Prosper.com

Anyone every done any lending on there before? I’m seeing rates all the time for 20% +.
What do you guys think about the place?

Bryan

Yeah, it seems to be coming along fairly well. I’m not sure if I would lend on there just yet though.

I’ve been a lender on there for about six months, so far no issues and have a nice little portfolio of consumer loans yielding about 15%. Sure you will see loan offers in the 20+% range but if you are going to lend you should diversify your loans, A/B/C/D grade with the associated yield. If you put all your eggs in one basket you end up with very low credit loans at 20% interest rate but who knows what the defaults will be. Prosper provides periodic performance statements and its easy to log on and see your portfolio laid out by credit quality and yield along with performance numbers.

To follow up on this and offer my view of this opinion…

Putting all of your money into higher risk, higher interest rate loans will up your default percentage by probably double digit percentages. This will bring your total yeild after you factor out all of the defaults down to low teens anyway. You might as well start by diversifying your loans to limit your risk, you’ll end up with the same spread anyway as going will all high risk because your defaults will be lower. I’d rather have my money go to someone that is going to pay me back rather than take my money and run.

I don’t use it at all, but I’ve read some bad things recently about performance and defaulting on Prosper. I think you really need to pick your deals carefully, since these are people typically with bad credit crad debt to begin with.

On top of it, when you do find a ‘safe’ investment, they end up paying things off early.

tips I’v heard:
never loan to HR
never loan to unverified accounts
look for verified homeowners

When you say HR do you mean High Risk?