I am also very uncomfortable with borrowers taking out second loans without being required to repay the first.
Some apparently believe that borrowers can go elsewhere and obtain loans, but I'm not so sure that's always the case. To the contrary, I'm concerned (particularly with borrowers who have not improved their credit with their first loans) that borrowers are hoping that six payments on their Prosper loan will cause lenders to think that borrowers treat Prosper differently than their other creditors. I'm concerned that having that additional debt will just delay the collapse of the house of cards, this time damaging TWO sets of lenders instead of just one. If the borrowers ARE creditworthy by the time they seek a second loan, they are likely to qualify for 0% balance transfers or other nice things instead of higher rate loans here. If they're NOT creditworthy, it's a risk I don't want to take.
When borrowers refinance, it's a different story. My best borrower was a D when he borrowed $25,000 at 20.5%. Several months later, he repaid his loan in full through a series of smart balance transfers and returned to borrow $15,000 at 12.17%. I was happy to bid on his second loan because he had repaid his first. If he had sought $10,000 the first time and wanted $25,000 which would have included repayment of his first, I would have bid on him, as well. However, had he paid off $5,000 of his first and sought a second to re-borrow that $5,000, I would not have bid on that.
This is one of the things about Prosper that has me most upset. They did nothing to protect lenders on first loans if the borrower seeks to take out a second.