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[DrZee]

Joined Prosper to see if I could do better than current CD, Money Market and Bond rates. Looks good until you figure in the risk of defaults AND the fact that your money is tied up for 3 years. If I average say 6% (and that seems optimistic based on what I read here) and have $20,000 loaned out vs. $20,000 in a 4.7% money market, at the end of three years I would be around $500 ahead when you figure that the money market compounds daily and the loans don't compound at all. And, 6% seems VERY optimistic. So, someone tell me how this makes sense. Reading posts here and looking at lendingstats.com has me rethinking this whole business. Also I notice that two of the speakers  (L5 and Pensioner) on the lender video have lots of money tied up in loans but aren't doing much bidding or loaning these days according to lendingstats.com.

[beerbud1]

{edited}

[leporello]

This thread should be moved to The Lobby.

[Urbi_et_Orbi]

...or general Prosper chat...

[Nontyper]

If I average say 6% (and that seems optimistic based on what I read here) and have $20,000 loaned out vs. $20,000 in a 4.7% money market, at the end of three years I would be around $500 ahead when you figure that the money market compounds daily and the loans don't compound at all.

I think you would have to show me this math...

[Greebo]

If I average say 6% (and that seems optimistic based on what I read here) and have $20,000 loaned out vs. $20,000 in a 4.7% money market, at the end of three years I would be around $500 ahead when you figure that the money market compounds daily and the loans don't compound at all.

I think you would have to show me this math...

I think he's factoring in reinvesting.

DrZee - if you simply put in $20,000 made one loan at 6% (and if you carefully pick your lending, you can do better), you would end up with $21,903.82 (click # for math).

However, if you put $20,000 in, every month you're going to get payments back.  If you turn around and reinvest those payments into other loans, and you average 6%, then your numbers work out because you can maintain 6% a year.

And yes, you *can* do better than 6% - even after defaults - if you are very selective about your loans and are willing to write off most lates as losts. Its a lot of work but it can pay off reasonably.

But even if you lend with careful analysis, cherry pick the loans, and find good loans every week to put your money in, there are quite a few MORE reasons not to use Prosper to do it.

You'll note that I'm making something on the order of a minimum of 9% at the moment, and I'm no longer supportive of Prosper.  Not unless they have a major house cleaning and change their attitude towards what COMMUNITY lending means.

[joezyz]

DrZee,
You also have to take into account Tax. (I hope someone has a link to the detailed post).

Loans are not taxed as CapGains (15%) but at regular income levels.

[mothandrust]

There are many other risks besides the possibility that the borrower will not pay on the loans.  You are entrusting every loan in your "portfolio" to a single company, and not GE or Coca-Cola, but an internet startup with private financial statements, an untested business model, recent competitors, and incompetent management.

By all means, compare your Prosper returns to something, but not for heavens sake CD's or Treasuries or MM accounts.  Compare your expected ROI to the yields on CCC/NR rated 3-year bonds, which are over 13%. 

Now look at who on Prosper is making 13%+ with 20+ loans that are 365 days old--Not a single lender is, not even jwitchel.

But over 100 are making 8%, which tells me that the interest rates on Prosper loans should be at least 500 points higher than what lemmders are bidding them down to.

[samandiriel]

While I  still have a green circle, none of my 14 loans have hit a year yet (7 months is the oldest).

Despite being fairly good at picking winners so far, I've stopped investing in Prosper as of last week for two reasons:

1, I am not certain Prosper itself will be around to service my loans to completion - if not, it will be a huge pain in the ass and whatever company takes over servicing may charge more for the service than Prosper does.  I'm here for the convenience of the platform, and the idea of helping out people while helping myself via p2p loans.

2, the forum deletions coupled with the blanket erasures of all profiles containing any links to prospers.org says to me that the management is not agile enough to effectively manage the company - strong supporting evidence my worst fear above.

[PLP]

My original intention was to jump in lend quite a bit, but I decided to start small in lending to see how it goes because many people are not earning great returns.  The S&P 500 is probably a better investment in terms of diversification and is taxed at a lower rate (capital gains) as long as you hold it long term. Plus it is more liquid if you need your money for dire emergency.   
 
For my P2P loans, I decided to go with Lending Club because you can double the number of loans you can spread your risk across which reduces your exposure to any one individual by half.  (They allow $25 minimum investments in each loan.)  If you want to invest $5K quickly they have a special 5% bonus program going on as a promotion right now. Also, it is not a reverse auction so if you like the rate and select the loan, it is yours as long as it funds so you don't have to spend a great deal of time bidding to find good loans. 

To follow up the other's criticisms of Prosper's actions. I have concerns when a a company deletes a large body of knowledge about its product because some of that knowledge is negative.  They need to attempt to fix the problems rather than creating FORT Prosper.  There was a great deal of information on the original prosper forums that was very useful--both to new lenders and borrowers.  I was just around about a week before they nuked it and learned a great deal from what people had to say. 

For all I know Lending Club will turn out to be the same, but for now they are not acting like that.

[DrZee]

Sorry for posting this in the wrong spot. It was my first time on line here. The information I have picked up on this site has made me much less enthusiastic about loaning money on Prosper. Lots of delays, money tied up, and from what I read, none too open about letting folks know about the problems. And, for me, I am not someone who takes getting ripped off with grace. I was a professional and when I worked hard for a client and they didn't pay their bills I was ready to tear their hearts out or send someone out to break their kneecaps. Never took action but just thinking about these people kept my blood pressure up way to high. If I averaged 12% but had to look at defaults of people who BS'ed to get loans out of me, I would still not be happy. Glad this website is here because it all sounds so good on Prosper.com.

[cowdog]

Sorry for posting this in the wrong spot...

You didn't post in the wrong spot, this section is public and so is indexed by search engines, and it is this type information on Prosper that needs to get out to prospective lenders, since Prosper seems bent on a cover up campaign as to real returns. Your post was moved for this reason, not because you did anything wrong.

...You are entrusting every loan in your "portfolio" to a single company, and not GE or Coca-Cola, but an internet startup with private financial statements, an untested business model, recent competitors, and incompetent management.

Just to add to this, remember that money put into Prosper is MORE than just gone... it really has no value, or at least a value that is seriously diminished. If one invests in a CD, stocks, bonds, one can remove the money at any time (albeit with possible penalties), but at least some of it can be recovered... these investments have value in the real world, even if greatly discounted.

A Prosper promissory note, on the other hand, is basically an IOU which has no backing except from an individual, and hence worthless to others; there is no market and we are prohibited from selling them anyway. Trading US dollars for worthless paper is really not a good idea, and looked at in those terms, one might be better off trading junk bonds or penny stocks.

The edit ---> Funny thing is, looked at in this way, junk bonds or penny stocks have the possibility of returning tremendous amounts of money, perhaps double, triple, or much much more... yet with Prosper, the possible return is capped by the interest rate, so profit is in fact limited compared to other risky investments.

[Caladia]

Sorry for posting this in the wrong spot...

You didn't post in the wrong spot, this section is public and so is indexed by search engines, and it is this type information on Prosper that needs to get out to prospective lenders, since Prosper seems bent on a cover up campaign as to real returns. Your post was moved for this reason, not because you did anything wrong.
...

Cowdog, DrZee just means that the post was originally in "Introductions" (which actually could be argued as a logical place for it), and a couple of people suggested it be moved to the Lobby instead.  Both are already public forums.  Threads don't generally get moved from from the private forums to the public ones, because the OP and everyone who responds to the thread has an expectation of privacy when posting in the non-public areas. 

And DrZee, welcome to the .Org forums! 

[jmathree]

*poof*

(temporarily forgot where we were)

[snake]

this is why you should have second thoughts about Prosper:

http://www.nytimes.com/aponline/business/AP-Credit-Card-Crunch.html?

most borrowers using Prosper are below prime and have tapped out conventional forms of credit