My Experience with Prosper

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Two months ago I funded my Prosper account with a few hundred dollars. Prosper connects those seeking a loan with lenders. Risk of default from rickety borrowers can be spread out by investing only $50 per loan. The interest rate is determined by lenders bidding the rate at which they are willing to loan.

When I am searching for loans to bid on I check off the homeowner box and select a B or higher Prosper credit rating. I allow any debt-to-income (DTI) ratio in the search. I then sort on hours left for bidding and select prospects with interest rates 10% or higher. I find the better the credit rating the lower the risk. The correlation is amazing.  I look for lower requested dollar amounts to be borrowed and those that need the money for credit card debt consolidation or for their business. Currently my lending is earning 17% but I am allowing for 7% of this to be defaults which will give be a net return of 10%. I shall not grieve though even if my net drops to 3%.

One can join a Prosper group and pick up tips on possible candidates for loans. I have loaned to a business borrower, based on a group tip, who had an E Prosper credit rating. I am rewarded with a return of 30% which bumps up my average return. I recommend you don’t have too many of these in your portfolio because of the risk of default.

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