Anyone Tried Prosper?

[Geo]

This isn't exactly real estate but I put it here because this seems like the best fit of our forum choices for general investment postings...

Has anyone invested with Proser (prosper.com)???

I started doing a year and a half ago and was hot and heavy with it and then totally forgot about it...

It is pretty cool-

you can lend people money there (or borrow)...

Let's say Jane wants to borrow $5000. She opens a prosper account and submits her loan to all Prosper's lender community. Jane submits that she will pay up to 13% for the loan. When a lender wants part of the action they can lend as little as $50 to Jane and specify the minimum interest rate they would take for this loan. Once enough lenders have jumped in to equal the total of $5000 the loan is then funded. Each month Jane pays on her loan to Prosper and Prosper distributes the funds...

The more stellar a loan applicant is, the lower the risk and the lower the return. The lower a borrower's credit rating and higher their debt to income ratio is, the higher the risk and the higher the return...

What's cool about it is you can diversify money across loans and you can set up "Standing Orders" so that the system automatically funds loans based on preset criteria you establish in whatever $ increments you specify...

Check it out... Let me know your thoughts/experiences...

I'm told that math professors and statisticians are making a killing on this site. I have just been experimenting with lending based on my gut...

Let me know if anyone is interested in starting a Prosper lenders group.

Cheers, GW

 

[SHELLY]

Just put your extra money here:

 

[Geo]

Normally I can count on Shelly to post something intelligent, witty or both. Shel, I'm doing my best to not feel personally slighted by your post...

Would you mind telling me why you feel the way you do about Prosper? This isn't some MLM scam. It's a neat concept and I am genuinely asking for your (well thought out/supported) opinion...

Cheers.

 

[SHELLY]

For starters....fully explain the risks associated with this investment.


.

 

[elgordoboy]

Normally I can count on Shelly to post something intelligent, witty or both. Shel, I'm doing my best to not feel personally slighted by your post...

Would you mind telling me why you feel the way you do about Prosper? This isn't some MLM scam. It's a neat concept and I am genuinely asking for your (well thought out/supported) opinion...

Cheers.

I remember being intrigued with the idea academically after an article I read a year and a half or so ago. I went to the site and looked it over and interest faded fairly quickly after reading in some of the forums. Now I am intrigued again though...academically. I'm gonna go look again. I don't know why someone would have an advantage beng a mathematician or statitician. I'd be more concerned with those who can game the system. There were a few back when I was reading that seemed to be very proficient at that. I wouldn't take Shelly's comment personally- it was kind of witty and well thought out--since it wasn't directed at anything I said.

 

[Geo]

For starters....fully explain the risks associated with this investment.
.

First, let me say I am not trying to convince anyone that this is a good or bad idea for them. I am not trying to convince anyone to lend or borrow money at Prosper. My post was to solicit the thoughts, opinions and experiences of others...

That said, the short answer to Shelly's question is-

The risk is that folks to whom you lend your cash will default on the loan and you will lose money. See the site for the detailed long answer-

They disclose performance data which includes default rates by credit rating and by loan amount. In addition, they show the same risk percentages that banks and credit card companies use to calculate their own risk when deciding to lend. So I am intrigued because if you can crack the math like the credit card companies have then there is potential to do well. In other words, lend to more winners than losers and hedge your bets when you take a chance going for the high rate of return that exposes more liklihood of risk...

Like I said, I heard folks who are great at math are able to tell within statistical certainty what their risk is and then it is just a scalable game...

GW

 

[elgordoboy]

Quants

 

[SHELLY]

1. The credit card companies aren't doing too good a job at "cracking the math" ....case in point: "Citigroup, one of the largest banking and credit-card firms in the United States, has announced that it is now building its loan-loss reserves in anticipation of a possible unraveling of auto loan and credit card debt. At the same time the bank is tightening credit card lending standards."

2. The loan pay-back time is 3 years. The lender's money waiting for the loan bidding process, and interest/principle paid back from the borrower, is held in an non-interest bearing account....well, not exactly, the lenders have to pay Prosper a yearly fee to maintain these accounts.

3. Lenders must bid for the loans stating how much interest they will accept from the borrower; the bids are lined in ascending order and those with the lowest interest rates get chosen over those who've bid higher rates. The borrowers with the highest credit ratings, of course, get the lowest interest rates...so the borrowers who will give you the highest return for your "investment" --say 18%+--are the same dirtbags who will take your money and disappear. Do you seriously think they care about another phone call from a bill collector??

4. Seriously...stop and think for a moment....these people are in debt for a reason, most have tapped out every source of cash, from mom to payday lenders (some are even asking for money to pay off payday lenders)....and what's more, we're in a recession, so money is going to be even harder to come by for these folks down the line.

5. I wouldn't recommend this route for "investment" for anyone who still has any kind of debt they're paying off (credit cards, car loans, mortgage, friends & family you owe money to); hasn't fully funded their retirement accounts; hasn't got a 6-12 month emergency fund; and hasn't fully funded a family vacation/outing. Even then, I think a better "investment" for this EXCESS money would be to hand it over (as a gift, not a loan) to a close friend, neighbor or charity you know could use a little help to get by--because you are truly well off.

It's true that there are people out there who may be making some money on Prosper (the owners of Prosper seem to leap to mind) and may be making above market returns (interest income that is taxed at the investor's marginal tax rate) on their EXCESS money--there are also those who have lost their money due to defaults and have made dismal returns or lost all their "investment." This is not "investment," it is a purely speculative play due to its risk and have returns that drag out over a period of 3 long years (the TVM [look it up] is not on your side).

You know of the rewards, here's the risk side: http://www.lendingstats.com/loanPer...&homeOwner=&automaticFunding=&submit=Generate

By the way, geo, you mentioned that you were "hot and heavy" into Prosper a year-and-a-half ago, and then "totally forgot" about it.
Can you expand on this statement and relate how much you made?

(P.S. I don't believe you are trying to convince anyone this is a good idea, and the photo wasn't meant as a personal affront to you. Oh, and here's an old saying you might find comes in handy down the road, "There are lies, damn lies and statistics.")

 

[SHELLY]

Quants

Might I remind everyone that Quants were behind the current CDO/SIV problems plaguing the financial world.

If you have several hours of your life you would like to needlessly throw away, I recommend you read this:

 

[Geo]

1. The credit card companies aren't doing too good a job at "cracking the math" ....case in point: "Citigroup, one of the largest banking and credit-card firms in the United States, has announced that it is now building its loan-loss reserves in anticipation of a possible unraveling of auto loan and credit card debt. At the same time the bank is tightening credit card lending standards."

2. The loan pay-back time is 3 years. The lender's money waiting for the loan bidding process, and interest/principle paid back from the borrower, is held in an non-interest bearing account....well, not exactly, the lenders have to pay Prosper a yearly fee to maintain these accounts.

3. Lenders must bid for the loans stating how much interest they will accept from the borrower; the bids are lined in ascending order and those with the lowest interest rates get chosen over those who've bid higher rates. The borrowers with the highest credit ratings, of course, get the lowest interest rates...so the borrowers who will give you the highest return for your "investment" --say 18%+--are the same dirtbags who will take your money and disappear. Do you seriously think they care about another phone call from a bill collector??

4. Seriously...stop and think for a moment....these people are in debt for a reason, most have tapped out every source of cash, from mom to payday lenders (some are even asking for money to pay off payday lenders)....and what's more, we're in a recession, so money is going to be even harder to come by for these folks down the line.

5. I wouldn't recommend this route for "investment" for anyone who still has any kind of debt they're paying off (credit cards, car loans, mortgage, friends & family you owe money to); hasn't fully funded their retirement accounts; hasn't got a 6-12 month emergency fund; and hasn't fully funded a family vacation/outing. Even then, I think a better "investment" for this EXCESS money would be to hand it over (as a gift, not a loan) to a close friend, neighbor or charity you know could use a little help to get by--because you are truly well off.

It's true that there are people out there who may be making some money on Prosper (the owners of Prosper seem to leap to mind) and may be making above market returns (interest income that is taxed at the investor's marginal tax rate) on their EXCESS money--there are also those who have lost their money due to defaults and have made dismal returns or lost all their "investment." This is not "investment," it is a purely speculative play due to its risk and have returns that drag out over a period of 3 long years (the TVM [look it up] is not on your side).

You know of the rewards, here's the risk side: http://www.lendingstats.com/loanPer...&homeOwner=&automaticFunding=&submit=Generate

By the way, geo, you mentioned that you were "hot and heavy" into Prosper a year-and-a-half ago, and then "totally forgot" about it.
Can you expand on this statement and relate how much you made?

(P.S. I don't believe you are trying to convince anyone this is a good idea, and the photo wasn't meant as a personal affront to you. Oh, and here's an old saying you might find comes in handy down the road, "There are lies, damn lies and statistics.")

Hi Shelly,

Thx for the reply. I respect your knowledge and your opinion. To answer your question-

When I said I was "hot and heavy" I meant that I spent a lot of time at the site browsing through loan apps, lurking on their message boards and trying to develop a strategy for lending for a solid return...

In the spirit of full disclosure- In total I have under $1000 loaned out to a diverse mix of borrowers. Interestingly enough, every loan I made to an AA or A borrower is being paid back beautifully and I am enjoying a return of around 13% on these types of loans. And of those couple of gambles that I made to high risk borrowers- the majority of them have defaulted and/or are in bankruptcy status- go figure. Last I did the math I was around 6% ahead for my first year. If I (woulda, coulda, shoulda) stuck with only my AA and A loans my returns would be pretty solid and I would be singing Prosper's praises...

I was hoping with all the savvy folks on sowal that I might get lucky enough to find someone who has cracked the code on Prosper and was willing to share. Hence the feelers I threw out for anyone interested in a lenders group...

I will take your advice to heart as always and again, thx for the response...

cheers!