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Prosper’s Prospects

Prosper.com is a new(er) website that brokers loans between individuals (and groups). There’s quite a bit of info out there, especially in the blogosphere, so I’ll refer you to other people’s comments more than repeat what they’re saying. It’s a cool idea, even if they’re not the first (or only) game in town. Here’s my quick version (here’s theirs and here’s their FAQ):

  • People sign up as a lender or a borrower, or both.
  • Loans:
    • can be any amount between $1,000 and $25,000
    • always have a term of 36 months, though there’s no pre-payment penalty
  • Lenders can loan anywhere between $50 and $25,000 to individual borrowers.
  • Prosper.com:
    • actually holds the loan, but they resell it to individual investors
    • runs a credit check and assigns a grade to individual borrowers
    • tries to mitigate the risks associated with loan default – here’s their explanation
  • There are fees for both lenders and borrowers, more info here
  • They have a (somewhat) confusing concept called “groups” which are supposed to help minimize risk and allow people to get reasonable rates, but it’s not 100% clear to me at this point

It’s generally held that the two biggest risks are these: that your loans won’t be repaid, and that Prosper.com goes out of business, though they try to pooh-pooh that as a concern.

http://www.ericscc.com/index.php?page=home — I’m not sure of this site’s relationship to Prosper.com (or it’s accuracy), but it appears to contain a lot of really interesting information about what’s happening at Prosper.com.

Here are some links to what some people are saying (I’ve read them all and found them to be at least marginally helpful or interesting):

There’s no shortage of opinions. I for one would like to see Prosper succeed because it is an idea that seems to serve both lender and borrower well. A good match between supply and demand should keep rates at reasonable levels given the relative risk of each loan. Just remember to never invest more than you can stand to lose and to manage your own expectations well.

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