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[HollowOak]

Patio11 says:

While I don't have any extra money around to help him this time (though I REALLY wish there was an explicit refi feature so I could instruct Prosper to take what I currently have on the loan and bid at whatever price necessary), I thought I would give you guys the opportunity. 

Read the entire quote and discussion inside.

[Mark12547]

The participants on that thread are feeling some of the same inner conflicts that I feel.

I have issues with a number of Prosper.com's actions, issues that are discussed elsewhere (such as in my interview on bamalucky's blog).

I think it is great that some borrowers can and do improve their credit, as well as be able to make use of that improved credit by refinancing at a lower rate to save more interest, now that they have demonstrated even more responsibility with borrowed funds. Many of us aren't just strict "by the numbers" people; we like to see others be able to improve their lot in life.

On the other hand, one does lose some interest (dollars) if one is on a loan that got refinanced; one has to find another place to deploy the returned funds, either at Prosper, or someplace else.

The My Best Borrower Is Refinancing thread in the  "About Prosper" > "Lenders - General" shows some of the conflicting feelings we share.

[joezyz]

All,
I aslo have a conflicting opinion.

While this is my humble opinion, as invaluable or un-valuable as it may be, I am very uncomfortable with my lenders taking a second loan.  I wish Prosper would require all first loans to be paid off with the proceeds from the second loan.  If any lenders wanted to, they could either bid, or if Prosper would make a new feature, they could bid the original amount on the second loan.

My bidding was based upon them not having more debt than what was listed.  I do realize that more credit card debt, or home equity debt could also be added, I have tried to bid on borrowers who wanted to use Prosper to reduce debt.

As always, JMHO

[xraider]

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.