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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.
 

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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.
 

JScott

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Just like any other investment, you need to manage risk. If you loan to high-risk borrowers, you're likely going to get burned. If you loan to low-risk borrowers, you're more likely to not get burned.

Unfortunately, too many people are looking for a no-risk, high-return investment, and they just don't exist...on Prosper or anywhere else...

Personally, I've had a bunch of money in Prosper for nearly two years now, and I've *never* had a borrower miss a payment.
 

Z5 FILMS

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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?
 

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.
 

JScott

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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!
 

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.
 

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JScott

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

Banks are smart enough not to invest in high-risk borrowers; the people you know obviously aren't. Again, if you expect to find a high-yield, no-risk investment, you're going to be disappointed.

And again, I'm guessing I have more money loaned on Prosper than most people (across dozens of borrowers), and have never had a single borrower miss a payment.

People shouldn't blame technology on their own bad decisions.
 

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.
 

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.
 

JScott

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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.
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.

The only difference is that the people who do this for a living are smart enough to understand the basics of actuarial mathematics. Too many of the people who loan on Prosper don't understand the risks and mitigations associated with lending money; they think that lending money to D class borrowers is no different than lending money to A class borrowers (except that they think D class loans generate more in return).

This is ridiculous. If you make loans only to A class borrowers on Prosper, the default rate is less than 2%. This is completely consistent with A class borrowers who borrow from commercial institutions. In other words, someone who loans to an A class borrower on Prosper is taking no more risk than a bank who makes the same loan to the same lender.

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. First of all, you assume that the borrower defaults before ever making a single payment. Second, you assume there is a 0% success rate for collections. Neither of those is true in practice.

I'm not trying to defend Prosper any more than I would defend a bank as a lender. It just really confuses how otherwise smart people don't understand the risk/reward relationship when it comes to this business model.

If you loan to low-risk borrowers on Prosper, you'll face a low risk of default. If you loan to high-risk borrowers on Prosper, you'll face a high-risk of losing money. Just like any other lending institution faces...

By the way, I have done a lot of investing on Prosper, and have been very happy with it. My biggest complaint (and the reason why I don't plan to use it in the future) is that I can generally get better returns elsewhere. For those people who can't get better than 10-11% elsewhere, I think Prosper is a low-risk opportunity for them.

That said, I have consistently earned over 10% on my money for nearly two years on Prosper. Am I just lucky? Are other people just unlucky? I don't think so, but if you're not convinced, I'm guessing there's nothing more I can say...some people always assume those that are making money are just lucky... :)
 

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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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.
 

JScott

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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.
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... :blush:

My big concern is that it's easy to convince people of things using very broad generalizations that aren't necessarily accurate.

And when I read people saying things like "you'll get ripped off if you use Prosper," and "all the borrowers are fraudulent" (not direct quotes, just my interpretation), it's like reading people who these days say things like "you can't make money in real estate anymore," or "the Internet money is drying up." Certainly there is some truth to all these things, but people who understand these markets well realize that the broad generalizations don't mean much.

I absolutely agree with you that the 10% ROI is not worth the time/effort it takes (I even said that in my last post), but to some people 10% ROI is not bad, and it's certainly possible to make that (with relatively very low risk) on Prosper.

I have no vested interest in Prosper whatsoever; but I do like the type of democratization that Prosper (and other sites like it) bring to the Internet, and think that there is tremendous value in Prosper for those who use it wisely (both lenders and borrowers).

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

JScott

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The biggest problem is that there is no consequence to those who borrow and dont make payments.
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.

Of course, there are plenty of people who don't care about their credit score, but those people are the C- and D-class borrowers on Prosper that I would recommend staying away from at all costs.
 

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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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