Legal loan-sharking

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Heard about this on NPR. There are others, but it's the biggest with 450,000 members. You can lend out as little as $50 to borrowers at interest rates that you both agree on. You can tell what their general credit rating is and get other details on their listings, so if a borrower needs $5,000 for instance he says he's willing to pay up to 14% interest, then you can say "I'll lend him $300" and once there are enough bids to equal $5k at 14% or less, he gets his money.

Payments are over three years and prosper makes money by charging 1-2% of principal plus a small yearly fee to lenders.

If a person defaults, their credit is hit and they're sent to collections, but basically you're out of your money.

Apparently 90%+ of people do pay back as they should, but I don't know how what the total ROI is...because if the average loan is, say, 15% and 9% of people are paying back nothing, that's going to make the total ROI not very good.

Just looking for experiences!

 

[MrChad]

http://forums.anandtech.com/me...=1876153&enterthread=y

 

[alkemyst]

I don't think they really looked into it.

I know a lot floating money successfully on prosper. You get everything a creditor would get and it's up to you to pick the risk.

If it goes to collections and they collect you do get paid.

No one I know has had problems going after the higher credit ratings there.

 

[SSSnail]

I never tried it, but I've tried the search button before.

 

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Originally posted by: SSSnail
I never tried it, but I've tried the search button before.

You have two options, the first being the more likely one which is to stay negative for the rest of your life and reap the rewards it sows and the other is to be positive and be a winner.

You were three hours late on the search allusion, which I got by the kind post of MrChad!

alkemyst I presume you're not doing it then...? I did scan the entirety of that other prosper thread, but bombarman's experience turned me off a bit.

 

[DBL]

I've looked into based on previous threads. It's certainly an interesting idea and should work well provided you understand that you need to spread your risk out.

However, the one glaring issue for me is the health of the network (i.e. Prosper). What if the company mismanaged or misused collected funds and went out of business? What would you do? Maybe there is some sort of independent insurance? That would put my mind at ease.

 

[StageLeft]

Originally posted by: DBL
I've looked into based on previous threads. It's certainly an interesting idea and should work well provided you understand that you need to spread your risk out.

However, the one glaring issue for me is the health of the network (i.e. Prosper). What if the company mismanaged or misused collected funds and went out of business? What would you do? Maybe there is some sort of independent insurance? That would put my mind at ease.

Yeah, that's a real concern. To make any money off this a person would want to be in for thousands and trusting it to that site I just don't feel comfortable with right now. Private insurance or something would be prudent.

 

[mugs]

I thought about doing it, but I came to the conclusion that I would never be willing to invest a large enough percentage of my money into it to make a noticeable difference in my overall return on investment.

Their collection agencies only recover ~15% on average. If you do it, definitely break it up into a lot of small (~$50) loans.

 

[Drakkon]

the more i read about it the more i realize the money in a high interest CD would work just as well or even better (guarantees your money back at least).

 

[jme5343]

I've still got a loan out from them. I've had absolutely no problems, but of course I'm on the receiving end.