[johnzie]

I just sent this response over re: Prosper.com.

I know my friend used this before and I see people on the site looking for auto, bike, boat loans on the site. Check it out if your bike loan request is turned down elsewhere.

It's worth a shot, but use with care.

In response to: Is Prosper Safe?

--
It seems to be a safe site. The guy who created it was the founder of E-Loan (eloan.com), which you may have heard of - A very reputable company and is a banking institution.

They run your credit and verify information from both sides (people who want to borrow and people who want to lend).

It helps to show a picture of you and present a solid story with a breakdown of your finances and how you plan to pay the loan back.

It's hard to explain the site fully - but one of my personal friends used it before to get a loan. He was generally happy with it since the loan got him out of a pinch - 5 grand for the christmas season. He's not too stoked about the interest rate, but his credit was less than worthy of anything reasonable.

I have a few hundred bucks lent out on the site. I just started lending last month, so I don't know too much about the return that it will give. Afterall - it's people...

Simple breakdown:

- You can request $1000-$25000
- If you have awesome credit and very secure finances, you can expect 7-11%.
- Never missed a payment but not the strongest of credit, you can expect 12-18%.
- Credit with some hits and/or bad shape to get you out of trouble, you can expect 19-29%.
- Expect to back up your finances - showing how much you make, how you spend your money, how you plan to pay it back.
- Give a story - be honest, people can smell phony-ness and nobody will bid on you
- Look around for reputable groups that may pick you up as a representative. Their good name backs you up and increases your chance for a loan.
+ sometimes, groups charge you .5-2% to get you a loan. Some charge 0 fees, which might be the best route.

The lower your amount requested + the higher interest rate you set will give you ++++chance to get the loan.


basically - it's the eBay for loans. You set a loan amount you want and an interest rate you can afford. The lenders read your story and depending on how convinced they are of you paying things back, you will have them bidding.

Loans can go for 10 days (maybe less, not sure) and once your amount is bid up to 100%, people start bidding less and less.

example:
Your credit is Great (Prosper runs your credit and gives you a Letter grade - AA, A, B, C, D, E, HR - high risk) and you need 5 grand for your bike + insurance costs or something.

You set a listing at $5050 (i believe Prosper charges 1%, you should look into that) at 19%.

You make an awesome story and people are convinced that you will pay back + the group you belong to is good.

You set a 10 day auction.

By day 7, your $5050 goal is met at 19%. The bar is at 100% and now it's on and crackin.

People bid $50, $100, etc at 18%.

Later they get an email saying theyve been outbid!

So they go back in rebid.

1 day left and you're at $5050 at 13.8%.

People are bidding frantically and as the seconds tick down, you wind up with a loan at 12%.

Prosper takes a day or two to finalize everything and sends you the money directly to your bank or by check.

Within a week of auction's end, you got your money.

it's a 3 year loan, so in 3 years of payments, you'll be free of the loan and your credit most likely got stronger.

Best of luck

 

[erw43]

Let me guess...you have stock in prosper.com?

 

[johnzie]

nah. just $250 in money lent out. i'm not an evangelist yet. cant say it's hot for lenders, but it seems to deliver for borrowers if they do it right.

 

[shockerpntbll]

very interesting man im gonna go check it out right now..... Question say you lend me money and i dont pay it back what goes on from there is it like ebay where you have a protection program or something?

 

[johnzie]

as a borrower, you get creditors on your ass.

as a lender, you don't get paid back unless the loan is back to current.

pros and cons that i see..

Borrower:
pros
-no prepay
-you get to tell your story for consideration. unlike bank lenders seeing it black and white.
-get money if denied elsewhere
-consolidate loans (ex you have 5k in bills at 25% and you score a 5k loan at 20%)
-rebuild your credit - shows up as an unsecured line of credit.
cons
-high rate
-takes a few days to get your info checked out. took me a week.
-lots of competition. most don't get bid up. you have to either take a hit on the rate or perhaps it was never meant to be.

lender:
pros
-diversify portfolio
-you get to help people if you feel like it
-some people have bad credit due to family or an outside cause. and some of those people make killer money and have multiple endorsements from friends, family, coworkers, etc. those get bid up like hotcakes.
cons
-i saw on their forums that there was a case of 5 loans that were from ID theft. I believe prosper insures that.
-risky bidders may default and you make a nice Bagel. $0
-even perfect credit borrowers default sometimes. rare, but sometimes.



verdict: very nice for borrowers

 

[erw43]

I'd like to lend some money if I could get a decent return but, it's scarey to lend to people that the banks have turned down already.

You said you have $250 out there...what do you expect to get in return?

 

[johnzie]

I'd like to lend some money if I could get a decent return but, it's scarey to lend to people that the banks have turned down already.

You said you have $250 out there...what do you expect to get in return?

at best ~20%. at worst ~0%.

all i have right now are savings accounts, so i threw a little in a risky spot. the site's newish - i believe a year or two. i wouldn't have touched it if it wasnt from the eloan guy.

there's not enough data to show if it's a horrible flop or a raving success. 3 year loans...1-2 years in business...yeah something like that.

unless the people i lent money to were flat out lying and prosper didnt verify their financials at all (which they say they do, but who knows...i havent borrowed from there yet)...i should have at least 4 of them be good.

wishful thinking? check back with me in 3 years or so, ill let you know if it's going good. :dontknow:

 

[kihun]

Interesting. I'm going to check it out but you only have 10 posts.. I don't even think you ride..

 

[niccoIndy]

Dont you mean the worst could be -100% if they don't pay it back and evade the creditors.

 

[kihun]

so if they don't pay back, the prosper will pay me back? and when are you getting money back.?

 

[johnzie]

i just bought me a a 600rr. you look ~6 posts ago i asked an incredibly newb question that after i looked at my bike, i smacked my head in the name of ignorance.

prosper's something i found randomly and slaved a few weeks over. this was just a response for someone who said they were running out of options for financing. after spending 20 minutes writing it up, i decided to put it up here.

as for...
-----------------------
so if they don't pay back, the prosper will pay me back?
-----------------------

lol but no. you lose your money. that's the risk.


and as for...
-----------------------
Dont you mean the worst could be -100% if they don't pay it back and evade the creditors.
-----------------------

you're absolutely right.



-but don't take my word for it. there are lots of people on that site in all credit ranges.

One would think that someone who has 720+ FICO yet needs a quick loan to pay their upcoming Real Estate taxes and plans to pay back in 3 months, would be a relatively safe loan. Consider it a 3 month CD at 8% or something.

Or someone who went through financial hardship a few years back and filed BK through a divorce, but has a steady job of 4 years and just got a raise...needs a $2000 loan to consolidate and is willing to give 29% - that would be at your discretion. given they dont have any current delinquencies on their credit, i'd put up $50, maybe.

i probably would have made an emtional decision...what can i say? i'm a loosey goosey in Hold Em

 

[kihun]

so when do you get mmoney back?

 

[johnzie]

little by little over 3 years. i think your even money point is from 1-2 years. <-- huge guess. too lazy to look up the actual break even points. varies by % obviously.

but this isn't a thread to convince you to lend. it's for people who are looking for another option to get a bike!

gl friends

 

[kihun]

Thanks bro!

 

[Fantas]

Here's my two copper. From a lender standpoint, it makes no sense to lend such a small amount of money to get your return over a 3 year period. You could invest that same $250 in a high risk mutual fund that yields 30-40% per, not 20% over three years. And that doesn't even include share price changes.

Also, if you broker with Vanguard or T.Rowe Price you are dealing with companies that have had a huge reputation for most of this past century.

New stuff is cool, but there is always something under the surface you can't see till it's too late.

 

[johnzie]

You could invest that same $250 in a high risk mutual fund that yields 30-40% per

oo, do you have any tips on mutual funds? i'm pretty much a newbie investor. but i do know that the lending model is on APR.

This ex. may be a little off (or way), and maybe too simplistic, but this is how I see it.

If 20% on $50..

year 1 - (50/3) + (.20*$50) = $16.67 + $10) = $26.67
year 2 - $26.67
year 3 - $26.67

I know prosper takes 0.5%-1.0% as a servicing fee over the loan term. Fees accrues daily on the principal leftover, so if someone pays it off sooner, then they will take less. At the same time, you will return less since it's paid faster.

Say someone takes the full 3 years to payoff, then they will have taken under a dollar.

ghetto-ly the payoff would be like this:

$50|--------------------------------- => principal
$40|_________..........................
$30|...............______.................
$20|..........................____.........
$10|.................................___...
$00|......................................__ => interest
.....||||||||||||||||||||||||||||||||||
......(year 1) | (year 2) | (year 3)

paying little principal at first, then more towards the end.

so with prosper making 1%
year 1, they make ~40 cents
year 2, they make ~32 cents
year 3, they make ~15 cents

$26.67 x 3 = ~$80
$80 - $50 (initial investment) = $30
$30 - $.87 (prosper service fee) = $29.13 profit

again, i may be off, but that is what I am under the impression of.

yeah, it's crap, but the point is diversification. Make many little investments of $50. Do the hokey pokey and spread it all about.

Some default as life would have it, but if you make good judgment calls, you'll have most of your portfolio performing.

At this rate, Make 2 good investments for ever 1 bad investment, you'll see

$150 out on 3 loans..outcome
Loan 1: $79.13
Loan 2: $0
Loan 3: $79.13
total: $158.26

Profit $4.13 x 2 = $8.26 @ 20% avg.

pennies, yes. but the top lenders (individuals!...or small groups) on prosper invest 7 figures each.

At that scale, it definitely makes sense to diversify.

That's all I'll say - I hope :confused3

keep in mind YMMV

 

[erw43]

Got to be better than the $6500 I lost in the stock market.

 

[frontslope]

the stock market will drive a man insane.

 

[shockerpntbll]

im thinking about throwing some money up on there maybe like 500ish.... If they default im gonna find them and punch them in the throat

 

[Fantas]

Johnzie - I understand what your saying about diversifying your portfolio. But you have to evaluate risk/return. I get what your saying about 50 bucks here, 50 bucks there. But to earn such a small amount over a longer period of time. Especially, when you getting paid back is laying in the hands someone the bank turned down.

I do all my own investing and am certain to do a lot of research into each fund I invest into. There is a loooooot of stuff to take into account when dealing with mutual funds (load, no load, prospectus's, managers, inception history, blah blach blach.)

I diverisify by investing in other national and domestic companies (so if China's economy is doing well and mexico's isn't your still alright.) You can also invest in safer "income" funds so that you don't stand such a risk of getting nailed in the stock market.

As far as mutual funds/stocks are concerned. It all depends on what you want to get and when. The younger you are the more risk you are able to take.

erw43 - Statistically speaking, no matter when you have invested in the stock market if you had left your money in their long enough (avg 10 years) you will always come out on top. Where people get nailed is when they see their shares drop consistently, they pull out and sell. The key is put money into it and forget it's there. (obviously check it every once in a while to make sure nothing wierd is going on.)

Frontslope - You are 100% correct. Gotta train yourself not to look at is daily.