Prosper.com Lending Trial

[JLeezer]

I've mentioned Prosper on here a few times as an option for people looking for relatively small, unsecured loans. I have been a lender on there for a little over a year, but at the time I originally bid on the loans, I was not sure what my goal was. This time around, I've had my wife encouraging me to stick a little of our money into something fairly secure, such as a CD. That is just painful for me...the best rate I could find on a CD with an initial deposit of $1000 (I'm planning on staggering our deposits to maintain a little bit of liquidity on such a fixed investment) is right around 4%, some slightly higher, some slightly lower.

With Prosper, I was able to create an investment plan that selected on AA credit rating borrowers, smaller loans of $0 - $5000, homeowners only, and full time, part time, or self employed individuals. I believe those criteria should make for a fairly secure group of loans. Also, as I said, I'll be investing $1000 at $50 per loan, resulting in the money being spread over 20 loans. Within the last 6 months, there have been 0 loans that went late or defaulted with the criteria I outlined above. However, even if one or two defaulted and I lost the majority of the principal, I would still be able to cover the investment and possibly still earn a meager return. Assuming none of the borrowers default, I could be looking at a return as high as 9%. By the way, this will keep the funds tied up for 3 years unless someone chooses to repay early, which happened with 1 of th 5 loans I had originally made.

Anyone have any thoughts on this type of an investment?

[jasaunders]

I have about 20 outstanding loans on Prosper, all of which are over a year old. I invested somewhat evenly over AA-C grades. I didn't have any late payments or defaults for a very long time, then surprisngly they started hitting.
As of right now, I have an A and a B that are both in collections 3 months late on payments, and I have another A and a C that are both late on payments. My portfolio had an expected ROI of about 18%; if I write down these loans as defaults then my return will be around 7%.

[ApplianceJunk]

I have about 20 outstanding loans on Prosper, all of which are over a year old. I invested somewhat evenly over AA-C grades. I didn't have any late payments or defaults for a very long time, then surprisngly they started hitting.

About the same story here, but It ended up costing me money in the end.

Just my luck, but I won't be doing the prosper thing anymore.

[JLeezer]

I just checked the statistics for all loans made over the past 3 years that meet the requirements I outlined in my original post, including the AA credit rating. It looks like 367 loans were made with 1 loan now being 4+ months late and 1 loan being 16-31 days late; the other 365 are current or paid in full. That means that historically the 99.47% of the borrowers that my plan would have invested in would meet their obligations to repay. So statistically, I'd have a pretty good chance of achieving the 7% projected return, but realistically I can expect to have one loan out of twenty go bad. Fair assumption?