Lenders at Prosper

Prosper.com is the highest profile social lending site on the internet today with a reported $34 million in loans originated off their site. Anecdotal evidence aside, the returns generated by lenders at prosper.com have ranged from 9.12% (highest quality grade loans) down to 6.72% (for loans graded "E") as reported on their site. Lender's individual portfolios however could vary wildly and customers have even reported losing money by picking a default-ridden portfolio. Overall though an observer would have to conclude the platform is successful with a site-wide average of over 95% of all loans current on their payments. Lenders at prosper.com have a personalized social aspect of their investment by interfacing with entrepreneurs and funding in some cases socially-conscious loans. Like any investment class, diversification is the key to reducing risk. Investors should be diligent in their loan and risk assesment and monitor third-party reviews of Prosper.com. The site money-rates.com is tracking the portfolio performance of Prosper.com and some of the other major social lending sites which investors can use as a benchmark.

Borrowers at Prosper

Free money off the internet? Perhaps a simplication, but how can a borrower go wrong with the ease, fee structure, timeliness, and social interaction of funding their business or dream through a prosper.com loan? In comparing five different loans, for five different amounts, at five different credit quality scores, we found an average variance of less than three quarters of a point in the ultimate APR charged on a loan. This is free market forces working their magic. Every loan originated on prosper.com is open for bidding and the borrower can opt-out if the rate does not become competitive enough for them. Borrowers can also use a loan at Prosper.com to build credit or re-establish credit. All loans originated on Prosper.com are 3-year unsecured fixed-rate loans, so each borrower loses the flexibility of picking specific terms - but for the ease of funding their business or venture from their couch in their t-shirt this may be a sacrifice worth making for a borrower.

The Future of Prosper and Social Lending

For now the future looks bright for this type of borrowing and lending. While the dollar amounts are small enough to make it an insignificant threat to banks and lending companies, the competitive atmosphere and social aspect of helping a fellow person is enough to make social lending (also called peer-to-peer lending) an innovative financial tool in the next decade. The keys for making Prosper.com a positive experience is diligence, determination, and diversification.