Forums: Discussions for entrepreneurs and small business.

It would be great to hear if anyone has used Prosper yet in terms of either lending money or borrowing money?

Any insights into this service?

Andrew
http://www.AdvisorGarage.com
http://www.AndrewIve.com

 

-------------------------

Andrew PS - Here's a free report on creating your startup success. Free report

I used the service pretty heavily for about 2 months late last year. I made
about 22 loans in that time. All small and all more or less as the service is
designed.

I find that the model takes a lot of work unless you have set up standing
orders. The quality of the borrowers varies. They have had some fraud
issues but seem to be past that problem. I have not tried to be a
borrower. I am a group leader but with a rather quiet group at this time.

The model is not bad and at the same time I am not sure it will scale.
Zopa is a UK company in the same space but with a different
implementation (they pool funds and not let lenders select which loans to
participate in). Prosper suffers from both lenders and borrowers being
naive to credit and lending.

At this time there really is no lending going on for commercial ventures.
The loan size is capped at a low number. As someone else pointed out
many loans are funded from $50 increments (each lender bidding no
more than $50) so even 20,000 is difficult to fund in such small bites. A
few people will bid larger amounts but we are still talking less than
$5,000.

Thanks John.  I created a group on Prosper and have introduced it to our members but they have been underwhelmed and no one has signed up so far. Perhaps it needs to be around for longer or maybe their business model needs some tweaking...

Andrew
http://www.AdvisorGarage.com
http://www.AndrewIve.com

 

-------------------------

Andrew PS - Here's a free report on creating your startup success. Free report

I currently have 17 loans out and have been making money on Prosper. I like the service and continuously add money to build my portfolio of loans.

JohnCorey mentioned that there is a large number of borrowers which is true but as a lender I find that sometimes there is a lack of borrowers that meet my requirements.



-------------------------

SecurityDistro Arm Your Toolbox

So what are your requirements?  Are they requirements that would not give people with bad credit ratings a chance?  I`m thinking about trying to get a loan, but my credit isn`t up to par.

This is the problem on Prosper. Too many naive borrowers and lenders
who think Prosper is about giving people a chance to prove something
that has not happened in the past.

Borrowers need to be realistic. Some are truly turn around stories. Others
feel they need help and that if stuff happens they can take a pass on
paying their debts (hence the bad credit).

The deals that seem to attract the most interest from lenders are the
deals that are professional, up front about any negatives in the past and
are firmly grounded in reality.

Very similar to a business plan where you want people to invest in your
venture. If the plan is really well thought out, the risks identified and
addressed then investors might be interested in the upside.

If anyone wants to borrow on Prosper look at loans that have been funded
which match your likely credit score. Then you can see what is working.
You will also notice how to present the information as there is a de-facto
standard.

The advice on SuN could be helpful in creating a pitch on Prosper. You are
limited to what you can fit into 4000 words there so think of it as an
elevator pitch for an investor (why should the investor be interested and
how will the investor make money). Try to avoid the `life is cruel` pitches
as they will only attract a certain type of lender. Lenders with serious cash
want to know they will get paid and make a profit.

    On Prosper everyone has their own approach. Some people want to assist high risk borrowers and some want ask close to perfect credit as they can get. My requirements fit a profile that I believe minimizes risk but still allows a decent return.
    I ran some calculations and determined that if you are not loaning money above 9% then you might as well put it in a free premium interest checking account. Since the high interest checking doesn`t have any risk and Prosper does you have to add in for the risk in which I added 4%. This means that if a loan goes under 13% I don`t bid on it.
    The next part is credit grade, Prosper gives AA through E and then HR for High Risk and NC for No Credit. I lend anywhere from AA to C at 13% and D at 14%. After D the risk becomes to high and I don`t want to lend.
    Both of these sections are easy to lend to but I go a few steps further and tack on a few more things. Like they cannot have any current delinquencies, no more than 3 in the past 7 years, must be a home owner, etc..
    Then I look at the overall profile and decide from there. This is just my strategy, everyone has their own goals. People get funded every day with a wide range of credit grades and situations. As for giving people a chance with bad credit ratings, it depends what you call bad.


-------------------------

SecurityDistro Arm Your Toolbox