Quote:
Originally Posted by funkyvega
hey caladia..
how good is it as an investor?
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Hi,
I also registered here just to answer this question (although now that I'm here, I may look around a bit). I began lending on Prosper in March, and put in around $2,300, having 49 loans in my portfolio. 5 have paid off in full (generally in about 2 months), 1 is 1 month late, 1 is 2 months late, 1 is 4+ months late, and 41 are current. My projected ROI (using the methodology that is generally accepted as the best one available) is 8.43% as of today. That is not bad, but given the high level of risk involved, the illiquidity of Prosper loans (once you're on a loan, you're stuck for 3 years unless the borrower decides to pay off early or default), an unfavorable tax treatment, Prosper's servicing fee (currently 1% on A-HR rated loans), and a not insubstantial idle time penalty where your money earns 0% while being transfered to/from Prosper, while you find loans to bid on, while those listings run, and until the loan originates while (if) Prosper does post-funding verification of the borrower. The prevailing wisdom is that borrowers also tend to increasingly run into financial difficulties after the holidays (around February, when their holiday bills come due), increasing missed payments then.
The absolutely crucial thing for any prospective lender to do BEFORE lending on Prosper is to learn as much as possible from the many excellent resources available. First and foremost is Prospers. ORG. This is a wiki style site with lots of information about Prosper, a number of blogs, and most importantly, the largest forum about Prosper. Prosper used to run the largest forums itself, but right before Thanksgiving it decided to delete them without warning, attempting to hide 400,000 posts made during the preceding 1.5 years. Prosper replaced its highly useful old forums with a new version that is 100% moderated (posts must be approved in advance), that is so slow, and that lets so few posts through moderation, that it is entirely worthless. In the month or so since Prosper started its new forums, the unofficial forums on prospers.org have had about 7 times the number of posts, and virtually all the old-timers who used to share their wisdom on Prosper's forum have moved to prospers.org.
Another very useful and informative source of information is the third-party statistics site who utilize Prosper's data downloads and API to make a huge amount of information available about Prosper loans and lenders, in a very easy to use format. The two most important of these sites are lendingstats. com and ericscc .com. On these sites, for example, you can see the portfolio of any lender on Prosper, and how it is working out for them. You can also see a list of every lender (or loan) on Prosper, filtering by certain criteria, and sorting as you like. For example, using the lender list on Lendingstats, you can see that the median projected ROI (Lendingstats projected ROI is generally regarded as the best one) for ALL moderately seasoned lenders (those with >20 loans and an average loan age of >6 months), is about 5%. After subtracting Prosper's servicing fee and adjusting for the idle-time penalty when your money is not earning any interest, this is less than you can make on an FDIC-insured, fully liquid bank account at E-Loan or elsewhere.
There are also other problems with Prosper, but enough for now. I do admit that lending on Prosper can be fun, as long as you consider it entertainment, and not a serious investment where you plan to make 10% or more. Although some lenders do have projected ROI's >10%, the last time I looked (a few weeks ago), more lenders had a negative projected ROI than one >10%. Of course, YMMV.
