Prosper Written About in the New York Times

If you want to read a great book that will turn a lot of ecomonic theories on their heads, read Freakonomics. It's a great book. The author, Stephen J Dubner, is apparently a fan of Prosper and makes some interesting observations about what he sees in the marketplace.

The article is called "Adopt and Prosper?", and points out how lenders are often swayed by a good cause.

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The Prosper listing creation process has now been fixed at 7 days. This is intended as a means to simplify the loan generation process. Its also viewed as a way to create more fundable listings.

I'm not sure I agree with that. Some loans are more sure to fund than others, especially in the higher credit ratings of AA and A. I would have allowed those listings to choose 3 days as an option.

I think one of the intents by standardizing at 7 days is to eliminate the desperate borrower syndrome that 'I need money, and I need it fast' which are more than likely to become defaults over time. Prosper stands out among other peer to peer lending sites in that it allows high risk borrowers to create listings, this freedom has certainly been a double edged sword.

Some good news from Prosper Days 2008 for both borrowers and lenders: Prosper is planning to modify their policy on when payments are pulled from borrowers bank accounts to better match their pay days.

Up until now, the date that a payment is due has always been dependent on the initiation date of the loan. Often times this ended up being at the worst time of the month, for example days before someone’s paycheck arrived in their bank account. Often times this created late payments, incurring borrowers fees and causing the lenders to also lose money as fees are passed on to them.

Soon, payment dates are going to be matched with the borrowers pay day. This is an excellent solution. Prosper is going to target the payment date to match the date a borrower is paid from their jobs. This might not do a lot to lower default rates but will certainly lower the amount of 15 and 30 day late loans as borrowers wait for their next pay period to make a payment.

One of the fastest turnoffs for me when judging the merits of a loan request on Prosper is a meager description of why the borrower needs the money. I have seen descriptions as tiny as “Got some bills to clear up” or “Consolidating cards”. This, frankly, won’t do.

It’s been proven that the longer the description (within reason) the better the chances of getting funded are. As lenders, we want to know what the money is for and why you feel you are qualified for the loan. While many lenders on Prosper don’t care and just look at the numbers, most don’t.

There are a few reasons a short description is a turn off. First, it appears the borrower has something to hide. Second, it appears the borrower doesn’t really care about this listing implying they don’t care about paying it back. Next, lenders want to know if you have writing skills, this may sound ridiculous but its true: when something is very badly written it demonstrates a lack of care which implies no repayment. Furthermore, lenders just want a basic idea of who someone is, the way a borrower describes their needs tells lenders a lot.

As far as better descriptions go, there is certainly room for improvement. My biggest pet peeve is the “magical thinking” listing that seems to imply an alignment of the stars or some other metaphysical event that will cause Prosper lenders to flock to a listing. This attitude implies the loan will be repaid magically as well. A good description does 4 simple things:

• Clearly describe why the loan is needed
• Clearly describe your financial situation
• Explain any marks on your credit
• Clearly describe why and how you intend to pay

You’d be amazed how many loans don’t even achieve one of them. There is a second good reason to do this: once you lay this information out, it should be obvious to you as well whether you can really afford this loan. If your numbers don’t clearly demonstrate enough income to fund the loan consider asking for less or changing your budget so you can actually afford it.

Credit card consolidation loans are among the most common types of lending taking place today. Often times I read about people that have multiple cards at 20% - 30% interest rates. Even for cards at lower rates, depending on your credit, getting a consolidation loan is a great idea, and Prosper can help.

If you have a significant amount of credit card debt things can begin to spiral out of control with bills piling up. The money going to finance charges on credit cards eats up income needed for other important things and as you pay small amounts every month, it can look like you will never get out of credit card debt. This is why a credit card consolidation loan thru Prosper can help.

Prosper is an online marketplace like Ebay, except for loans. You post a loan request and people bid on your loan until its funded. If your loan gets funded early, the interest rate can go down as lenders start to bid lower and lower on your rate.

For a variety of reasons, its hard to pay off your balances every month. While credit cards can be convenient and credit card providers are very willing to give you cards, the interest rates they charge are often much higher than average.

If you have excellent credit, you can get a Prosper loan from as little as 7% or 8%. If you are paying 20% interest now, you can save a lot of money and pay the balance off much faster.

For example, if you owe $10,000 and are paying 20%, you are paying $2,000 a year in interest. Just to service this debt, you must pay almost $170 a month in interest! You have to pay more just to lower the balance.

But let’s say you got a Prosper loan at 9% to consolidate the debt, that would mean you would only need to pay $75 in interest, a savings of almost $100 a month in interest. This can have a huge impact on how quickly you get out of debt.

Prosper loans are amortized over 3 years. You can make payments any time you want, and you can pay the loan off early without any extra fees. Prosper is also a very safe place to borrow money.

One question that I seem to get over and over via email thru my blog is if Proser is safe for lenders and borrowers to use. In a nutshell, yes, it is very safe.

Prosper has many safeguards for both lenders and borrowers to ensure that things like personal information is not divulged and fraud cannot take place as a result of the website. Prosper also has a community of over 500,000 members to support eachother. In the two links below, you will see a long bullet pointed list of things which show why Prosper is a safe place to borrow and lend money.

Read the links below and judge Prosper’s features and safeguards for yourself. Peer to peer lending is growing fast and Prosper represents the leading online marketplace for this service.
If you are interested in becoming a lender, Prosper makes the process of joining and funding loans very safe and easy, you can read in detail about Prosper’s features here:

One question I seem to get over and over via email is if Proser is safe for lenders and borrowers. Safe is a relative term and would have to consider their own personal level of risk and security. But as far as the service Prosper.com is concerned, yes it is safe.

Let me take a moment to mention some of Prosper’s features and safeguards, from this list you can make your own judgements.

Is Prosper safe for Lenders?

If you are interested in borrowing money using Prosper, your identity is safe and you have complete control over your listing and eventually your loan. You can read further here:

Is Prosper safe for Borrowers?

If you would like to explore person to person lending, you can join Prosper here.

Prosper is a safe marketplace to borrow money from people just like yourself. Loans are originated by Prosper and your payments are pulled directly from your bank account by Prosper. Here are some of the points which make Prosper a safe place to borrow money from other people:

• Prosper has over 100 million dollars in loans and over 500,000 members
• Prosper is licensed in every state it operates in
• Prosper verifies your credit, bank account and homeownership
• A Prosper loan can increase your credit score
• Prosper has an identity theft guarantee
• Loans are all given a credit grade, AA, A, B thru E and HR (high risk) depending on your credit and other factors
• Loans are reported to credit bureaus
• If you fail to make the required payments, your case is sent to a collection agency
• Detailed information about your credit history in your listing cannot personally identify you
• All identifying information about you is kept private, Prosper uses a screen name similar to that of Ebay
• If Prosper should go out of business, your loans and credit score is safe, the loan will continue being serviced via a third party
• You can pay off your loan at any time without penalty
• All loans must be reviewed before you are approved to ensure the listing is accurate
• There is a large community of lenders and borrowers out there willing to help
• You can re-list your loan if it does not fund the first time
• Prosper is regulated by privacy and fairness Governent acts
• Interest rates will not change thru the term of the loan

Now, there is no guarantee your loan will fund, you need to provide as much information as you can and make sure the interest rate you are offering is competitive. You can learn more about getting a Prosper loan here and you can join Prosper here.