Comments on: Borrow Money With Prosper & Lending Club

By: Stefanos

Stefanos — Mon, 15 Feb 2010 16:22:03 +0000

It seems more logical to be prudent, set up a disciplined spending and savings program. By budgeting for a known fixed expense over each pay period and putting these funds into an expense only fund, it will allow funds to generate an internal loan within the non spending funds so to “pay Peter from Paul’ and then repay Paul internally. All it takes is a 49cent spiral bound notebook, a pencil and calculator.

These internal non-consumable funds may generate a few dollars in interest. By robbing Peter to Paul you essentially keep your debt internal and save the interest expense you pay to an external source.

These funds come straight off the top and are out of sight for regular spending except for the known fixed expense. The allocation of these internal deductions should be reviewed once a year to bring known yearly fixed expense into balance with the prorated amount deducted from take home cash.

By: Soccer9040

Soccer9040 — Wed, 06 Jan 2010 14:52:34 +0000

I have a prosper loan and it never showed up on my credit report. Not sure why, but it will not be 1 credit request per borrower. At most it will be prosper running your credit once and displaying it to the crowd to see if they want to lend to you.

By: linda

linda — Wed, 06 Jan 2010 07:29:40 +0000

my concern…hoping I can get assistance here…is that when I apply for a loan with Lending club or prosper it will run my credit through a lot of different people which makes it look like I applied for a lot of loans. Example…I went to bankrate.com once for the best interest rate on a car loan and a year later found out that about 250 banks looked at my credit report which made it look like I had applied for credit 250 times. It killed my good credit score. Does this happen with these types of loans. I asked lending club but just got rerouted to their website in the reply..can anyone help me answer this question?

By: Janie Johns

Janie Johns — Sun, 27 Dec 2009 18:35:42 +0000

Another option for peer to peer lending is 40billion.com. Small businesses and startup entrepreneurs raise money through personal connections online (a.k.a person to person, peer to peer, social lending). This elevates access to funding, increases transparency, reduces costs, and lowers risk.
Entrepreneurs connect with their social networks (friends, family, friends of family, community members, colleagues, alumni and others) to raise up to $99,000 in funding by requesting loans and gift contributions. Funders can get product discounts and freebies, as well as the ability to track how the funding is spent.
Visit http://www.40billion.com for more info about people funding businesses.

By: eric

eric — Fri, 25 Dec 2009 22:33:13 +0000

It’s definitely a great alternative, especially with the guarantee of a fixed rate so that you know exactly how much and for how long you’re paying the loan back.

By: kitty

kitty — Fri, 25 Dec 2009 02:24:52 +0000

I was considering it, but this seems too risky for me. At the default rate mentioned above, I don’t really see the advantage on lending on Prosper to buying junk bonds (and I don’t do the latter). I read that at present junk bonds default rate is 10%, and the yields on junk bonds seem much better than on Prosper. At the height of credit crisis last year, the feared default rate on junk bonds was around 20%, and the yields were incredibly high.

This is what turned me off Prosper initially. At the height of credit crisis, I got 8.9% yield on investment grade bonds — this is what I got in November 2008 on Goldman Sachs bond. At the time, lending to Goldman Sachs seemed a whole lot less risky than to people I don’t know.

Now these yields are gone. so I started thinking about peer-to-peer, but it is way too risky.

By: lara

lara — Thu, 24 Dec 2009 14:34:24 +0000

I’m a lender in both. Prosper seems to have higher default rates, but more options to lend to (more loans). I’m barely breaking even there. At Lending Club, i’m making 7.4% after a couple of defaults, but the loans seem to be holding up better there, with collection updates when loans go late.

By: Chris

Chris — Wed, 23 Dec 2009 22:37:50 +0000

Ouch, makes me nervous about getting involved with them.

By: Foo Finance

Foo Finance — Wed, 23 Dec 2009 15:20:01 +0000

@ Mark – You can be a borrower and lender at the same time. I was both at one point. This is actually a good thing as a potential lender as they are lending their money too and know what a default would feel like and therefore not default themselves!

It is true and common practice that those with good credit borrow and lend out at a higher right. I did exactly that but paid off early. Also, that is exactly what banks do! You put money in savings at 1.3% (you are lending to the bank, essentially) and they lend out mortgages (and other loans) at 5-6% or higher. They make money on the spread.

The main difference is that you get FDIC insurance on your money (therefore no risk) and with Prosper you are taking the risk. For some it is worth it and for others it is not.

@ S_S and NewPerspective: I agree that the default rates CAN be high. My theory is that 70% of investing in Prosper is doing your homework and 30% is luck, economy, and other uncontrollable factors out there. I would not recommend it as a primary investment vehicle. It is ok to invest a little money as a hobby or experiment but don’t expect to get rich at it.

The bottom line is that all the statistics in the world cannot account for real life. People die, get divorced, get ill, economies go bad, disasters, etc. We call this risk. It cannot be easily measured or accounted for. Know the risks before you lend.

I am sorry you had high default rates. I am not saying you did not do your homework. Just adding that part of it is luck and that is not always on our side. I have 4 defaults too and I did my homework. It is part of the game!

Best of luck to all!

- Foo

PS: If you check my blog I post monthly Prosper reports on my returns and stats around the 15th of each month.

By: NewPerspective

NewPerspective — Wed, 23 Dec 2009 14:34:33 +0000

For what it’s worth… I’m 2 years into most of my loans on Prosper and I have a current default rate of 28.4%. I’m slowly pulling my money out and never loaning again.

By: BrianC

BrianC — Wed, 23 Dec 2009 13:51:01 +0000

Of course. But I’ve been looking for a new card recently and there are still some 0% offers out there (though rare)–even some with a capped balance transfer fee.

By: Safeway_Sage

Safeway_Sage — Wed, 23 Dec 2009 12:37:51 +0000

I am on the other side of the coin. I have made a few investments in these websites and have subsequently learned that the default rate on these loans is higher than I would like.

I think the rates are higher because the website owners didn’t have their algorithms set to deal with professional fraudsters. One blog I read actually has the default rate for Prosper at a whopping 44% of loans.

So, the take away is this… If these sites do survive, expect the qualification process to be more stringent than it currently is. So, maybe it might require a little more documentation or a longer wait.

S_S

By: Mark

Mark — Wed, 23 Dec 2009 11:28:49 +0000

Please tell me that you cannot be a borrower and a lender at the same time?
I can totally see a novice with a decent credit rating borrowing at a lower rate and then lending it out at a higher rate. The get to keep the spread.

By: aua868s

aua868s — Wed, 23 Dec 2009 04:25:09 +0000

unless Lending Club offers in service in Oregon, I have to stick with Prosper for P2P lending.

By: Moey1121

Moey1121 — Wed, 23 Dec 2009 03:41:23 +0000

They both report to all 3 agencies. All of the potential borrows info shows up when you view it as a lender. It helps decide who to lend to.