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Borrowing Money from Social Lending Networks
Posted By jonathanfowler On 04/07/2009 @ 1:06 pm In Debt | 9 Comments
Following up on Jim’s guide to social lending networks , this is my story of doing business with Prosper, which is a lot like Lending Club . Although Prosper is in a quiet period, my experience with them is indicative of the basic social lending process, and should mirror what you’d get at other active social lending sites.
I hired a local landscaper and dirt mover last June to correct a horrible grading job in my back yard. For the basic hardscaping (dirt removal, retaining wall, and grading), he quoted $5,000. Of course, I needed the cash on hand. I looked at my local credit union first, which could go as low as 9%. Then I heard about Prosper on Clark Howard’s show, and checked it out. After registering and verifying the usual stuff, I created my loan page. Within a week, my loan had been funded.
No single lender laid out the entire $5,000. Multiple lenders pitched in anything from $25 to $1,000. My rate started at 11%, but once the loan was fully funded, lenders continued to bid on my loan and drove the rate down to 7.1%. Think of it as an eBay for loans… instead of bidders driving the price up, they drive the rate down.Everybody wins and the whole process only took a few weeks. My rate is almost 2% lower than what my credit union could provide, and lenders are getting an attractive return on their money.
You might observe that I would have been better off with the credit union if the Prosper loan didn’t bid down below 9%. Yes, this was a gamble. I was certain that my loan would be attractive enough for lenders to bid the rate down, though, as I researched comparable loans and borrowers. Folks with my credentials asking for roughly the same amounts of money were doing pretty well. I took a leap of faith, though. Thankfully, it paid off. My $5,000 loan started bidding down immediately after it was funded.
My monthly payments (roughly $155) are deducted from my checking account each month. The loan will be paid off in 2011. Right now, our back yard is over halfway finished. All the unwanted dirt (probably 40 dump truck loads) is gone, I have electrical & plumbing connections on the far end, and the retaining wall is to be built in the next few weeks. The money I’ve saved by financing through Prosper is going to come in handy when it’s time plant grass, trees, and gardens out back.
(Photo: andrewbain )
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 guide to social lending networks: http://www.bargaineering.com/articles/social-lending-network-guide.html
 Lending Club: http://www.bargaineering.com/articles/r/lendingclub.php?tag=prosperBorrow
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 andrewbain: http://www.flickr.com/photos/andrewbain/524195139/sizes/l/
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