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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?
I know people that have lent money to borrowers on Prosper, and they have had a higher than 50% default rate.
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!
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.
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.
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.
The only difference is that the people who do this for a living are smart enough to understand the basics of actuarial mathematics.
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.
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.
The biggest problem is that there is no consequence to those who borrow and dont make payments.
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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