My experience with Prosper
Back in November I became a member of Prosper, a site which allows P2P lending. I thought it'd be a good idea to just write up some of the stats and quick things I've learned from Prosper thus far.
The idea, essentially, is that people who need money (usually from $1k-$25k) come to the site, put up their loan request, and then other users who have money to lend bid on the loan (usually in amounts from $50-$250). The lenders participate in a Dutch auction (the lowest interest rate wins) until the entire loan is fulfilled and the auction has ended. Each loan has a 3-year repayment schedule.
On December 5, 2006 my funds of $500 were (finally, after almost 10 days) transferred to Prosper and I was able to bid on auctions. There are two ways to bid: manually, and through a standing order. I highly recommend using standing orders, as they typically are much faster and also keep you from using too much emotion to make decisions. I also recommend bidding low amounts (I only bid $50 for any loan) so as to make it easy to diversify.
Over the past few months, I've never been able to fully invest my $500. Currently, I have 8 loans worth $400. My average interest rate is 10.40%. I have the other $100 currently on bids with an average rate of 12.80%.
My loans are interesting -- even with those reasonably high interest rates, my breakdown is:
So far, I've received $18.04 of repaid principal, and $3.06 of interest. My total account value is $504.68 after fees. That amounts to a 1% gain on my money in just over 2 months. I'm hoping to see at least 10%/year return including defaulting loans, etc. This would match a fairly-moderate stock fund and help out people at the same time.
The idea, essentially, is that people who need money (usually from $1k-$25k) come to the site, put up their loan request, and then other users who have money to lend bid on the loan (usually in amounts from $50-$250). The lenders participate in a Dutch auction (the lowest interest rate wins) until the entire loan is fulfilled and the auction has ended. Each loan has a 3-year repayment schedule.
On December 5, 2006 my funds of $500 were (finally, after almost 10 days) transferred to Prosper and I was able to bid on auctions. There are two ways to bid: manually, and through a standing order. I highly recommend using standing orders, as they typically are much faster and also keep you from using too much emotion to make decisions. I also recommend bidding low amounts (I only bid $50 for any loan) so as to make it easy to diversify.
Over the past few months, I've never been able to fully invest my $500. Currently, I have 8 loans worth $400. My average interest rate is 10.40%. I have the other $100 currently on bids with an average rate of 12.80%.
My loans are interesting -- even with those reasonably high interest rates, my breakdown is:
- 25% AA credit rating,
- 50% A credit rating,
- and 25% C credit rating.
So far, I've received $18.04 of repaid principal, and $3.06 of interest. My total account value is $504.68 after fees. That amounts to a 1% gain on my money in just over 2 months. I'm hoping to see at least 10%/year return including defaulting loans, etc. This would match a fairly-moderate stock fund and help out people at the same time.
posted by Ian Sefferman at 10:31 PM
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