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What do you guys think of this web site?

hakrjak

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http://www.prosper.com/

Looks like some people are taking some good risks, but getting good returns on letting personal loans. Very interesting new way to invest in "paper assets"?

- Hakrjak
 

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kurtyordy

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started with $250 to test it out. 2 safe loans, and 3 risky. Both safe are in collections. Looks like at the end I may break even. Oh well, you have to throw a lot against the wall before you discover what sticks.
 
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Bilgefisher

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Did I mention I really like this forum. I had no idea this sort of thing existed. Interesting find.
 

biophase

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Based on the number of investor blogger's reports on Prosper, I'd stay away from it.

Now if you were an evil person, Prosper is a real easy way to raise some cash quick and not pay it back!
 

Bilgefisher

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Ive spent the afternoon reading up on prosper. Some interesting information. It seems prosper has pretty poor customer service, they are slow to remove scams, some web outages. From what I gather the site has improved drastically from its beginning, but they are still suffering from growing pains. http://www.wiseclerk.com/ has a dedicated independent site about prosper. It has mixed reviews.

There is a British company named Zopa that is in the process of building a US site. They have been doing this for a year longer then prosper and their reviews are generally ok.
 

Yankees338

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I've also heard pretty poor things about Prosper. However, that was a little while ago, so things could have changed.

Definitely a cool concept though.
 

MJ DeMarco

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As with many great *ideas*, the devil is in the details -- the execution plan. Looks like Prosper hasn't quite figured things out. I have a long laundry list of great ideas -- the problem comes after the idea -- how to execute and administrate the idea so it works as you envisioned, and is NOT overrun by scammers and crooks. If 20% of your customer base is disgruntled, you haven't figured it out. I hope they do because I like the idea.

Many ideas I like ... its the execution that needs to uphold scrutiny.
 

Peter2

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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?
:iamwithstupid:

I know people that have lent money to borrowers on Prosper, and they have had a higher than 50% default rate.
 

Bilgefisher

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I think prosper has a lot of potential. I am kinda of curious though. With a hard money loan, a borrower would be a charged a fee for that loan. Say 1.5 points. I don't see that here. Seems to be a disadvantage to a lender in that respect. Am I missing anything here?

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?
 

camski

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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.
 

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MJ DeMarco

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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!

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.

Human behavior is to oversell themself. Go to Match.com and look at all the profiles. Everyone is an ex-model, in great shape, and hikes in their spare time. All the women have body types that are slim, fit, average, or curvy. People post their best pictures.

Hit Ebay -- everyone's product is "barely used" or "perfect condition".

If you look at Prosper's descriptions, everyone oversells their situation and most likely, undersells their expenses.

Second, borrowing money is a VERY PERSONAL thing.

When you borrow someone money and they fail to pay you back, what happens to the relationship? It dies. You don't talk to that person anymore and you expel them from your life. You label them a loser, low-life, and a whatever else befits a deadbeat. When Prosper lenders start experiencing defaults, I believe they will stop using it. Prosper will share the deadbeat blame, in addition, to the borrower they referred. This poses a long term challenge as the word spreads of defaults and lenders dry up.

There is a saying I once heard ... "If you want someone out of your life, borrow them money". At the heart of that is when someone of questionable character owes you money, they are guaranteed to disappear.

1 defaulted loan can kill 6 good loans. For example, assuming $100 loans at a ROI of 16%.

Loan 1: $100 $16
Loan 2: $100 $16
Loan 3: $100 $16
Loan 4: $100 $16
Loan 5: $100 $16
Loan 6: $100 DEFAULTS

In this case, $80 is earned in interest but the borrower loses $100 on the defaulted loan yielding a negative ROI.

So to answer your question, I don't have any suggestions because human behavior is difficult to engineer. As a borrower, it would be nice to have a portion of the principle guaranteed ... but I doubt that will happen as it will destroy their margins.


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.

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?

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.

From a borrower's perspective, I think the site is great. From a lender's perspective, its too risky for me and I'm not willing to conduct the diligence on the borrowers when my time is better suited elsewhere.

Prosper will be a great site to watch in the future to see how it grows and addresses these challenges.
 

MJ DeMarco

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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.

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.

The only difference is that the people who do this for a living are smart enough to understand the basics of actuarial mathematics.

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?

Prosper has TWO customer groups to satisfy - lenders and borrowers. For it to survive long-term, it needs to provide value to BOTH entities AND keep both happy. I see the lender side (PEOPLE with feelings, emotions, and families) being a long-term issue. When Average-Joe makes a deposit at the local bank, he knows its safe -- even though the bank turns around and loans out the money at a higher rate. If that loan defaults, Joe Depositor doesn't feel it in his pocketbook, nor in his emotions.

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.

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.

It just really confuses how otherwise smart people don't understand the risk/reward relationship when it comes to this business model.

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.
 

Rawr

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Hey guys, you are making the kids cry, can we chill a little? :)

Does anyone have experience lending large amounts of money on Prosper?

I just don't know if I trust someone with 15k of my money nevermind 100k without having something instantly gettable as collateral.

For small loans - why bother with this? Is the headache worth the extra x%?
 

camski

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Jul 24, 2007
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I have averaged over 20% on my prosper portfolio and like I said earlier only 1 default and that was a "c" borrower. The biggest problem is that there is no consequence to those who borrow and dont make payments. There is no attempt by anyone in prosper to recover the funds and because of that the overall number of lenders is way down.That combined with prosper's total blowoff of some very big lenders. They have also deleted a lot of negative opinions on their forums which was a big red flag for me. Of course there are plenty of borrowers but the lack of lenders (because of prospers inadequacies) will ultimately be their downfall. As a borrower it can be great, I have seen those with good credit scores get very low rates. But as a lender I would discourage you from using them.
 

MJ DeMarco

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And again, sorry for the tone of the last message...

Apology accepted ... I think your opinion/insight/experience is highly regarded by everyone here, including myself. :tiphat:
 

PWog

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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?

Great question, and one that seems to have been lost in the discussion. Any responses to this?
 

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