Prosper (for Lenders)
Jackie Gay rates this 3/5
Average User Rating
No users have rated this product
Prosper For Lenders Investors Review From: Prosper.com

Pros
Cutting out the 'middle man' (banks, the stock market) and manage your investments directly with borrowers

Cons
Lack of action over defaulting borrowers, inflexible terms

Verdict
Small returns for early adopters, interesting idea though, worth watching

Will Your Investments "Prosper" with Prosper?

With widespread scandal and disillusion surrounding banking and the banking system, it is no surprise that other forms of lending and borrowing are appearing. The majority of these are internet based, peer to peer (P2P) systems which (as Prosper say) ‘connect people who want to invest money with people who want to borrow’. Prosper ‘cut out the middle man… so that everyone prospers’ and claim that investors get better returns and borrowers get better rates.

It is perhaps unfortunate that Prosper was launched in 2006 prior to the current banking crisis and decline in the economy. Prosper’s loans are fixed for a duration of three years and complaints of poor returns from early adopters have been countered with the assertion that it’s not bad considering ‘the context of the largest recession in generations.’

However many people see peer-to-peer lending as a fresh, alternative way to invest funds, particularly those disillusioned with the stock market who want to ‘invest on their own terms’ to ‘individuals with faces and stories.’

It works like this: once a lender is approved (which can take a few days), they then make bids on available loans, in a process similar to an eBay auction. If there is a lot of interest, then (of course) there will be many lenders bidding, and the idea is for the borrower to get funding at the lowest interest rate possible.

The biggest risk is that borrowers default on the loan. Lenders minimize this risk by spreading out their loans across many borrowers and by checking credit ratings, which are provided in some detail. However it should be emphasized that there is a risk, and this is by no means a ‘get rich quick’ enterprise. It perhaps should be viewed in terms of microcredit, a growing and potentially important concept that is best viewed as a cross between an investment and a charitable contribution. 

To some this makes Prosper more interesting, an ‘opportunity to reduce poverty in our own back yards’, but to others this is a problem: with borrowers asking for money for cars, vacations or even paying off credit card bills (transferring debt around) rather than the microcredit model which is generally for financing (very) small businesses.

So will your investments with Prosper enable you to prosper? Not on current figures. Experienced lenders report funding high-risk loans and then rolling the return and interest into safer loans. This requires a certain type of nerve reminiscent of the stock market. It may be fun, though. Prosper provides great detail on borrowers’ financials situation and this reveals useful information on interest rates and their relationship to debt and income. Amateur investors love this stuff. 

On the downside Prosper have been accused of paying insufficient attention to defaulting borrowers, and the terms of the loans are undoubtedly inflexible. People with an inclination toward ‘social’ loans maybe better off investigating one of the microlenders, which, interestingly, report very high repayment rates (98.4%), and can genuinely claim to alleviate poverty by loaning money to small scale third-world entrepreneurs.  But only you can truly find out how Prosper will work for you.

Date Reviewed: September 29, 2011, 6:33 pm
Reviewed by Jackie Gay
Did you find Jackieg's review helpful?
Interaction Tools:
Vote 1
Share
User Ratings
There are no member ratings/reviews for this krit be the first!
Add your own rating for: Prosper (for Lenders)
Rate this product
Minimum rating is 1
Slide rating bar to select rating

Must be logged in to leave a rating.

Publish Your Own Reviews - Just Like This One...
We are currently accepting new contributors for Ukritic.com!

• Add your own reviews to Ukritic.com for FREE
• Get published & receive global exposure
• Help others make the best purchase decision
• Earn a passive income from your review pages!

Leave a Comment
Legal Info
Reviewer has: Researched Only
Reviewer has not owned or tested this product, all information contained in this review is based of research the feedback of others that may or may not have owned the product.

Compensation Disclosure: Commission On Sale
Compensation for purchases made through links clicked in this review may result in the reviewer and/or Ukritic.com being compensated for any referred sales or actions.

Additional Disclaimer:
The content on this page IS NOT to be considered any kind of professional advice. For all intents and purposes, this content is to be treated as "entertainment only". Please do your own due diligence and consult with a licensed professional before making any decisions in connection to this content.
Copy the code below to embed this Krit summary in your website or blog.
Back to Top ▲