Steve
What approximate ROI are you hoping for?
I'm targeting 12%
Don't take this the wrong way, but -- bwahahahahaha!
There are roughly 15,300 lenders with an average loan age > 730 days (2 years), and > 20 loans made. Of those, exactly
13 have ROI's of 12% or more. You need to be in the 99.9th percentile to do that. Maybe you are -- but I wouldn't count on it if I were you.
ResearchPro is an excellent example -- he spent a lot of time crunching numbers, and created a whole mathematical model that he was convinced was going to get him an ROI of 10%. With an average loan age of about 600 days, his ROI has plunged to around 4%. And it will almost certainly be lower by the time he's done.
I know you think this time is different," but surely you know the usual result when people think that way. Certainly the average borrower on Prosper today is better than in the past, due to Prosper raising (several times) the minimum credit score required to get a loan. I believe that will make the performance of current lenders better than those in the past, but not enough to make Prosper a worthwhile investment. Also, while you seem to believe that Prosper is now attracting excellent borrowers due to lending conditions elsewhere, you also state that your average portfolio interest rate is 28%. I hate to tell you, but you are NOT attracting excellent borrowers paying those rates. Even if your borrowers have good credit/Prosper scores, if they are willing to pay such high rates, there are facts about their credit and/or overall financial condition that you cannot see making them a much worse risk than you think. You might want to read
http://www.prospers.org/blogs/ira01/2008/08/09/loans_with_very_high_rates_for_their_cre.html. Don't forget, even though Prosper provides more credit information than lenders got long ago, you still only get a small portion of the borrower's credit report -- much less than what a bank or other potential creditor sees.
Also, despite what you say, there is still plenty of inexpensive credit available from mainstream sources for people with excellent credit. I recently bought a new car with a five-year 0.0% interest rate loan. Sure, that is subsidized by Toyota to help them sell cars -- but there are a ton of new car loans available even from credit unions for 5-6% -- those obviously aren't subsidized at all. Even for unsecured loans, I get tons of balance transfer and no questions asked cash advance checks from my credit cards offering 12-month periods at around 5%, which would then go to 14% or so after the one year. The origination fee is 3-4% (Prosper is 3% for all but AA borrowers, and .5% for them). And sometimes I get even better offers.
And don't even get me started on all the slimy ways that Prosper conducts its business.
I think everyone here wishes you all the best (and you are certainly welcome) -- but you aren't going to hear us blowing sunshine up your ass about how much money you're going to make. The reality is that you will probably not make much money, and certainly not enough to compensate you for the risk.
