“Prosper Borrowing” Archive

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Final Words on My Prosper Borrowing Experience

Those of you following my blog for a while know that I used Prosper.com to help lower the interest rate on some of my credit card debt. Not too long ago, I paid it off in full, so I thought it would be a good idea to write a final post on it.

At first, I wasn’t even sure Prosper could help someone like me (for those unfamiliar with Prosper, it is a people-to-people lending site). I tried going to banks before to try to consolidate our debt, but they fell short of laughing at me. We had too much debt and not enough income. The appeal of Prosper, though, is that it is regular people funding your loan. They have the ability to see the reasoning behind the numbers and not just the numbers.

After taking some time reading about Prosper, I made the leap and created a loan listing at Prosper. In seven days, I had a fully funded loan for $3,500 at 9.9%. A total of thirteen lenders contributed to my loan.

If I had to do it all over again (if our situation was the same), I would. It was nice to have a debt payment that was the same amount every month. They even automatically withdrew it from our account! There was no worrying about our rates increasing and I knew my money was going to regular people. I didn’t blog too much about that loan after it was funded because it was on auto-pilot for repayment. That was nice.

If you are thinking of trying Prosper.com for debt consolidation, here are some of the tips I’ve written:

Tips for Using Prosper for Debt Consolidation
My List of Tips for Listing a Loan on Prosper
Resources for Prosper Borrowers
Reader Question: Is Prosper.com Trustworthy?

As with anything, always learn as much as you can. I read about Prosper for months before I finally decided to list a loan. I also talked to others who were already involved with them.

If you have any questions about Prosper.com and my experience, feel free to ask in the comments or contact me.

Posted by Tricia on October 29, 2007 at 10:36 PM in Prosper Borrowing | 31 Comments »
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Prosper Loan Update

I have been aggressively paying my Prosper loan since July of this year. What originally was at $3,500 in June of 2006 was whittled down to $769. With the balance transfer offer that I received, I have initiated the payment that will pay off my Prosper Loan in full.

I know for sure that two of my Prosper lenders stop by from time to time. I’m not sure if anyone else does. In any case, if you are reading and were one of the lenders on my loan…thank you.

Thank you for believing in me and what I’m trying to do here. It meant a lot that normal people thought I was worth a shot because the banks sure didn’t think so back then. I think sometimes just the fact that someone believes in you helps you to succeed. In this case, you believed that I would pay back what was borrowed and you trusted your hard earned money with me.

Thank you again!

(For those interested, you can read all about my Prosper Experience in my archives.)

Posted by Tricia on October 7, 2007 at 9:43 AM in Prosper Borrowing | 9 Comments »
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A Note to The Lenders on My Prosper Loan

For those that were gracious enough to lend me money through Prosper.com, it is time for me to aggressively pay off that debt and I will begin to do that today.

It’s hard to believe a year has already passed since getting my loan. I’m glad that regular people earned some interest off of my loan and I can’t thank you enough for believing in me and trusting me with your hard-earned money.

Thank you.

Posted by Tricia on July 6, 2007 at 10:20 AM in Prosper Borrowing | 7 Comments »
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The Scoop on What it’s Like to Borrow Money with Prosper.com

J.D. over at Get Rich Slowly asked if I would write an article about my experience with obtaining a loan through Prosper.com. I decided to do it and J.D. posted it earlier this week.

If you are interested, you can take a peek here.

You also may want to spend some time reading some of his articles. There’s some good stuff over there.

Posted by Tricia on March 22, 2007 at 3:09 PM in Prosper Borrowing | 3 Comments »
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Would You Lend $750,000 to Complete Strangers? This Man Has

Prosper.com launched early 2006 as a place where everyday people could go to borrow and lend money. Some refer to it as the “eBay of personal loans.” I am fascinated with the Lending side of things, although I am a borrower there. I decided to ask the person with the most money invested in Prosper for an interview. He goes by the name pensioner and he was very kind and answered a few of my questions via email.

Without further ado, here is my interview with pensioner…

You joined the Prosper community in July of 2006. What made you decide to join Prosper?

Prosper listed 1000 loans that could be had for rates up to 29%. I was intrigued to see if I could lend money at more than 20% to folks that would pay me back 95% of the time.

You have invested $750,000 in Prosper. When you first started lending at Propser, what were your expectations as to how much you would lend? If it has changed from when you first started, why did it change?

My initial thought was to put in $10,000 as a test, to see if I could lend at high rates to people that were likely to pay me back. I was thinking that I could put in several hundred thousand or more. I quickly decided to put in about a half million, then decide where to go from there. Within a couple of months I put in another quarter million. I now have $750K in (which has grown to $812K). I think I am at the right level now.

Most lenders lend smaller amounts over many loans. Propser even recommends this on their website. You have gone against the convention and frequently lend large amounts (you have even lent $24,950 on a single loan). Why?

So many lenders think that if diversification is good, more diversification is better. But diversification has a cost. More money can be made by selecting a small number of great loans, instead of a mix of good and great loans. Diversification should be measured broadly, considering all assets. It is not necessary to diversify each asset class, such as Prosper.

Part of the appeal of Prosper to some lenders is the personal aspect of it. How personal are you with borrowers?

Not very. I enjoy getting a â€œthank youâ€ when I fund 90% or 100% of a loan. I sometimes respond with a few pleasantries and share a bit of information about things that we have in common. I sometimes use the opportunity to show borrowers that they are dealing with a real person, not an impersonal institutionâ€¦hoping that they will consider the effects of not paying me back.

Prosper has the option of creating standing orders. The computer will bid on your behalf if a loan listing meets certain conditions (interest rate, credit grade, # of delinquencies, etc.). What are your thoughts on standing orders?

I donâ€™t like them. I want to take a minute to see if the borrower has a reasonable story. If I were making $50 bids, I would not have enough time to read listings, but I typically bid several thousand. I have, at times, spent as little as 15 seconds reading a listing before bidding, but I always spend at least a little time reading their story.

Your current estimated risk adjusted ROI at Eric’s Credit Community is 18.7%. Now that you have been around Prosper for a while, do you feel that number may be accurate? What ROI would make you pleased with your Prosper experience?

Originally, I expected returns of 18% to 20%. I now think my returns will be more like 15%. I am happy with 15%. If my returns drop to 11% or 12%, Iâ€™ll start moving money back into stocks and mutual funds.

Is there anything else that you would like to share about your Prosper experience?

Some days I feel badly that most people with low credit scores cannot get funded on Prosper, but on other days it seems like most people are where they are through their own choices.

Lastly, wondering minds are probably curious about this one. Do you get any special “perks” from Prosper for being the leading investor? If so, can you share with us what they are?

I have not received any discounts or other perks that translate to money in my pocket. I was taken out to lunch by the CEO, Chris Larsen, and the VP for development, Karen Appleton; and I did get a nice tour of the Prosper headquarters in San Francisco. They have a nice place on the top (33rd) floor where NBC Broadcasting used to be.

Thank you pensioner for the interview

To read more about Prosper, including more interviews with lenders as well as my own borrowing experience, please visit my Prosper.com archived articles.

NOTE: I also asked pensioner one other question unrelated to Prosper, and I will be writing about that later this week

Posted by Tricia on January 28, 2007 at 1:27 PM in Prosper Borrowing | 17 Comments »
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Interview About Prosper.com With Spotsearch from TopicPoint

I decided to ask another prosper lender a few questions about their social lending experience with Prosper. If you visit Spotsearch’s Prosper lending and borrowing tips, and start reading, you will discover that he is one of the lenders on my Prosper loan. He actually has a very interesting way of lending on Prosper. Instead of making small $50 loans to many people, he is choosing to lend larger amounts, as you will read more about below.

Without further ado, here’s the interview…

What was it about Prosper that made it appealing to you as a Lender?

I’m probably one of the few bold people that have made Prosper a key portion of their investment portfolio. In the past, my fixed income assets (cash, CDs, bonds) have been lacking. The popular rule of thumb is stocks in your investment portfolio should make up 120%-your age; and fixed income investments would be the remainder. In my case, that comes out to 82% stocks, 18% fixed income. Currently, about 8% of my investment portfolio is invested in Prosper loans, and in the future I expect to allocate around 12% or more. Why would I put such a large stake in such a potentially risky investment? There are a number of reasons.

1. The main reason is it’s fun and rewarding. I like reading peoples’ different loan requests and like feeling like I am making a difference, helping someone out. For the first time, fixed income investments are fun and interesting. Also, as an open marketplace, I feel that the rates set are usually good for both the lender AND the borrower.

2. Second, the potential rates of return on Prosper are fantastic. Typically the stock market returns average between 10-11% a year over long periods of time. With Prosper loans, you can get returns just as high or higher, which is absolutely amazing compared to CDs, bonds, or money market accounts. My current Prosper portfolio is estimated to have a 13.80% interest rate (assuming no defaults and no early paybacks). Depending on your tolerance for risk, you can have lower or higher rates of return. You can manage the risk by choosing borrowers with good credit ratings and by spreading your money over a large number of borrowers. For instance, my loans are spread across the following credit grades: AA=26%, A=45%, B=16%, C=13%

3. Finally, I feel very comfortable lending on Prosper. It is a very well-designed system. For instance, loan payments are reported back to credit reporting agencies so borrowers have an incentive to pay on time or risk ruining their credit ratings. Also, the system does a great job of tracking loans and payments and key statistics.

How “personal” are you with Borrowers? Do you contact them to ask additional questions?

I like the human aspect of Prosper. I personally contact about 75% of the borrowers that I lend to. I like to follow up on the details of their listing because usually something they write might spark a question, or they might leave out details that I’m interested in seeing. I tend to make fairly large loans so I like to personally hear from the borrower. After about 6 months of using Prosper.com, so far I have had 0 defaults and 0 late payments on 11 loans, which, though a fairly short history so far, is quite encouraging.

Do you feel that a Borrower needs to join a group within Prosper?

I think that if a borrower has a good credit rating (AA, A, B, and possibly C if the record is clean) and does a good job of writing up their loan description, there is no need to join a group. The group system in Prosper really has little benefit for those people and can even hurt them if they join a bad group. For people with worse than C grade credit, it might be good for them to join a reputable, group with a good track record. Joining a bad group, however can really hurt you in many ways such as getting a worse interest rate or getting fewer bids. The worst groups I see are ones that charge a huge fee (Prosper calls them “rewards” to the group leader), which can be as much as 4% of your loan amount, depending on your credit rating. This is absolutely outrageous. Look for groups that have a good track record of getting loans funded, of groups where the members and leaders bid on the loans, and where the group leader goes through extra verification work, if you even decide to join a group.

What one piece of advice would you give someone that is thinking of borrowing money with Prosper?

Only join groups that do 100% reward sharing (no group leader rewards). Do your homework on groups to join. Write up a good loan which tells your story, lays out your financial situation in detail in terms of your income and expenses, explains why you need the money, and your plans and ability to pay the loan back. Make sure to ask for a fair to slightly higher interest rate for your credit rating to start out with (you will likely get a lot more bids, which many times creates a competitive situation that drives down your rates in the end). Getting a loan from Prosper can be easy, painless, rewarding, and maybe even a little bit fun!

Thanks Spotsearch for the interview

Posted by Tricia on January 19, 2007 at 10:38 AM in Prosper Borrowing | 4 Comments »
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Prosper’s Automatic Payment Feature

This month is the first month where I haven’t paid my Prosper payment ahead of schedule. I apologize to any of my lenders that may have been wondering why I wasn’t following my usual schedule. I’m not trying to run from you

I decided to let Prosper do its thing and take the money out automatically on the due date, which is today. I logged into my account and I see that there is a payment processing and my next payment is due 1/20/07. I do not see the withdrawal at my bank yet, but I’m sure it will show up shortly.

Now with that paid, it’s time to do a debt update…

Posted by Tricia on December 20, 2006 at 6:02 PM in Prosper Borrowing | Comment First »
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