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Prosper People-to-People Lending Marketplace

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I’ve seen a bunch of personal finance bloggers talk about Prosper lately and honestly I don’t see the sense in it. For those who aren’t familiar with it, it’s a place where you can loan money to other people and earn, in some cases, a hefty interest rate on it. Everyone seems to be approaching cautiously, with good reason since your money is not protected in any way, because the business model hasn’t been proven in the States yet (Zopa, something similar, exists in the UK) and most people don’t like the idea of lending real cash to complete strangers.

Handling Defaults:

For privacy reasons, we do not disclose the identity or contact information (like an email or telephone number) of members on the site for any reason. If you would like to contact the borrower yourself, you can go to that borrower’s member page, and click “Contact member.” Your message will be sent to the individual anonymously through the Prosper messaging system.

You can’t get into contact with the person you are lending to for “privacy reasons.” So when the borrower misses a monthly payment:

Once the loan is one month past due, it is turned over to a collection agency to pursue collection from the borrower. If the collection agency cannot collect payment from the borrower after a reasonable period of time (within 3 months), the loan will be considered uncollectable, and written off as a loss.

It’s written off in three months and then sold at auction, where you will receive the proceeds. “Because the debt is already fairly old by the time it reaches the debt buyer, you should not expect to receive much of your original investment in return for the outstanding debt.”

If you have very weak credit score, it wouldn’t be unreasonable for you to get a high risk loan, avoid the collection agency for a mere 3 months, then get your friend to bid on the loan and clear it – all for less than the auction price. That’s what I’d do if I was a scammer and wanted to rip people off.

Borrower Statistics:
Now add that with the experiences of Savvy Saver and you’re left with an empty feeling plus an empty wallet. Through very savvy 0% balance transfer offers, she has $40,000 of credit card debt and still receives a grade of A (second best!) by Prosper! Since credit grades and debt to income ratios are basically the two fundamental pieces of information about a Prosper borrower, you’ve just lost credibility in half of the equation. If you read further in her post, she notes that you can enter any income you want thus making the debt to income ratio metric an entirely useless one.

No real protection for lenders + Borrower stats weaker than eBay’s feedback system = I’m keeping my money in my mattress.

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29 Responses to “Prosper People-to-People Lending Marketplace”

  1. adam says:

    I was wanting to join Prosper. My credit rating is low because of the lack of credit history as well as i have been late a few times on my truck. I make good money as a elevator constructor in Vegas. 3rd generation. I have been helping my GF since she was laid off. So savings has dwindled down and now I am only able to make it by a hair. I had taken out payday loans and now the interest is killing me. GF will begin work in the middle of Nov. I make shy of 1000 a week. I was looking to borrow between 1500-2000 to consolidate those bills and get caught up. GFs income will help to pay off loan. Can you tell me if I meet the criteria for a loan? And would it be beneficial to do so? I wanted to research before going through all the process. Thank you for your time.

  2. adam says:

    I was wanting to join Prosper. My credit rating is low because of the lack of credit history as well as i have been late a few times on my truck. I make good money as a elevator constructor in Vegas. 3rd generation. I have been helping my GF since she was laid off. So savings has dwindled down and now I am only able to make it by a hair. I had taken out payday loans and now the interest is killing me. GF will begin work in the middle of Nov. I make shy of 1000 a week. I was looking to borrow between 1500-2000 to consolidate those bills and get caught up. GFs income will help to pay off loan. Can you tell me if I meet the criteria for a loan? And would it be beneficial to do so? I wanted to research before going through all the process. Thank you for your time. Last years w2 income was 75000.

  3. Ana Becker says:

    I have been opening a home health agency since 2007 and with all the new regulations and laws i am stuck at the end waiting for my provider number to be able to bill myself. i work 24/7 and at this time wasted over 200,000 dollars trying to accomplish my dream. Medicare (CMS) requires me to have 98,000 dollars in the bank for a couple of weeks so it could reflect in the statement so i could send them to me. Please help me i only require it to put in the bank account and return it back.


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