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:iamwithstupid:There's a good reason banks and other professional lending institutions won't loan these people money at any interest rate.
So why on earth would you?
When you loan money on Prosper, you have pretty much the same information about the borrower that a bank would have. The only difference is what you do with the information.I know people that have lent money to borrowers on Prosper, and they have had a higher than 50% default rate.
The issue I think Prosper will have is long term viability and unfortunately I don't have a solution because the challenge lies in human behavior.MJ --
Would love to get your feedback on what specific details Prosper hasn't gotten right, and what suggestions you'd have for improvement.
I have a bunch of friends there, and I'm sure they'd love the feedback!
IMO, over the long-haul, Prosper will have a difficult time keeping lenders as defaults will start poisoning their lender well. What is your total return on loans? 1 default of 12 still should yield a decent ROI ... do you have that info?I have done a total of 12 loans on prosper. Only had 1 default everything else is current and paying on time. Ironically my default came from a c grade borrower and I have over half my prosper portfolio lent out to HR or d borrowers. The biggest complaint from lenders is prosper's collections. They boast that if a borrower defaults they go to collections but as of this point their collections process has had very little if any recovery. Many of the largest lenders have stopped bidding on new loans and others have started withdrawing funds rather than reinvesting. I was a big proponent of prosper a while ago on the RD forum but I am considering just withdrawing and putting my money towards another something else. I still think it is a great idea but like MJ says, it has been executed poorly up to this point.
I find it very weird that people have this perception of Prosper. There are plenty of commercial institutions that have the exact same business model as a lender on Prosper. Banks, mortgage lenders, and any other commercial business that makes loans is doing the same thing as a lender on Prosper.For me personally, I would NEVER risk 100% of my money for a 14-20% unsecured, uncontrolled return unless a portion of the principle was guaranteed.
Are you sure you want to use the word "exact"? It isn't exact. When Average-Joe-Depositor deposits his money in a bank, he isn't impacted when his money is recirculated by the bank to a defaulted borrower. The models are hardly exact unless you take the position that you are starting a bank and using Prosper as your lead pool.There are plenty of commercial institutions that have the exact same business model as a lender on Prosper. Banks, mortgage lenders, and any other commercial business that makes loans is doing the same thing as a lender on Prosper.
I understand actuarial mathematics ... in fact, I was studying to be one until I opted for finance degree instead. I never stated that the model wouldn't work or wouldn't be profitable -- however, I did state a long-term challenge -- if their lender pool dries up (due to defaults and disgruntled lenders), they will be in trouble. Did you even read what I wrote? Or are you just looking to counter-argue anything I post while dropping-in a back-end insult?The only difference is that the people who do this for a living are smart enough to understand the basics of actuarial mathematics.
Actually, it isn't unfounded. I did assume that they immediately defaulted. Second, having been in a business that did extensive collections, I understand that the return of capital on accounts that go to collection is virtually non-existent.The other statement -- that if you make 6 loans for $100 and one borrower defaults, that you make a total negative return -- is unfounded as well.
With all due respect J, I understand completely. Time is money. I don't have time to go trolling on Prosper.com trying to earn 10% returns on my money. If someone wants to spend hours of their time doing due diligence on random people that they'll never meet for a 10% return, unsecured, have at it.It just really confuses how otherwise smart people don't understand the risk/reward relationship when it comes to this business model.
Okay, I was needlessly argumentative with a couple posts in this thread...apologies for that... And certainly didn't mean any insult...again, I'm sorry...With all due respect J, I understand completely. Time is money. I don't have time to go trolling on Prosper.com trying to earn 10% returns on my money. If someone wants to spend hours of their time doing due diligence on random people that they'll never meet for a 10% return, unsecured, have at it.
Just like traditional lending, those that don't make payments will see their credit score drop. For many people (the type that I would lend to on Prosper), this would be considered a serious consequence, and would likely keep them from defaulting.The biggest problem is that there is no consequence to those who borrow and dont make payments.
Great question, and one that seems to have been lost in the discussion. Any responses to this?As a borrower it seems like a great way to get a small loan with a very small interest rate and no added fees. Has anyone been a borrower on Prosper, what was your experience?
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