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Zopa

2 (10%)

Lending Club

3 (15%)

Globe Funder

1 (5%)

Loanio

4 (20%)

Virgin Money

2 (10%)

Community Lend

0 (0%)

Prosper (if you think prosper is better than above)

8 (40%)

Total Members Voted: 20

[FeistyTiger30]

  What are your views of the new P2P sites?
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Prosper Increases its Loan Fee by 100%
By Jim Bruene on January 7, 2008

As noted in our recent research report on the P2P lending market (here), the exchanges need to boost revenues to remain viable. Even with scale, a 1% borrower fee and 1% servicing fee just doesn't provide enough revenue with the relatively small loan sizes currently being funded.

For example, using Prosper's previous pricing on a typical $7,000 loan, it would earn about $130 in the first year, then another $50 for the remaining two years of the loan (see note 1), for a maximum of $230 in lifetime revenues per loan.

So until loan sizes increase dramatically as secured notes become more common, Prosper has raised its prices for the core portion of its loan demand, the alt-prime and subprime portion. The company left its superprime, class AA price alone because it competes with banks and credit unions for this type of borrower. 

As you can see from the table below, most loan origination fees increased by 1 point, although C and D loans were increased 2 points. Looking at the company's mix of business during the first half of 2007, the new pricing would have doubled its loan origination revenue from about $500,000 to just over $1 million. The weighted average fee under the prior pricing was 1.2%, compared to 2.4% under the new formula.

Here's the new price plan effective Jan 4, 2008 as announced in the Prosper blog (here):

    Type   New Price   Previous  Change  Avg Loan*  Avg Loan Fee*
    Prime 
      AA           1%               1%             none             $9,000            $90
      A             2%               1%            +1 point         $10,300         $210
    Near Prime
      B             2%                1%           +1 point         $9,800          $200
      C             3%                1%           +2 points       $8,400           $250
      D             3%                1%           +2 points       $6,500           $195
    Sub-prime
      E             3%                2%            +1 point        $4,500          $135
      HR           3%                2%            +1 point        $3,000           $90

    Weighted
      Average*** 2.4%          1.2%

    *Average loan size during the first half of 2007 per company
    **Loan origination fee deducted from proceeds of loan, there is no fee if the loan does not get funded
    ***Using the loan mix from the first half of 2007

Note:
1. It depends how the servicing fee is calculated. At Prosper it's calculated on the outstanding loan balance which for a $7,000 loan averages to approximately $6,000 in year 1, $3750 in year 2 and $1250 in year 3.

[jmathree]

Do we get the standard choice....WGAF?

[HollowOak]

Why only one choice?

[BigGulp]

Do we get the standard choice....WGAF?

I can't vote without a WGAF choice.

...Gulp

[FeistyTiger30]

WGAF...what is that?

[traveler505]

I could tell you, but I'd have to suspend myself.

But it's a traditional option for Prospers.org polls, thanks to Bama.

[ira01]

WGAF...what is that?

http://www.prospers.org/wiki/Glossary#anch_WGAF