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[onthefence]

So one of Prosper's new features are "Bid Floors".  Essentially the lowest rate you can bid a loan for is the projected loss for the Prosper Credit rating + the average rate for a 3 year CD.

Hmmm... protecting lenders from their own stupidity.  Well the only other route would be lender education, but that is near impossible.  If Prosper's loss rates are correct, then this ensures that most lenders will not lose their bottoms left & right as many have been doing.  This of course creates a lot of negative word of mouth.

And it avoid situations like this:
http://www.ericscc.com/stats/lender-return-distribution (set Avg Age > 365 & Loan Count >30)

[ira01]

So one of Prosper's new features are "Bid Floors".  Essentially the lowest rate you can bid a loan for is the projected loss for the Prosper Credit rating + the average rate for a 3 year CD.

Hmmm... protecting lenders from their own stupidity.  Well the only other route would be lender education, but that is near impossible.  If Prosper's loss rates are correct, then this ensures that most lenders will not lose their bottoms left & right as many have been doing.  This of course creates a lot of negative word of mouth.

That's a mighty big "if."  When has Prosper ever done anything right?

[pioneer11]

So one of Prosper's new features are "Bid Floors".  Essentially the lowest rate you can bid a loan for is the projected loss for the Prosper Credit rating + the average rate for a 3 year CD.

Hmmm... protecting lenders from their own stupidity.  Well the only other route would be lender education, but that is near impossible.  If Prosper's loss rates are correct, then this ensures that most lenders will not lose their bottoms left & right as many have been doing.  This of course creates a lot of negative word of mouth.

And it avoid situations like this:
http://www.ericscc.com/stats/lender-return-distribution (set Avg Age > 365 & Loan Count >30)

The graph plotted at the link you posted goes to show that all of the ROI projections provided by Prosper are criminally optimistic.  New lenders need information like this.

Nominate for lobby.

[cowdog]

Here's the chart graphic:

[Urbi_et_Orbi]

Second for lobby

[Mark12547]

Second for lobby

OnTheFence, are you good with this thread being moved to The Lobby?

[onthefence]

Second for lobby

OnTheFence, are you good with this thread being moved to The Lobby?

Look at my Signature.

[112233]

what if you want to help a dear friend with an altruistic bid of 0%?

[Urbi_et_Orbi]

If someone doesn't intend to re-pay, the rate is irrelevant.  The loan is no safer at 30% than at 10%.  The floor is meaningless.

[ira01]

If someone doesn't intend to re-pay, the rate is irrelevant.  The loan is no safer at 30% than at 10%.  The floor is meaningless.

I wouldn't say that the floor is meaningless.  Collecting higher rates on those loans that do pay will compensate, at least in part, for those loans that don't.  That should boost overall ROI.  It also prevents another Muleshoes.

[onthefence]

what if you want to help a dear friend with an altruistic bid of 0%?

The Prosper has cut themselves out of that market.  
As a side note, technically if you offer someone a 0% or below market rate loan, then they are supposed to owe taxes on the interest free gift.

They also have kind of killed that market with the 3% front cost +1% on going cut.

A Virgin loan, or a quick & easy law pack loan document would be a better choice.

If someone doesn't intend to re-pay, the rate is irrelevant.  The loan is no safer at 30% than at 10%.  The floor is meaningless.

I wouldn't say that the floor is meaningless.  Collecting higher rates on those loans that do pay will compensate, at least in part, for those loans that don't.  That should boost overall ROI.  It also prevents another Muleshoes.

Agreed.  On any single loan the rate doesn't matter if the person does not intend to pay you back.  But collectively, if no one is bidding below the estimated risk of loss + the current market CD rate, we should no longer see Average lender ROI look like this:

[NewHorizon]

It also prevents another Muleshoes.

For the convenience of onlookers, Muleshoes was of a mind to give low-interest Prosper loans to high risk people.  And he had deep pockets.  Here's how his portfolio is performing as presented by two sites:
http://www.lendingstats.com/lenders/MuleShoes (a few months outdated as of this writing)
http://www.ericscc.com/lenders/MuleShoes

In short, he's lost over $260K of the $400K he loaned out.

[ira01]

what if you want to help a dear friend with an altruistic bid of 0%?

The Prosper has cut themselves out of that market.  
As a side note, technically if you offer someone a 0% or below market rate loan, then they are supposed to owe taxes on the interest free gift.

You can give anyone a gift of $13K a year without owing any taxes or having to file a gift tax return, so that isn't an issue with Prosper loans.  And it is the giver that owes taxes on amounts in excess of the limit, not the recipient (there is also a $1M lifetime exclusion, so even on annual gifts greater than $13K, there is still no tax due until $1M has been given away, although a gift tax return must be filed).

[onthefence]

It also prevents another Muleshoes.

For the convenience of onlookers, Muleshoes was of a mind to give low-interest Prosper loans to high risk people.  And he had deep pockets.  Here's how his portfolio is performing as presented by two sites:
http://www.lendingstats.com/lenders/MuleShoes (a few months outdated as of this writing)
http://www.ericscc.com/lenders/MuleShoes

In short, he's lost over $260K of the $400K he loaned out.

To further expound on this, Muleshoes had a hypothesis that High Risk borrowers defaulted on their loans due to the high rates of interest they were normally charged.  He thought that if he gave those same borrowers who were really in need a break, that they wouldn't screw him over.  As you can see from the links to his profile above he turned out to be very very wrong. 

It's a shame.  His heart was in the right place.  And we all would have loved for him to be proven right.  But that's not how high risk borrowers work.

[Faithful_Steward1]

It also prevents another Muleshoes.

For the convenience of onlookers, Muleshoes was of a mind to give low-interest Prosper loans to high risk people.  And he had deep pockets.  Here's how his portfolio is performing as presented by two sites:
http://www.lendingstats.com/lenders/MuleShoes (a few months outdated as of this writing)
http://www.ericscc.com/lenders/MuleShoes

In short, he's lost over $260K of the $400K he loaned out.

To further expound on this, Muleshoes had a hypothesis that High Risk borrowers defaulted on their loans due to the high rates of interest they were normally charged.  He thought that if he gave those same borrowers who were really in need a break, that they wouldn't screw him over.  As you can see from the links to his profile above he turned out to be very very wrong. 

It's a shame.  His heart was in the right place.  And we all would have loved for him to be proven right.  But that's not how high risk borrowers work.

Actually I remember having arguments with him and he actually thought he'd make money on these loans. Thus I wouldn't say he was doing it as an act of charity.