
    Prepaid Finance Charge: 138.25
    Amount Received: 3361.75
    – first monthly payment: 301.38
    – second monthly payment: 1.38 + 300 bonus from Prosper
    – payback remaining balance before more interest accrues: 2931.31
    = Profit of about $127.68

    So this works out to roughly the same profit potential (for me) as the iPod nano bonus they ran in December 2011 which has a retail value of $129.

  28. My Prosper borrow ID is unequivocal-responsibility9 in case anyone wants to fund my loan. Note, I will be repaying in full after the second month as I describe above, so you’ll only be making interest off me for a couple months. But hey, its still better than the bank would pay you. 🙂

  29. Yes, the A loan isn’t quite as lucrative. But it’s cash as opposed to iPod, and I don’t think it will be reported as interest income like the iPod value.

  30. Well, for the iPod nano promotion from December I actually received $129 cash because they ran out of iPods I guess.

  31. Thanks, Jonathan. Yes, that backyard landscape project listing is mine.

    If anyone else is acting the lender, consider funding my loan — my listing # is 559676 and borrower ID is fwdcypher

    I am also going to pay this off after 2 months. Does it help, as an earlier poster suggested, to pay off the majority of the loan in the first month’s payment? (to reduce the 2nd month’s interest?) Or maybe even pay off all but $300 in the first month’s payment? Or will that annoy Prosper?

  32. I just got approved for AA loan listing #560181 if anyone wants to fund it. I will be paying off after 2 months.

  33. Jonathan: as far as investing in today’s “free-money” loans goes, I didn’t have any money in my account this morning either. But, if you have an active loan on the borrowing side (including, apparently, one that you set up today), Prosper will let you instantly transfer money in for investing. It took me by surprise, but now I’ve invested in several of these new loans.

  34. I also got the A, 6.08% rate.

    ID# 559827. Like everyone else, I’ll be paying it off in two months…

  35. I’m a email subscriber, so I didn’t get this email until 2:30 AM EST, leaving me just a half hour to list my loan online, if I had been up at that hour. I did give it a try today, I got a 14.34% rate with a credit score of 764, my only guess is that it is because I am self-employed.

  36. Listing #560293
    Will be paying it off in 2 months as well.

    Thanks again Jonathan, great site.

  37. Can you tell me if it is necessary to do all the verification like ID and voided check?

  38. Mike, in order to qualify for the $300 bonus your loan listing needs to reach “verification stage 3” which I believe requires that you send them your ID & voided check. I had to do that back in December to qualify for the promotion they were running at that time.

    P.S. My loan is currently only 67% funded. I’ll be paying off in 2 months, if you want to collect a little interest off me for 2 months check out listing #559800 on prosper. Thanks.

  39. I got AA with a score of 808 under “green loans”. My listing is #559787 and it will also be paid in a few months. Thanks for the deal alert!

  40. @Jared – Sorry about that, I don’t have full control over my RSS-to-email system which updates once a day. However, I would encourage you to switch over to Feedburner instead of Feedblitz which I think is what you are on, because I have a better idea of when the Feedburner system is going to pull from my RSS feed (first thing in the morning). Feedburner is my default system now:

  41. Any reason not to have my wife invest in my loan, so as to keep part of the interest “in the family”?

  42. thanks for the heads up on this! i took advantage of the same offer last year but did not make a profit – but basically borrowed money for 4 months no interest. this time though i’ll make some money on this.

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