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My Prosper experience

Over the past few months, I’ve been putting aside some money and sending it off to, a site that has been described as the “eBay of loans”. Essentially it is big kahuna of the growing peer-to-peer lending movement. Essentially, I am loaning money out to people who “need” it.

I know, the words “money” and “Internet” always sound suspicious when found in the same sentence, but Propser seems to be on the up-and-up from my limited experience. Basically someone posts that they need X amount of money @ Y% interest, and people bid with the lowest interest rate they are willing to pay. So if enough people are interested, and the loan reaches 100% met, the interest rate starts going down until the listing ends. So I might bid $50 at a 12% interest rate, but a bunch of people bid 11%, and my 12% bid is outbid. The interest rate is largely driven by the credit rating of the person asking for the loan. So someone who has a credit rating of D or E is likely to not get what they are asking for, and if they do, it might be at like 25% interest, because the lender is taking a lot of risk. Meanwhile, someone with an A or AA credit score, will often get an interest rate under 10%, since they are less of a risk.

The minimum bid on a loan if $50, so I’ve slowly been sending over money and picking up $50 loans. Currently I have 8 loans, each right around $50. Of those, 2 are to borrowers with a AA credit rating, 5 with an A, and 1 with a B. The average interest rate on my loans is 13.21%, which is a lot better than the less than 3% my money market account is paying right now. Obviously there is more risk involved, hence the premium, but I’d like to think that as long as I stick to loans with good credit scores, and spreading my money out across many loans, that I’ll be pretty safe and come out ahead of where I’d be with just leaving all of my money in a money market account, even if a loan goes bad every now and then.

Business & Personal Loans. Great Rates. Prosper.


One response to “My Prosper experience

  1. TraciJ June 26, 2008 at 11:44 pm

    Hi Brad,I live in the SF Bay area (grew up in Parma, OH) and came across your blog because I follow a bunch of Cleveland type blogs (I’m a foodie) and noticed your entry on Prosper.SMALL WORLD – I was one of the first employees at Prosper. I was the assistant to Chris Larsen, the Founder & CEO. I also worked with Chris at E-LOAN prior to that. The commute was too far for me, so I ended up landing an Ops Manager position back at E-LOAN (10 minutes fromm home). Sounds like you have had a good experience thus far. Chris is a master-mind and all around great guy and there are a lot of great people working there.I hope Prosper is good to you from an investing standpoing – It’s a really cool concept, with an exceptional technology team behind it all.Just thought I would say hello – take care!Good Luck!TJ

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