My Experience with Prosper

Prosper Logo

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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Kiva

Lend to the poor all over the worldKiva is the world’s first person-to-person micro-lending website, empowering individuals to lend directly to unique entrepreneurs in the developing world. I started using Kiva last year.

When you browse entrepreneurs’ profiles on the site, choose someone to lend to, and then make a loan, you are helping a real person make great strides towards economic independence and improve life for themselves, their family, and their community. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates and track repayments. Then, when you get your loan money back, you can relend to someone else in need.

Kiva partners with existing expert micro finance institutions. They are experts in choosing qualified entrepreneurs. That said, they are usually short on funds. Through Kiva, partners upload their entrepreneur profiles directly to the site so you can lend to them. The power of the internet is used to facilitate one-to-one connections that were previously prohibitively expensive. Kiva creates a interpersonal connection at much lower costs due to the instant, inexpensive nature of internet delivery.

You can personalize a web page on Kiva, here is mine.

Articles about micro finance:
The Six Lessons of Kiva
Fight Poverty With Online Microlending
Business Lessons from Kiva
eBay’s New Direction: Micro-Finance