Shortly after my last Prosper review update, I decided that I should go ahead an sign up for my own Prosper account in order to (1) be able to provide a better review and (2) try to perhaps find an algorithm that works. While making a few more bids today since my last ones all failed, I noticed that there is now a $25 sign-up bonus for new lenders through their referral program. Just click on the banner below:
From the site:
Refer a lender
You receive $25, and your friend receives $25 as soon as your friend funds his or her first loan.
There is no promotional code necessary. If you use my link above, I also get $25. This is actually pretty good because you can fund a loan with as little at $50, and there is no hard credit check. This gives you an instant 50% return on your investment, which means you can try out Prosper without having to worry quite as much about the interest rate you earn on your loan. In my opinion, to get the best risk/return ratio, I would look for a AA loan, which has the lowest default rate of 0.2% (1 out of every 500 loans) and the highest early-repayment rate (so you can get your money out). Or maybe an A loan with zero previous delinquencies. Keep in mind that your initial $50 will need to stay there earning interest for up to 3 years.
For more information on Prosper, see my two-part Prosper review.
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What is your lender name on prosper?
If I’m already a member but haven’t lent any money am I eligible for this bonus?
bob – ‘mymoneyblog’
Joe – I don’t know, but I’ll let you know if I get the $25. I signed up months ago but haven’t had a successful bid yet.
I’m a small-scale prosper (about $300 in current loans). The biggest problem with lending on Prosper is that there are so many loans to search from — and you need to carefully choose where you want to place your $50.
Here’s my criterion for picking out loans: AA, A, or B credit, 0 delinquencies in the past 7 years, and 0 public records. I also look through the lenders who have bid at least $200 on this listing. I look for lenders who have been lending for over a year invested over $4000 total, and have never received a late payment — I need to see three of such lenders bidding on this listing before I’ll bid. (You can see the portfolio of any Prosper lender at LendingStats.com)
Recently, to help save time, when I find lenders which I described above (invested $4000, no lates, etc), I add them to my “Watched Lenders” list at ericscc.com. This helps me learn from the experts.
I hope this will be of service to someone. Prosper is very risky — but it offers great rewards.
I’ve already had a prosper account for a while but I haven’t done anything on it yet. Have always been wanting to but I don’t need a loan and I’m using all my extra $ to pay off student loans before I start investing anything.
buildandsucceed,
your plan of paying off student loans before investing is likely a flawed concept unless your loans are with a nongovernment backed lender charging extraordinarily high interest rates or if you have $100k+ in loans outstanding.
For myself, sallie mae offered a 6.8% interest rate payable over 10 years. they then offered an additional 3% off of that rate if I chose to automatically pay out of a bank account and never missed a payment. so 3.8% is then tax deductible (if your agi is at the nations average). 3.8% * .75 = 2.85% interest rate (assuming 25% tax bracket). you can earn 5%+ guarunteed in an online bank.
consider changing your logic to earn more $
I have dealt with Prosper for about 8 months now. Here are some of my thoughts/findings. It’s tough to make it worth it when a single loan default of the minimum of $50 can kill most of any extra interest earnings. It seems you need to have a certain volume in order to make it work. There aren’t enough “excellent candidates” out there to just do AA loans or even B loans in volume. One thing to do is to have enough loans that each repayment from the total amount of your loans could possibly fund another loan. I started with about $1,750, or about 35 loans of $50. This meant that when those 35 loans (at an average of 10%) came due, there was enough in payments to make another $50 loan. Each month then you can add more loans to your portfolio. It’s a snowball effect. But then the problems start. As mentioned before, even a single default can kill your interest. It’s terrible! So in theory, you would need a portfolio multiple times larger than my portfolio in order to be able to absorb those losses. And by continuously loaning out your payments, you are extending the length until you get all of the money back. So personally, i have stopped loaning more out and have pulled my money out and back to EverBank. The risk is too great and it’s discouraging to have defaults. I have had 2 loans default and 3 more now are slowly becoming more and more late. The only way to make it work, in my opinion, is a large portfolio, or a stink load of research. And even then that’s not a guarantee nor cost-effective. It’s a tough product to master.
I’ve been loaning money through Prosper for 1 year now and regret to report two AA rated and one “flyer” NR loans in 3 month overdue collections. I was placing $50 loans over several months to a total of $ 1250 or so. I’ve had three loans pay off early which meant little interest earned and an uptick on the person’s credit report.
But since the two AA rated (which are also my oldest loans) have dropped into collections, I’ve stopped all new loans and plan to slowly bleed the monthly payments out. Which is a pain because there is a $ 25 minimum to move your funds. They do not earn interest while in your Prosper account.
The volume of loans needed to spread the risk as even AA loans don’t seem to be as safe as their Prosper ratings would indicate. I think that some people that have a “real” credit rating would not default on this loan unless they a) did not really have the rating in the first place or b) they not see the Prosper default as having the same effect that a bank loan default has on their credit score.
Anyway, my experiment in micro-banking will spin-down and the $25 sign-up bonus doesn’t seem worth it unless you were getting $25 for each referral as well. I think the bait is not worth the aggravation that most people will find as money gets tied up and kited by Prosper during the three – four days funds transactions into and out of the system.
The probable bad loans mentioned above will wipe out any potential gains for the next three years on the other 20 loans that I have currently in repayment, so the only way to get back into the black is to INVEST even more money. I would take a long long look at Prospers performance and your own risk tolerance.
M2CW
I signed up as a Prosper lender but never funded anything after looking at the rates/defaults chart in context of the 3 year timeframe of the loans. It’s just too much work to manage a portfolio of small loans relative to what you can do through one stop bond mutual funds. If you diversify through a bond fund (many bonds, some conservative and some junk) the recent rate of return is similar (7%-10%). Plus, you only need to keep a mutual fund for (at most) 6 months to avoid a withdrawal penatly.
Also, Prosper has a very amateur feel about it. Amateurs often make huge mistakes. For example, I’ve observed that young attractive women who post photos on Prosper get funded more easily and at lower interest rates than others. This is nuts from a risk standpoint, but understandable from the amateur lender base. If I were to fund loans I’d avoid young women entirely…
I think the return is 100%. If you put up 50 but get 25 back, you are making a 50 investment for only 25. Just my 2 cents.
I was orriginally optimistic about Prosper, but I too am withdrawing my ‘fun money’ a few dollars at a time. It’s a pain to transfer in funds and wait for them to clear to be able to transfer them and the couple bucks back out.
Think of this, if the site was doing well, they would never be doing the $25 bait to get you to sign up. Sure, if you feel lucky, sign up, make 1 loan and then transfer everything back out. BUT be aware that you will be stuck withdrawing your money for 3 years in itty bitty chunks. Not worth the pain if you ask me as if you value your time at minimum wage, you won’t be making that in order to transfer your money out.
I agree wit Bary and Randy, as that has been my experience with Prosper as well. While in theory the concept is good getting a delinquent or worse defaulter borrower completly takes the wind out of your sales. You can’t even contact the borrower with words of distaste. Additionallylikw was mentioned when your money is not invested in borrowers it sits at zero interest.
I will no longer dump cash into Prosper. hate the idea of a borrower f-ing their peers, we’re (lenders) not big business which can absorb these defaults.
I love how you all take advantage of our corporations here in America and wonder why our economy and and stocks are going to hell..
Nicolas,
What are you talking about?
I think he is trying to say that we are taking some sort of advantage of Prosper and the act is somehow damaging the economy….but I’m not sure. Weird argument.
How does this website calculate your “credit” rating? Do you give them personal information?
The credit rating comes from a modified Fico score coming from Experian, it’s described in the help section on the site and although Prosper gives it rosy description that implies it’s better than it is the gist is there. They pull your credit report when you try to create a loan request and some of the information is self reported like income and occupation, this affects the debt to income percentage as if they enter a higher number the percentage goes down. If they can’t ‘verify’ their income (such as they own their own business so no pay stub) they enter zero and this makes a really HIGH percentage of debt to income. Address verification is done via Prosper mailing them a post card with a code that they have a certain number of days to come back and enter the code.
Personally, I don’t see much correlation to the credit rating and how likely they are to repay except the bottom end of the scale where it seems to be a higher default rate. Look around on the prosper forums and you will find references to the different sites that have sprung up to analyze the data on the loans, it’s not a pretty picture. Amazingly enough the ‘bad’ information seems to disappear on the Prosper’s queries over time, but you can find it on the analysis sites. I am not sure if this is somehow due to my misunderstanding of their queries, but that alone makes me really reluctant to put anymore money in the site.
I did not simply mean prosper.. it’s a whole pandemic with you cheap skates.. if you want money why don’t you work for it instead of trying to rip off corporate America all the time.. wow good work you can swipe some fast money out of the places that just happen to provide millions of jobs and support countless families
Let’s see…. is Prosper giving out $25 because they
(a) want to do so out of the goodness of their hearts, or
(b) because they want to attract new customers to try their product who wouldn’t otherwise join up, with the hopes that many of them will borrow lots of money from them and generate profits, so they can get rich?
Advertising is simply a numbers game. I’d give out $5 to everyone if I could make $100 from every 10th person, and that is exactly what Prosper is trying to do. Who’s greedy in that picture?
Wow, Nicolas, you have a tremendous misunderstanding of capitalism and what corporate America is all about…if a supermarket is offering free cheese as samples would you pass it up because you did not want to take advantage of the farmers or are you more likely to buy something as Jonathan points out. I am sure that Prosper has a done a through financial analysis that shows this $25 promotion will not lose money because they will float the influx of money into an interest paying instrument – and more likely then not that interest will pay for the promotion – along with all the people that never bother to remove the funds or the fact that the funds will be tied up for 3 years as a loan to the hard-working people of America.
I don’t think this blog and its readers are out to cut America’s life blood, in fact, I think most of us represent the drive, determination and discipline that puts the great in American industry.
what about the borrowers who are reinvesting in prosper? that seemed kinda wierd to me that so many people were so into it. Like a cult or something. Are they trying to develop a large enough portfolio to minimize risk or are they having success and are confident in their returns?
I decided that was not where I wanted to put my money. Nicolas wilson, are those people the bigger cheap skates who just want to rip off others instead of working for it?
I signed up via your link and have received the $25 bonus. Did you receive the bonus too? Was there a splitting of bonus like Emigrant?
I signed up for Prosper a while ago but haven’t funded my account. Tell me if you get the $25 bonus if you signed up a while ago and just loaned out now.
I just funded two loans myself over the last week. I initially funded many months ago before this promotion started – no $25 bonus for funding. I would re-sign up under a different username, perhaps? Not sure if that would help.
I have received a few awards for referring other people, thanks! I get $25, you get $25. Win-win, just how I like it.
i just registered for a prosper account – had always been curious and the
$25 was enough to convince me.
However, I do not see this $25 in my account — any idea when it will be posted? Has anyone else seen it?
Did you successfully bid and fund a loan? Gotta do that first, I know people definitely have gotten their $25.
follow-up to my earlier post – all three loans defaulted including this one:
AA credit grade
Homeowner Homeowner Bank account verified Account verified 8% debt to income ratio
Sold to a debt buyer at approx. 10% balance….wipes out any gains I had over a modest 2K portfolio of “high” quality loans.
Lender beware!
Thanks for the info guys. I have been evaluating prosper from a lender’s perspective and also believe that the risk is much too great without a large investment in time (and even then it seems too risky). I was very optimistic on the whole peer to peer idea but now feel that the model may begin to crumble before it even gets really going.
Wow. Sad to hear all the bad reports on Prosper. I’ve been using it for a year myself and haven’t had any significant problems. I invested $1000 initially, and currently I have 18 loans from AA to HR at an average interest rate of 13.87%. There have been a couple late payments, but they always caught up. I also send a note when they’re late asking if there’s a problem and anything I need to be aware of. Maybe it helps when they know that someone is paying attention.
Good luck to you.
Cheers,
hey Quick,
Just in case you’re still reading this thread I wanted to ask you if you wouldn’t mind volunteering a sample of how you’ve phrased those notes to borrowers. I myself have meant to send such notes many times, but have sat there with my fingers hovering over the keys, typing a word, backspacing, for quite a while before giving up. I’m not good at that kind of thing.
-Amanda
@Amanda,
Sure, no problem. I don’t really have a template, I just try to keep it short and mostly positive, while conveying a sense of partnership and responsibility. Something like,
“Hi xxx, I’m one of the lenders on your Prosper loan and I noticed that you haven’t made the latest payment yet. Hope everything’s alright. Please let me know if there are any problems so that I can change my plans accordingly. Best wishes.”
That lets them know that the lenders (at least one, anyway…) are paying attention and that they’re just regular people, too. It’s the motivation of expectations and responsibility. If you know other’s are depending on you to be somewhere or do something, then you are more likely to live up to those expectations.
Or at least that’s the idea. I’ve really only had one loan with late payments (although it’s happened three times), and he’s never responded to my note. 🙂
Cheers,
Just curious, is Prosper still offering $25 sign-up bonus? or did I missed it…
Do you have another review update on Prosper? Has anything changed since last year?