Prosper has been around a long time. I've read some great reviews, and some horrifying reviews. In the past (as in, old data) there was some risk if you are a lender. At the end of the day, if someone didnt want to pay up, you were screwed. Read all FAQs and some reviews online before you go in as a lender

Anyone want to read the paper I wrote on Prosper for my Financial Institutions course? I got an A on it.

@MeSoHornsby: ME ME

I'm a big fan of Prosper, though, like many others, I have been burned by fraudulent loans. All this is moot, however, as you have the bad timing of promoting Prosper during their "dark period," they went to apply for some waivers from the government and they had to temporarily shut down their operations for a few months while they are waiting for their application to be approved.

It's still too early to say if they will emerge out the other side, and if so, in what condition, but I think that this article probably would have been better held until they came out.

Prosper sounds great from a borrower's point of view, but I can't really see why anyone would want to lend through it. Why would I want to loan the OP money at 10% when credit card companies, with diversified portfolios, strong credit scoring models, and extensive collection infrastructures are asking 13.5%? Seems to me that the lenders there are very exposed to the winner's curse.

@SimonHova: You're a big fan, but you've been burned? I'm confused. Can you explain in more detail your experiences with Prosper.

Well i would think from the lender POV, that I can either get a safe 4% return from standard investment, or help someone and get an 8%+ return on the same money.

Does anyone have any experience in the lending department of prosper? Are you protected from deadbeats?

I've been a lender on Prosper for about a year now. We're not talking big bucks here, but I put in $50 a paycheck for a while and now just keep that money on rotation as it is paid back. I actually do the same thing with Kiva. Anyways, the point is that in my experience of funding high risk/high rate loans I see about a 35-40% default rate on loans, but I still make a good profit. Folks funding lower risk loans likely see a much lower default rate and obviously lower interest rates also. Prosper, like pretty much everything financial, is a classic risk vs reward scenario. I get a kick out of it and it has my money making money so I'm a fan.

Lending is not recommended; Prosper has a very poor default record, and in my opinion does not do nearly enough to collect on bad debts. I've lost a bunch through them myself. People can screw you easily. Stay away!

I should add, to answer some questions above, that there is indeed an automated collections agency escalation. I haven't really seen collections milk any of my default loan funds back yet, but the system is in place and automatic.

Note that the site currently says they're not accepting new lender registrations or new commitments from lenders, and you can't post new loan listings on their site: http://www.prosper.com/help/topics/lender-quiet_period.aspx

Did anybody even look at the Prosper.com website before writing or posting this article? They are on hold on new loans or lenders for an indefinite period for a public offering.

@zarex42: What does Prosper actually do if someone defaults on a loan? Do they just email the lenders and say sorry? Do they send a collections agency after the borrower? How much do lenders get to know about the borrowers? Personally-identifiable information or just generics like state, income level, and FICO score?

I'm a small loaner on Prosper. I tried to apply for an account. Apparently my credit score was so high, that they referred me to a credit union, saying that prosper wasn't the best place for me.

Since then, I've been wary on the people I give loans to.

Yes, Prosper is kinda in limbo right now and may not be back as concieved. That said...

Remember a little obscure company called Ebay ? Remember how they started up as a darn good idea that got hijacked by :

1) Crooks ,scam artists and third world thieves.

2) The accountants.

I see Prosper as somewhat the same thing. Great in concept , but really prone to abuse. Predatory borrowers (as well as identity thieves) could overwhelm the honest or naieve people when they start passing their secrets around.Can Prosper enforce these arrangements between borrowers ? To go back to the Ebay story, one thing that is killing their core business is taking a "see no evil,hear no evil " attitude toward bad sellers and scamming buyers.As long as the ever increasing fees are paid, they just look the other way.
I like Posper in theory,but these are things that concern me.

Just my two cents...

Can I use Prosper.com loans to build my credit?

@OggJoshua: You sure can! Prosper reports to credit bureaus just like any other lender does. So, if you want, you can also use Prosper to destroy your credit.

No offense but you're touting a company that is "on hold" right now; is not taking new loans; just admitted that a huge % of loans through Prosper will never be repaid; and is rumored (note: rumors) to perhaps be going out of business. If you want the skinny visit prosper.org which is a forum for current prosper lenders. Bottom line in my experience - people that need loans from Prosper can't get them anywhere else. And those aren't the people that are good debtors.

okay I just checked out prosper.com and they are not accepting loan apps at this time. I was redirected to another site..

I just heard about this on NPR, actually. Prosper is closed to new lenders, has anyone used LendingClub.com or Kiva.org as lenders?

@hewhoroams: You have basically no protection.

@MeSoHornsby: I would too!

Argh! No mortgage refinance options.

Why would a prosper.com lender give a loan for credit card debt? Sounds like a default ready to happen.

@sleze69: It's a website, not the government.

@kwsventures: High risk, but high return also if it pans out.

Only 2/3rds of the Prosper loans made 2 years ago (Nov '06) are current.

^^^^ johnfrombrooklyn means prospers.org, not prosper.org.

I took out a Prosper loan a year or so ago to pay down debt and help repair some credit issues. The interest rate wasn't that great, but the loan itself is a step in the right direction. If investors who got in on loans are being screwed not receiving payment, that may be an issue with Propser then and not the borrowers because people who take loans are required to authorize automatic monthly payments. I haven't missed a payment, but I'm sure there might be people out there who've taken loans and figured out how to game the system by closing accounts or something. Also, Prosper is no longer accepting requests for new loans for the time being.

@OggJoshua: If you are at the bottom rung you can. It won't rise fast but it will get your foot in the door. Due to my prosper loan I finally started getting CC offers that made some sense again and took one up. Since then my score has gone up over 200 points. But like everything else if you can't afford it, don't get it.

I have done a few loans, all AA rated, and haven't had any problems with them. This dark period though sounds like bad news. I hope the money I lent is OK!

@TWSS: I use Kiva pretty regularly, but it isn't really the same thing. Kiva is a non-profit for struggling entrepreneurs in developing countries. So you are giving zero interest loans to help people help themselves. Instead of profiteering off American credit greed on Prosper :)

Prosper stopped allowing new loans a few weeks ago. They claim to be looking for SEC approval on something. They at the same time wrote off a ton of loans that were more than 4 months outstanding. Beware.

@howie_in_az: You're not allowed to know jack squat. In fact, if you try to track down the borrower and get the money back yourself, Prosper boots you.

@Hoss: Yeah... four of those loans were mine. All A and B rated loans. 2% default rate my ass.

This would have been a great post about... eh... 2 years ago. Now, the space is murky because of Prosper's high default rates, being "on hold" and potentially never coming back.

The bright spot seems to be on Lending Club (approved by the SEC), and Kiva (doing good by helping people in third world countries). I'm sticking with these 2 for now.

This sounds like it could be a good idea at the community level. You could also know the people and meet them face to face. Think about it 10 people that want to help their neighbors and make a little money. The community shame could be a big factor in them paying back.

Yes I was thinking the same thing. I have a loan there and want another one...

@MeSoHornsby: I would be interested as well, although with prosper in a quiet period now.....

@frodo_35:

That (community shame) is a key portion of the business model of many 3rd world microlenders like Grameen. In many cases, other people in your village are, in essence, jointly liable for your loan, so you're ripping off your neighbors if you don't pay up.