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RE: Full disclosure and $25

Comment comment by jmarkdavison on 19 June 2007

This is very intriguing. I heard about Prosper a few months ago but now that I know someone who knows someone who uses it, I'm considering joining as a lender. I make 5.08% on my USAA savings account- good but not great compared to 10%+. With a stock market slide inevitable, Prosper might be a good move.

I get the default rate info. It's great how you Prosper aggregates the mini-loans from lenders, thereby reducing the risk. I get that.

What makes me curious is this: why don't the A or AA folks just borrow from a bank? The rates seem high compared to banks'. My perspective is that of someone who has only ever borrowed with collateral--a car or house--maybe unsecured loans just run higher, but aren't a lot of these people using their home equity as collateral?

Tomtolman, let me know what you end up doing. I intend to ease into the lending business, with a couple hundred bucks I can afford to lose.

Very interesting!

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RE: Full disclosure and $25 by Anonymous :: NR0

That is how I started, a couple of hundred at a time until I had a good feel for the site. Your questions about why the AA or A borrowers don't go to a bank for a better rate is a really good one. I have AA credit with no delinquencies. At my bank, which happens to be Wells Fargo, the current rate on a 36 month unsecured $10,000 Personal Loan is 11.44%. This varies by State and loan amount - they have a tool on their website that helps you calculate the current rate. For home loans the rates are less, but there are also upfront fees, and not everyone is a home owner. For car loans you can also get a better rate, but not everyone with A or AA credit has a car that is completely paid off to use as collateral. You can see the average loan rates for Prosper at http://prosper.com/lend/rates.aspx&referrer=mateo . I think what you will find is that Prosper rates end up being very comparable to loan rates that you would get from a bank on a Personal unsecured loan. I have funded loans to AA borrowers for between 8.5% - 12% which seems right in line with what banks charge. Also, I am wary of giving loans to people who are trying to use it for buying a house or something where they should be able to find traditional financing - I prefer loans where people are doing things like refinancing their credit card debt at a lower rate.

Posted 19 June 2007, Hide, Parent, Reply
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Why would a borrower use Prosper? by tomtolman :: NR5

Mark - in addition to answering your question in here, Matt has written a deeper response here:

Why would a borrower use Prosper instead of a traditional bank?

He pulls some examples of rates for personal unsecure loans for people with good credit.

    • Key Bank is at 12.24% with $99 in fees for a $5000 loan at 36 months
    • America First CU is at 12.75% for a $1000 loan at 36 months
    • Chase is at 13.49% with $75 in fees for a $2500 loan at 36 months
    • Bank of the West is at a whopping 16.25% with $50 in fees for a $5000 loan at 36 months#
Posted 21 June 2007, Hide, Parent, Reply