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Prosper Changes In Rate Caps |
ITBInvestor
84 Posts
Member Since: 09/07/2005
Holly Springs, NC
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Posted: 12:08 on 05-09-2008
I have been a prosper lender for a few years now, and wanted to pass along this message to anyone who may be interested.
Great News:
Prosper recently partnered with WebBank* to expand the availability of Prosper loans. State specific rate caps have been replaced with a national cap rate of 36%.
Prosper has experienced a surge of new, good quality borrower loan listings, many with starting interest rates much higher than before the national rate cap change.
Essentially www.prosper.com allows a lender to "pool" funds to make microloans to individual borrowers who "tell their story" to www.prosper.com subscribers. You can set up methods for automatically making bids, etc., or you can loan directly. It is worth checking out... for lenders or borrowers. The biggest limitation is that the borrowing cap (maximum) is $25,000.
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joel
1628 Posts
Member Since: 02/15/2002
Jamestown, NC
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Posted: 13:35 on 05-09-2008
What have your returns been?
I have been wanting to diversify with my Mothers IRA money a little more with this.
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ITBInvestor
84 Posts
Member Since: 09/07/2005
Holly Springs, NC
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Posted: 08:32 on 05-10-2008
On my currently active loans, my average interest rate (weighted average interest rate on principal outstanding) is 14.18%. My historic rate of return is I think about 8.5%, mostly because I was lending to AA credit (lower %) and partly because after loans were paid, I left funds in cash instead of actively reinvesting.
To date, I have had no "defaults" from borrowers, but that is about to change since I have a loan 4 months behind that is going to collections. Unfortunately, I hit the 1% of loans in this category that are non-performing... mine has an 'A' credit grade, Homeowner, 16% debt to income ratio. So my overall return may be lower than the percentages identified above....
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loon
1012 Posts
Member Since: 03/27/2003
Duluth, MN
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Posted: 10:07 on 05-11-2008
Thank you for sharing this. Like many, I've wondered how Prosper works REALLY, and how in the heck it makes sense to lend to strangers. It sounds a little like landlording, most tenants are OK, but the few that aren't take up all your time and drive you nuts. When a loan goes to collections, is that up to you to take care of, or does Prosper help take care of that? Overall, would you say it's been worth it, even compared to other uses and opportunity costs for your cash?
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ITBInvestor
84 Posts
Member Since: 09/07/2005
Holly Springs, NC
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Posted: 14:03 on 05-11-2008
I started out picking individual borrowers, but migrated to a portfolio approach. I found myself spending lots of time... too much time... finding borrowers. Even though I liked the "hunt", I decided to make a larger number of small loans using their automated portfolio feature. I set up the parameters, and they automatically put in bids.
The collections part is the responsibility of Prosper. I get to choose the collection firm from their list, but it is against the rules for me to make direct contact with the borrower.
Worth it? I would say yes because I joined as a lender to help people who otherwise had little chance of borrowing from a traditional source, especially people with relatively modest borrowing needs who could/would get a big boost with (collectively) peer-to-peer lenders. Prosper is good for this kind of lending.
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das1997
27 Posts
Member Since: 11/11/2006
Brewerton, NY
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Posted: 18:37 on 05-11-2008
i have been playing with prosper. I only have 12 loans over the last two year and my average is 24% but I have lent to c and lower to help them out. Knock on wood everyone paying. 
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