Tuesday, December 19, 2006
Who are the borrowers?
Friday, December 15, 2006
What exactly happens if I'm late?
Below is the schedule that Prosper follows in the event of a borrower missing a payment due to insufficient funds (NSF). At any point in this process, if your outstanding payment is paid in full, your account will be returned to "Current" status.
One week before payment is due
- You will receive an email from Prosper indicating the date and amount of your upcoming payment.
- On the day your payment is due, Prosper will attempt to withdraw payment from your bank account.
- You will be charged a failed payment fee of up to $5, depending on your state lending limits. Failed payment fees are collected by Prosper.
- You will receive an email from Prosper indicating the amount due, fees accrued, and notifying you about upcoming payment attempts.
- You will receive another email from Prosper indicating the amount due, fees accrued, and notifying you about upcoming payment attempts.
- Prosper will attempt to withdraw payment from your bank account a second time.
- You will be charged a second failed payment fee of up to $5, depending on your state lending limits. Failed payment fees are collected by Prosper.
- You will be charged a late payment fee for being more than 15 days late on your monthly payment. Late fees are the greater of $15 or 5% of the unpaid installment amount, depending on your state lending limits. Late fees are passed on to lenders; Prosper does not profit from late fees.
- You will receive an email from Prosper indicating the amount due, fees accrued, and notifying you about upcoming payment attempts.
- If you are a member of a group, your group leader will receive an email from Prosper notifying them about your delinquency and the effect of your delinquency on the group's reputation.
- Prosper will attempt to withdraw payment from your bank account a third time.
- You will be charged a third failed payment fee of up to $5, depending on your state lending limits. Failed payment fees are collected by Prosper.
- You will receive an email from Prosper indicating the amount due, fees accrued, and notifying you that your loan will be turned over to an outside collection agency for collections.
- If you are a member of a group, your group leader will receive a second email from Prosper notifying them about your delinquency and the effect of your delinquency on the group's reputation.
- You will be charged a late payment fee at 46 days past due for being late on the next month of monthly payments. Late fees are the greater of $15 or 5% of the unpaid installment amount, depending on your state lending limits. Late fees are passed on to lenders; Prosper does not profit from late fees.
- Your loan will be sent to the collection agency partner selected by the lenders with the largest participation in your loan. The collection agency will attempt to collect the amount due and any fees accrued. Learn more about Prosper's collection agency partners.
- Your delinquency will be reported to Experian, Prosper's credit reporting agency partner, and will appear in your credit history. Your credit score will be negatively impacted.
- You will be charged a late payment fee at 76 days past due for being late on the next month of monthly payments. Late fees are the greater of $15 or 5% of the unpaid installment amount, depending on your state lending limits. Late fees are passed on to lenders; Prosper does not profit from late fees.
- The collection agency assigned to your loan will continue attempting to collect the amount due and any fees accrued.
- Your delinquency will be reported to Experian, Prosper's credit reporting agency partner, and will appear in your credit history. Your credit score will be negatively impacted.
- You will be charged a late payment fee at 106 days past due for being late on the next month of monthly payments. Late fees are the greater of $15 or 5% of the unpaid installment amount, depending on your state lending limits. Late fees are passed on to lenders; Prosper does not profit from late fees.
- The collection agency assigned to your loan will continue attempting to collect the amount due and any fees accrued.
- Your delinquency will be reported to Experian, Prosper's credit reporting agency partner, and will appear in your credit history. Your credit score will be negatively impacted.
- After four months of delinquency for any single payment, your loan will be sold to a debt buyer and any proceeds will be distributed to lenders.
- Your delinquency will be reported to Experian, Prosper's credit reporting agency partner, and will appear in your credit history. Your credit score will be negatively impacted.
- Borrowers who have defaulted on a loan at Prosper will not be allowed to borrow again on the Prosper marketplace.
Wednesday, December 13, 2006
Detailed Payment and Delinquency Fee Schedule
What happens if I am late on a monthly payment?
Each month, your monthly loan payment is automatically withdrawn from your bank account on file. If you receive an email from Prosper that your payment failed, it means that your account has insufficient funds, or that the bank account on file at Prosper is out of date or incorrect. In either case, you will pay a failed payment fee and can fix the problem with no further penalty by making a manual payment and ensuring that your bank account has sufficient funds. Just go to "Your Account > Borrowing" and click the "Make payment" link. If your bank account information is out of date, be sure to add a new bank account first.
If you can't make a payment, Prosper will follow the delinquency schedule shown in full detail below. Please note that at all times interest continues to accrue on the principal balance of your loan, in addition to any failed payment or late payment fees assessed.
What's the best way to get current on a late loan payment?
Go to "Your Account > Borrowing" and click the "Make payment" link.
You will see the amount and date of your missed payment, along with any additional fees that have accrued. Simply enter the amount that you want to pay, and the transfer should complete in 2 to 4 business days.
Once payment is received, your account will be made current. The next month's payment will be due on the regularly scheduled date.
Saturday, December 09, 2006
Five steps to group success
2. Create your group's identity
- Use pictures: Pictures help you tell the story of your group. The more you add, the better your story will be
- Add links to related websites: Make these links specific to your group. For example, if you are on a softball team, put links to the pizza parlor where the team goes after the game
- Use categories: Prosper lets you put your group in up to five categories so both lenders and future members can find you when they browse groups (add link to Groups tab)
- Tell your group's story: Who are you and why are you starting this group? Both lenders and group members will want to know
- Membership criteria: Create a clear list of criteria for group membership and post them on your page
4. Connect with your group members
Communicate with your members regularly to ensure a strong bond and a good reputation.
5. Grow your group
Prosper provides resources to help your group grow:
- Invite new members by clicking the "Invite new members" link on your group management page. Go to "Your Account > Group > Invite new members". Just type in email addresses and hit "send".
- Download and customize your own Prosper business cards and flyers from the group resources page. Leave a stack of business cards at your dry cleaner, grocery store, gym, and everywhere you go.
- Put a link to your Prosper group in your email signature. To find a link to your Prosper group, open your group page and scroll down to the bottom of the page and click the "Promote this group" link.
- Visit Prosper's discussion forums to learn marketing tips from other group leaders.
Thursday, December 07, 2006
Prosper Days 2007
Prosper lenders and group leaders, and those who would like to learn more about Prosper, are invited to San Francisco on February 12 & 13 for 1.5 days of learning, networking, and fun!
When: February 12 - 13, 2007
Where: The Argent Hotel, San Francisco
Is there a cost for Prosper Days?
The cost of Prosper Days is $25. That price includes all education and materials as well as meals.
Tuesday, December 05, 2006
Five Ways to Improve Your Score
If you’ve got a low FICO score, don’t get all depressed. Snap into action; there’s plenty you can do to snag a higher score. And it’s not nearly as hard as you might think. Here are the five major factors that determine your FICO credit score:
- Pay the Minimum Due on time each month. Notice I said MINIMUM. You don’t need to pay off your balance every month to get a good credit score. Just hand over the minimum on time every month and you’ll please the credit folks. Think about it for a sec: the thing lenders, landlords, and other businesses care most about when sizing you up is whether you will be diligent about paying your bills on time. Showing that you can pay your credit card minimums every month is considered a sign that you are indeed a good credit risk. Your ability to pay the minimum on time makes up 35 percent of your FICO score.
- Reduce your debt-to-credit ratio. Another 30 percent of your score is determined by how much outstanding debt you have relative to the total available credit limit on all your cards. (Part of this calculation also includes whether you have other debts such as car loans and mortgages, and how much you have left to pay on those, compared to the original loan amount.) The lower your debt-to-credit ratio, the better. And there’s plenty you can do with your credit cards to improve your ratio. Let’s say you have two cards. One has a balance of $5,000 and a limit of $10,000, and the other has a balance of $2,000 and a limit of $8,000. That means you have total credit debt of $7,000 and a total credit limit of $18,000, which works out to a ratio of 38 percent. Now let’s say you manage to cut your balances in half, so you now have just $3,500 in debt and the same credit limit of $18,000; your ratio will fall to 19 percent.
The FICO brain trust says there is no specific number that qualifies as a “good” ratio, just that lower is always better.
Another tactic for lowering your ratio is to boost your credit limit. But please be very very careful before you call up a credit card issuer and ask for a bigger limit. I only want you to do this if you know you have the will power to not use that extra money. The whole idea is to lower your ratio by changing the denominator in the calculation, without touching the numerator. For example, you maintain a combined credit card balance of $7,000, but you get your limits raised so your new combined credit limit is $25,000. That means instead of a 38 percent ratio you now have a 28 percent ratio. Again, only attempt this if you have the resolve to never touch the extra credit line.
- Save your credit history. About 15 percent of your credit score comes down to your credit history. The more history you have, the more evidence the FICO folks have to size up your credit habits. Therefore it’s a big mistake is to cancel a credit card you no longer use. When you cancel the card you wipe out all that history. Look at it this way: if you were trying to size up two people to entrust with your money, would you lean towards the person you’ve known for ages, or someone you’ve just known for a short time? That’s the way lenders think. Besides, when you cancel a card, you also lose the credit limit it carries, a move that hurts your debt-to-credit ratio we just discussed.
Now if you are concerned you won’t be able to leave an unused card unused, then just tuck it away someplace safe where you can’t easily get to it—or hit it with a pair of scissors if you have to. Without formally canceling your history you’ll have made sure there’s no way you can use it. - Avoid offers for new cards. Even though your mailbox is full of credit card offers, and you’re asked if you want to open a card at just about every check-out counter these days, I want you to just say no. Too many cards makes lenders nervous, and your card count is responsible for about 10 percent of your FICO score. The theory is that if you open up a bunch of new card accounts you are an accident waiting to happen: you have way too many opportunities to ring up big balances you won’t be able to pay.
- Get the mix right. While you don’t need 10 cards, lenders nevertheless also like to see that you can handle multiple credit lines simultaneously. An example of what they would consider a responsible array of personal debt would be a credit card or two, one department store card, and an “installment” loan such as student loan debt or a car loan. The idea here is that you want to show ‘em you are responsible enough to juggle a few different types of debt. It‘s a bit ironic, but the one thing that makes lenders absolutely nuts is if you have no cards or loans; they then have no way of gauging whether you will be a good customer. So your mix of credit cards and loans constitutes the final 10 percent of your FICO score.
Monday, December 04, 2006
AA - Trying to help military families
| Listing Summary |
| |
| ||||||||||||||||||||||||
| Borrower Information |
(36) 
Homeowner 
Account verified Gaithersburg, MD
| Credit information |
| Credit grade: | AA | |
| Debt/Income: | 3% | |
The money will be used to make Prosper loans to help military families, teachers, firefighters, police, and other public service families, trying to get back on their feet.
I have never had any credit problems, and have plenty of resources to repay the loan. This is a good opportunity to bid on a low risk loan.
Friday, December 01, 2006
Prosper security measures
- Never leave the computer you use unattended while you are signed in.
- Please do not share your screen name, email address, or password with anyone else under any circumstances. Ensure that they are kept safe, secret and not used by anyone else for any fraudulent purpose.
- Never mention your screen name or password in emails, letters or phone conversations, even to Prosper employees.
- Do not write your screen name or password down in a manner that allows them to be understood by someone else. Do not use any of them for another purpose.
- If you know or suspect that someone else has learned your screen name or password, please contact customer support immediately.
- Please change your password regularly.
- When signing in to Prosper, make sure that no one is watching you type your password or looking at your account over your shoulder.
- Check your account regularly. If you spot a transaction you don't remember making, or if funds are transferred unexpectedly, please note the exact details and contact customer support immediately.
- Check the certificate of the site. To ensure that you are using Prosper and not a look-alike scam, check the server certificate by clicking on the little yellow lock icon on the bottom right of your browser.
- Please only use the secure "Sign Out" link to safely end your Prosper session.
- Stay alert for spoof email which claims to be Prosper. Learn more about email security at Prosper.
Tuesday, November 28, 2006
Who's Building the Next Web?
Prosper
Chris Larsen does not want you to pay 14 percent interest on your next credit card. He also thinks that lending small amounts of money to regular folks is an investment opportunity that's hoarded by big financial institutions. So the e-Loan founder introduced Prosper. The San Francisco firm allows regular users to take out loans of up to $25,000. They register with the site, specify how much they need and propose a rate of repayment over three years. Lenders either compete to fund that loan, or don't touch it if the buyer's credit rating or reputation is too risky.
To improve their reputations, borrowers can band together in groups with their offline friends. Members of a PTA, for example, might join together to form a virtual credit union and can all vouch for each other's identity and standing. Groups build their status on the site over time, and the better their reputation, the lower the interest rates they can seek. Larsen thinks borrowers will be less likely to default on loans if there's a real-world stigma attached. Meanwhile, the 35-employee company performs all the background credit checks and takes a 1 percent cut of each loan from the borrower. If it can explain this tricky model to consumers, Prosper might do as its name describes.
source: Newsweek
Who's Building the Next Web?
Prosper
Chris Larsen does not want you to pay 14 percent interest on your next credit card. He also thinks that lending small amounts of money to regular folks is an investment opportunity that's hoarded by big financial institutions. So the e-Loan founder introduced Prosper. The San Francisco firm allows regular users to take out loans of up to $25,000. They register with the site, specify how much they need and propose a rate of repayment over three years. Lenders either compete to fund that loan, or don't touch it if the buyer's credit rating or reputation is too risky.
To improve their reputations, borrowers can band together in groups with their offline friends. Members of a PTA, for example, might join together to form a virtual credit union and can all vouch for each other's identity and standing. Groups build their status on the site over time, and the better their reputation, the lower the interest rates they can seek. Larsen thinks borrowers will be less likely to default on loans if there's a real-world stigma attached. Meanwhile, the 35-employee company performs all the background credit checks and takes a 1 percent cut of each loan from the borrower. If it can explain this tricky model to consumers, Prosper might do as its name describes.
source: Newsweek
Friday, November 24, 2006
How I Got My Funding:Trying Out Prosper
Dow Jones
When Ellen Carroll moved from Seattle to Kingman, Ariz., she says she knew the town's need for a speech therapist could work to her advantage.
Ms. Carroll, 27 years old, got a job in the Kingman school district as its second full-time speech therapist, working with students in preschool through junior high school. Ms. Carroll says she has a "gigantic" caseload at the Kingman schools and that showed her that starting her own speech therapy business could be lucrative -- and helpful for the town of 26,000 people.
"I don't get to see kids for very long periods of time, so I'm not seeing much progress," Ms. Carroll said. "If I'm going to make a difference, I have to do things differently."
To start her own business, Ms. Carroll says she needed therapy materials, diagnostic tests which cost up to $700 each, games and toys, and a down payment on rent for an office. She estimated it would cost about $11,000 to get started, so she says she first turned to her credit cards, figuring to put $6,000 on one card and $5,000 on another. But she decided the interest rate of 21% on the cards was too high.
Surfing the Internet for possibilities, Ms. Carroll says she found Prosper Marketplace Inc (prosper.com). "I thought I'd try Prosper first, and if it didn't work, I'd go to a bank," she said.
The San Francisco-based Web startup offers an online marketplace that puts together prospective borrowers and lenders. Borrowers can request a loan of between $1,000 and $25,000, and specify the maximum interest rate they're willing to pay. The site allows lenders to evaluate hundreds of borrowers, who explain why they need a loan, and provide a credit history and a debt-to-income ratio. Borrowers seek loans for a variety of reasons, such as opening businesses, paying off hospital bills or even buying diamond engagement rings.
Prosper works a bit like an online auction, with prospective lenders bidding against each other to fund all or part of a loan. The site also has social-networking features like user groups and profiles.
Ms. Carroll joined Prosper, adding to her loan request another $2,000 that would allow her to pay off old credit-card debt from college. In April, she secured a $13,000 loan with 13% interest from lenders on Prosper. "I felt a sense of relief," she says. "I knew I was going in the right direction, finally doing what I want to do."
Ms. Carroll made her first $312 loan payment in May, an amount she'll pay each month for another two years and eleven months. To pay back her loan, she uses part of her salary from the Kingman school district as well as the cash earned from the speech therapy business.
Starting a business isn't something Ms. Carroll dreamed about when she was young. "I just want the freedom to be able to see kids or adults however long I want to see them," she says.
With her public school caseload, Ms. Carroll already has a vast resource for clients. She is providing private therapy sessions to a few kids on evenings and weekends and hopes to have a full caseload of 20 to 30 kids by the fall. Down the road she wants to open her own clinic with more therapists.
Hilda West, on the other hand, always believed she'd be her own boss. But it wasn't until after CNN downsized in 2001 and eliminated the broadcast engineering job she held for 12 years that Ms. West set out to start her own Atlanta-based videography and photography business.
"My father was a builder, he had his own business too," says Ms. West, 53. "I grew up in that atmosphere. It's more work than working 9 to 5 but there's more satisfaction."
To start her business, the Atlanta native spent about $8,000 -- using credit cards, severance pay and her savings -- to buy computers, a Sony VX2000 camcorder and a Fuji FinePix S2 Pro SLR Digital Camera.
Focusing on weddings and corporate events, she found clients by passing out business cards at wedding conventions and video-equipment businesses, advertising in the local newspaper and on the Internet.
After three years in business, Ms. West says she does about three events a month. To draw new customers, she has been charging less than she would like -- usually about $1,500 for what she estimates is about $3,000 in services.
Recently, Ms. West needed to buy DVD and CD duplication equipment after her clients began asking for that service. But, she says she didn't have the $5,000 she needed for the purchase.
Ms. West says she posted her request for a loan on Prosper and was approved for a $5,000 loan at 11% interest. "It was very fast," Ms. West said. The site's moderator said she should post her request for ten days, and after five days her loan request had been filled at rate of 17.62%. After another five days, the rate offered by lenders on Prosper dropped to 11%.
Ms. West says still relies partly on her savings to pay the bills because she isn't bringing home as much money as she made at CNN. Her standard of living has also changed. But she says the opportunity to own a business is worth as much as money. "I enjoy what I do; this is my passion. The freedom is worth it," she says.
Erica Davis
http://www.startupjournal.com/financing/trends/20060612-davis.html
Thursday, November 23, 2006
Lots Of Loans, But No Banks :Finance co-ops have hit the Web, and they look like a good deal for borrowers and lenders
When Lyna Lam's family landed in San Jose, Calif., in 1983 after fleeing Vietnam, they soon learned what it means to rely on a community for money. Times were tough, with seven people in a studio apartment. "My parents were on welfare a long time," she says. But the Lams tapped into their local hoi, a cooperative of Vietnamese neighbors who pooled money to lend one another. Lam's father first used hoi to buy a used Oldsmobile. Then he borrowed from it to launch a landscaping business that took the family out of poverty.
Today the Net is taking the logic of Asian microlending co-ops global. One of the Web's most intriguing trends is the rise of peer-to-peer lending communities such as London-based Zopa Ltd. and San Francisco's Prosper Marketplace Inc. Fifteen-month-old Zopa (www.zopa.com) has attracted 75,000 members. But the most buzz surrounds Prosper, the four-month-old site (www.prosper.com) whose undisclosed number of members have made about 1,500 loans for over $7 million. Backed by eBay Inc. (EBAY ) founder Pierre Omidyar and the venture capital firm that funded eBay, Prosper has spawned a raft of microbusinesses that recall the eBay economy. Prosper founder Chris Larsen is the former CEO of Web mortgage pioneer E-Loan Inc. His wife? Lyna Lam. "He was fascinated by how we work together and come through for each other—and that's how he started Prosper," Lam says.
"WHAT DO WE NEED A BANK FOR?"
At first blush, the idea of making loans to complete strangers seems crazy. But it turns out that online communities can do a lot of what banks and payday loan companies do—and cheaper. In Prosper's market, loan rates are set by auction. Borrowers post an application, and prospective lenders bid on the interest rate, aided by basic analysis tools provided by Prosper such as simplified credit scores. Prosper rates borrowers from AA (top credit) to HR (high risk). Many lenders do extra research; some contact prospects by phone.
Analysts say peer-to-peer lending could become a big deal. Americans make 6.1 million friends-and-family loans, for more than $89 billion each year, says Asheesh Advani, CEO of CircleLending, a Waltham (Mass.) startup that provides billing services for friends-and-family loans. Forrester Research Inc. (FORR ) lumps peer-to-peer lending with "social computing" phenomena such as blogging, podcasting, and wikis that are shaking up industries. The opportunity lies in consumers' mistrust of financial institutions: In Forrester studies, most people believe their banks put their own interests ahead of consumers', and a majority don't think their financial institutions have strong ethics. Their attitude, says Forrester analyst Catherine Graeber: "If we can get this done cheaper between ourselves, what do we need a bank for?"
That said, Prosper and Zopa probably won't have an eBay-like upside. EBay created the first national market for stuff people used to move at garage sales and craft fairs. But capital markets are dominated by big companies that sell a smorgasbord of credit cards, mortgages, and other products to people with virtually any credit profile—and rates finely calibrated to borrowers' credit scores and other data. Fact is, no one knows if borrowers will reliably repay loans from relative strangers. CircleLending says 14% of person-to-person loans go unpaid in the non-Internet world. Zopa says its default rates are a tiny 0.05%; Prosper hasn't broken out default rates.
Then again, peer-to-peer lending isn't a risk that can't be managed. The key is diversification. Loans are typically divided among lenders; a $5,000 loan might be funded by 100 people. Payments are sent directly to Prosper or Zopa, which distribute the money to lenders and report deadbeats to credit agencies or collection firms. Lenders can simply ignore high-risk borrowers; only 2% of Prosper applications from poor-credit customers have been funded, according to SavageNumber.com, an Atlanta Web site that tracks Prosper data. Formal arrangements seem to make people responsible about repayment even without a bank involved. Advani says delinquencies fall to 5% when friends-and-family loans use his firm's billing service.
The result: Loans are cheaper, while lenders can earn more than from other investments. Last month Doug Sophia borrowed $12,500 on Prosper to buy equipment for his new pizzeria in North Myrtle Beach, S.C., at 11.75%; his local finance company wanted 26%. Meanwhile, Frisco (Tex.) lender Dave Elliott, CEO of a small software company by day, says he expects a 13% return on 97 loans. "There aren't many investments that will get you more than 12% without much management," he says. Zopa CEO Richard Duvall says the average Zopa lender makes 7% to 10% after bad debt is written off, twice what top British savings accounts pay.
THE SHAME FACTOR
One draw is the sense of community that online peer-to-peer lending shares with Asian co-ops, though there are some differences. At a May dinner for Prosper lenders in New York, a half-dozen agreed on a favorite example of their quirky clique: A mother of five who wanted breast implants to undo the effects of nursing. Members were impressed enough with her—and her AA credit—to bid the interest on her loan down to 7% from 14%.
Mostly, though, borrowers and lenders are drawn by better prices. Take Sophia, who plans to open Acme Pizza in late June. When a partner backed out in May, he needed money fast. Prosper rated his credit AA, its lowest-risk category. His three-year loan, at $413 a month, was not only cheaper than finance companies offered but also felt far safer to him than starting a business with revolving credit cards. "Once that teaser rate goes away, you're looking at the same rate as the finance company," he says.
For lenders, the trick is charging enough to cover defaults and still profit. If online communities are paid as reliably as others, says Prosper, lenders must add 2% or so to rates for defaults. Small fry are springing up to help: Part-timers from Germany to Atlanta have set up sites to crunch data about Prosper market conditions.
Most of all, Larsen relies on a strategy borrowed from hoi: shame. He says people repay real-world co-ops because they fear losing face among peers. So Prosper has 1,000 organized groups set up to let members lend to one another. "If you acquire customers through a Jimmy Stewart sense of community, you'll have a better business," he insists. And if his virtual savings and loan takes off, it will be a wonderful life indeed.
Monday, November 20, 2006
Money: Lend Me a Little?
Money: Lend Me a Little?
Newsweek
Newsweek
July 31, 2006 issue - Banks, shmanks. New person-to-person online lending sites eliminate loan officers (and savings-and-loan regulators) and match borrowers directly with lenders. San Francisco-based Prosper.com and the British site Zopa.com work similarly: borrowers post their needs ($7,000 for backyard landscaping; a $3,000 small-business loan) and lenders respond to the rates and reasons. Payments are automatically deducted from the borrower's bank account and deposited into the lender's account. Zopa says its lenders have been getting an average of 6.75 percent on their loans.
Lending to complete strangers is a risk, but Prosper limits that by vetting the identities and credit scores of borrowers and by threatening collection agencies if they don't pay. Lenders can limit their risks by offering $50 to 100 borrowers (who may each have 100 lenders) instead of making one $5,000 loan. Now that's diversification.
—Linda Stern
Saturday, November 18, 2006
This Time, You Be the Bank
Fed up with high interest rates or loan rejections? Try online peer-to-peer lending.
If we all stick together, can we live without banks? Not likely, but the online move toward so-called peer-to-peer lending suggests some of us are ready to try.
The trend plays off the success of eBay, which proved strangers can deal directly just fine. Now, key eBay backers are behind Prosper.com, a new peer- to-peer lending site.Here's how it works: Prosper.com links folks seeking modest sums -- small business owners, would-be debt consolidators -- with other folks who bid on interest rates they place on money they're willing to lend. For a fee, the site consolidates bids, links them to loans and moves monthly payments between parties.
Sure, such unsecured loans can be risky. But anytime we can skip a middleman, that's its own reward.
source: http://www.rd.com/content/openContent.do?contentId=30377
Wednesday, November 15, 2006
How is a credit grade different from a credit score or credit rating?
Here is a table that shows the equivalent credit scores for Prosper credit grades:
| Grade: | AA | A | B | C | D | E | HR | NC |
| Score: | 760 and up | 720-759 | 680-719 | 640-679 | 600-639 | 540-599 | Up to 539 | No credit score |
Your credit grade is posted with your loan listing to help lenders plan their bids appropriately. Your numerical credit score is never displayed or disclosed to anyone.
Note: Having Prosper obtain your credit grade won't affect your credit score! Although we are making a request for your credit score, we're doing so at your instruction so no inquiries viewable by subsequent users of your credit report will be placed in your credit file. That means your credit score won't be affected when you register or post a listing. Only if you obtain a loan through Prosper will an inquiry that others can see be placed in your credit file.
Tuesday, November 14, 2006
Learn about Credit Grades
A credit grade is what potential lenders use to measure your likelihood of repaying money you have borrowed based on your past history. Everything from your first credit card to your home mortgage contributes to your credit history. Your credit grade can be affected by many factors, such as how much money you owe and your on-time payment history. Lenders will consider this credit grade (along with other factors, such as your group's borrowing history) to determine the interest rate they are willing to offer you, and how much to loan.
Monday, November 13, 2006
Borrower Death
Upon the death of a borrower, it is possible that the borrower's Prosper loan will be paid in full by the estate. In this case, lenders will receive their pro-rata share of the outstanding principal, interest, and fees accrued. If the borrower's Prosper loan is not paid in full by the estate, Prosper will sell the loan to a debt buyer as soon as is practicable. Proceeds from the sale of the loan will be distributed pro-rata among participating lenders. Loans in which the borrower has died will receive a special status on the lender's loan accounting screens.
Friday, November 10, 2006
Rules for Lenders
Prosper prohibits email offers between members to borrow or lend money outside of the Prosper web site. Offers of this nature circumvent Prosper's fee structure, may violate state or federal consumer protection laws, and are a potential fraud risk for both borrowers and lenders.
Some examples of off-site loan offers include:
* Using information obtained through Prosper to offer to lend money to a Prosper borrower outside of Prosper
* Offering to lend additional money above and beyond the loan amount stated in your bid
* Offering to accept additional interest or other compensation (in the form of cash or other things of value) above and beyond the interest rate stated on the listing page
If you would like to report a member who is attempting to borrow or lend money outside of Prosper, please contact customer support.
Thursday, November 09, 2006
Lenders may not require prospective borrowers to provide proof of identity, proof of employment, financial statements, a credit report, or authorization to obtain a credit report as a condition to bidding on listings, and borrowers are not encouraged to provide such information. When a borrower creates a listing, Prosper obtains their credit report and determines their credit grade, which is displayed in the listing. That is the only credit grade relevant to lenders placing bids on Prosper.
Tuesday, November 07, 2006
People-to-People Lending
Egypt: Gameya
Ethiopia: Ekub
Kenya: Mabati
Madagascar: Fokontany
Tanzania: Fongongo
China: Lun-hui
India: Kamet
Japan: Miyin
Korea: Mujin
Vietnam: Hui
Bahamas: Esu
Bolivia: Pasanacu
Brazil: Consorcio
Mexico: Tanda
West Indies: Susu
Monday, November 06, 2006
If I make a loan through Prosper, what guarantees do I have that the loan will get repaid?
The way to ensure a good return on your investment is to diversify your lending—create a standing order to place bids on many listings, and spread your risk across many borrowers. If you make 100 loans to B-rated borrowers at 8%, and B-rated borrowers have an expected default rate of 1.8%, then you might have 2 borrowers default, which would lower your return by 2%. After annual lending fees of 0.5%, this would give you an annual 5.5% return overall. Learn about diversifying your lending with standing orders.
Friday, November 03, 2006
Lender Death
Saturday, October 28, 2006
Proper Prosper Etiquette
Recognize differences between people using thesite
Different people use Prosper in different ways. Recognize and respect these differences, and treat others the way you would like to be treated.
Prosper welcomes borrowers of every financial background and credit grade. As a lender, you don't have to bid on any listing that doesn't appeal to you. Others may choose to bid on their listing, but that is the decision of those lenders. Different lenders have different reasons for placing bids: some bid out of kindness, some bid for profit. Both are acceptable reasons for lenders to bid at Prosper.
Lenders are just people who have a little extra money and are willing to lend it out. Don't assume that they have unlimited resources and can bid on every listing. Don't be offended if they haven't bid on your listing. And don't bug them about it. Also bear in mind that many people bid using standing orders, without personally reviewing the listings.
Group leaders are responsible for their own groups. As such, group leaders may be very particular about who they let into their group. If you don't get accepted, don't take it personally: you might not have fit their criteria. Some group leaders might not respond to your group request at all. Just move on and find another group to join, or start your own!
Spam is annoying and disrespectful, and may actually work against your objective. Spam is normally defined as "unsolicited commercial email", and includes any message that is both unsolicited (the recipient did not ask to receive it), and commercial in nature (the recipient is asked to buy a product or service). Prosper takes a broader view of what is considered spam—often broader than the definition of spam under federal and state spam laws.
Prosper considers the following to be spam:
* Borrowers sending messages to lenders saying "Bid on my loan!"
* Group leaders sending messages to existing borrowers saying "Join my group!"
How can sending such messages work against you? Most lenders who have reported spam on Prosper noted that this kind of message from a borrower, rather than being an enticement, is actually a warning flag against bidding on that listing. So if you spam a lender, you might have actually reduced your chances of receiving a bid from the lender.
If you want to send a short thank you note to your lenders or fellow group members, that's okay. But try to keep unnecessary chatter to a minimum.
Respect the privacy of others on the marketplace. If you happen to know your group leader's name, but that information is not published publicly elsewhere, please do not include "thanks to my group leader Jill Smith" in your listing. This is a violation of your group leader's privacy, and undercuts the effectiveness of the marketplace.
In much the same way that spamming lenders for bids can reduce your chances of getting bids, making false (or improbable) promises in your listing or group description can also work against you.
Use simple forthright language that clearly describes your situation in ordinary words. Keep the promotional language to a minimum. Avoid vulgarities.
| Not OK | OK |
| Guaranteed greatest business investment ever!!! Can’t lose!!! | I need the loan to buy a commercial espresso machine for my new restaurant. |
| Our group will never-ever-ever miss a payment!!! That’s right!!! Never!!! | We are a group of friends who has known each other for 10 years. We all live in Baltimore. |
Lastly, falsifying information on a credit application is a crime. Prosper will end any listing and close any group or account if we suspect fraud.
Under no circumstances should you attempt collection on a late payment yourself. Compliance with all state and federal laws while attempting to collect a delinquent loan is not trivial. When necessary, Prosper ensures all collection activity is performed by licensed and professional collection agencies. Lenders who undertake debt collection (even if they are a debt collector by trade) are in violation of Prosper legal agreements and will undermine the collection agency's ability to do their job. Moreover, in doing so you run the real risk of creating a legal liability for yourself. Learn about Prosper collection agencies
Friday, October 27, 2006
Group Ratings
A group's rating is a measurement of that group's performance in paying back its Prosper loans. Specifically, the group rating is an expression of a group's performance against expected (historical) default rates."Expected default rates" are based on Experian historical default rates, which are available to lenders on every bidding page.
 | Not yet rated Groups are not rated until they have at least 15 total payments billed or at least one late payment |
 | 1 star Underperforms expected defaults by 60% or more |
 | 2 stars Underperforms expected defaults by 20% - 60% |
 | 3 stars Performs within 20% of expected default rates |
 | 4 stars Outperforms expected defaults by 20% - 60% |
 | 5 stars Outperforms expected defaults by 60% or more |
Thursday, October 26, 2006
Prosper Fees
Borrower Fees
1% closing fee
If you are a borrower and your loan is funded, you will be charged 1% of the amount borrowed or $25, whichever is greater.
For example, if you take a loan for $5,000 to help pay for your wedding, you will be charged $50. The 1% is taken from your loan immediately, so in this example your loan is for $5,000 and you'd receive $4,950 in cash deposited into your bank account.
This means that if you're using Prosper to purchase something specific (like a wedding dress), make sure you ask for enough to cover the dress and the 1% closing fee.
1% Non-electronic payment charge (optional)
Borrowers who elect to pay their loans through bank drafts, rather than the free electronic payment service through ACH, will have 1% of additional interest added to their loan's interest rate. This added interest will be paid to Prosper for processing bank draft payments, not to lenders.
Prosper Fees
Lender Fees
0.5% annual loan servicing fee
The annual servicing fee is accrued daily, and is based on the current outstanding loan principal. This fee is accrued the same way that regular interest is accrued on the loan.
For example, on a $5,000 loan at 10% interest, the servicing fee would be $40.40 over its full 3 year length. Because the servicing fee is based on the daily principal balance (which is an amortized value), it will change on a monthly basis, and the servicing fee for a loan will vary based on the interest rate and the length of the loan.
Collection agency recovery fee
In the event that one of your loans becomes more than 1 month late, Prosper will assign a professional collection agency to attempt to collect the overdue amount. Each collection agency has its own fee structure, but will only collect a fee for their services if funds are recovered. Learn more about collection agencies and their specific fees.
Wednesday, October 25, 2006
Prosper Fees
$5 failed payment fee
If your automatic monthly payment fails due to insufficient funds or because you closed your bank account and forgot to tell us, you'll be charged $5, which may vary depending on your state lending limits. This fee is paid to Prosper, and covers the fees that Prosper's bank charges for failed payments.
Late payment fee
If your monthly payment is 15 days late, you'll be charged a late fee, which depends on your state lending limits. Late fees are passed on to lenders; Prosper does not profit from late fees.
Note: Delinquency fees may vary based on regulations from the borrower's state of residence. View state lending limits for state-specific fees.
Are there any other fees?No. There are no other fees of any kind.
Manual Bids
To bid on loan listings, you must be a registered lender, and you must transfer funds to Prosper before you can start bidding. Learn about becoming a lender.Once your account has funds for bidding, you are ready to go! Simply go to the "Lend" tab and search for a loan listing that you would be interested in bidding on and click on that listing's title.
When you get to the listing page, you can view some information about that listing:
- Requested: This is the dollar amount that the borrower is interested in borrowing.
- Lender rate: This is the current interest rate that lenders have to bid at, or below. If the loan is fully funded (there are enough bids to meet the loan amount requested by the borrower), lenders will have to bid less than the current listed interest rate to participate in this loan.
- Automatic funding: If displayed, this icon
indicates that the borrower has selected an "immediate funding" listing—it has nothing to do with any superhero powers the borrower may have. Immediate funding means that the listing will close as soon as the requested amount is funded. This scenario can happen when the borrower is less interested in getting the absolute lowest interest rate, and is more interested in getting a loan quickly.
- Funded: This shows how much of the amount the borrower is requesting that has been funded by bids. If the full amount requested is funded, a "100%" icon
is displayed next to the amount funded.
- Bids: This shows how many bids have been placed on this particular listing. Clicking on the number of bids will display the bid history (learn more below).
- Time left: This is how much time remains before the listing ends. Tick tock.
- Borrower rate: This is the current interest rate that the borrower must pay on their loan if their loan listing is matched. In some cases, the borrower rate shown on a listing may be higher than the lender rate. This can happen when the borrower's group takes group leader rewards. To understand how group leader rewards can shift the borrower interest rate, learn more about group leader rewards.
- Borrower APR: The borrower Annual Percentage Rate (APR) is the cost of your credit as a yearly rate. It is different from the borrower rate (or "note rate") because the APR factors in both the interest rate and the one-time fee Prosper collects at the time of loan funding. Learn more about borrower APR.
- Monthly payment
The monthly payment is the amount that the borrower will pay for the requested amount at the current borrower interest rate. If the listing receives enough bids to drive the interest rate down, the monthly payment will also go down.
To begin placing a bid, click the "Place Bid" button.
You will then be asked to enter the following information:
- Amount: Enter the amount you wish to bid on this listing. You may bid as little as $50 and as much as the entire amount requested in the listing.
- Minimum rate: Enter the minimum interest rate that you would be willing to receive on the loan if you are a winning bidder. Unlike some auctions where the price is bid up, Prosper bids on your behalf down to your minimum rate. So if you are a winning bidder, there's a chance that the interest rate you receive on this loan will be higher than your minimum rate. How's that for a nice surprise? One other important note: your minimum rate is kept confidential from other bidders and the borrower—only you know what it is. When choosing a minimum rate, you can use the "Experian historical default rates" chart at the right of the bid page to help you determine the rate you should offer.
- Collection agency: You may select a different collection agency for each of your bids. The collection agency that you selected during lender account setup will be displayed here automatically.
- Support this group: If you would like this group's name to appear on your member page under "Groups I support," click this checkbox.
After clicking continue, you will be shown the bid data you specified on the previous page, and asked to confirm your bid. A few very important things to note about bidding before you click that "confirm bid" button: - When you place a bid, funds are immediately set aside in your account for that bid.
- By placing a bid, you are committing and promising to fund and purchase the loan should your bid be matched.
- If you are a winning bidder, funds will be automatically transferred from your account to the borrower's account when the listing closes.
- If you are not a winning bidder, funds will be immediately made available for you to bid again elsewhere.
- Bids cannot be withdrawn at any time.
Tuesday, October 24, 2006
When you create a listing, you specify the maximum interest rate that you are willing to pay, and lenders bid the interest rate down, unlike some other auctions where the price is bid up. Prosper displays average interest rates on funded loans, which can serve as a useful guide in determining what kind of interest rate you can expect.Successful borrowers usually set a starting rate which is a few percentage points higher than past rates for their credit grade, group status, and amount requested. For example, if the historical interest rates chart says that borrowers with your credit grade, group status, and loan amount are getting interest rates around 12%, you might start the bidding on your listing around 14% to attract more lenders. Keep in mind, however, that the listing could close at the starting rate, so only specify a starting interest rate that you are prepared to pay.
What does it cost to borrow money?
There is one standard fee for obtaining a loan through Prosper. You will have to pay a fee of 1% of your loan amount if your loan is matched and funded. The 1% fee is deducted from the amount of your loan at origination. For example, if you asked for a $5,000 loan, the 1% closing fee would be $50, and the total amount you would receive at loan closing would be $4,950.
After your loan is funded you will, of course, have to pay interest on your loan. As long as you make timely loan payments, you will not have to pay any other fees.
Creating a Loan Listing
Before you get into it, view a tutorial on borrowing money.If you are not registered with Prosper, click the "Register now" button on the home page. You will be asked to fill out a quick registration form. Registration is free.
If you are not a member of a group, we recommend that you join a group before creating your listing. Borrowers who join groups with a good reputation are likely to receive more favorable bids because its members pay on time. Learn more about joining a group. If you don't want to join a group, you can still post a loan listing as an individual.
When you are ready to create your listing, click on the "Borrow" tab and click "Create a new listing now".
First, you will be asked to provide your social security number and a few other personal details so Prosper can verify your identity and pull your credit score. There is no fee to you for pulling your credit score, which we use to categorize your credit into one of eight credit grades. There is no fee to you for obtaining your credit score and grade.
This won't affect your credit score! Although we are making a request for your credit score, we're doing so at your instruction so no inquiries viewable by subsequent users of your credit report will be placed in your credit file. That means your credit score won't be affected when you register or post a listing. Only if you obtain a loan through Prosper will an inquiry that others can see be placed in your credit file.
You will also need to provide bank account information. If your loan is funded, your loan proceeds will be deposited in the bank account you specify. Additionally, if you choose, starting on the first month after funding, your monthly payments will be deducted automatically from your bank account. Learn more about monthly payments in manage your loan.
Your loan listing is what will inspire lenders to bid against each other to make you a loan. Your listing communicates very important details to lenders about you and your loan. Your listing will include what you need the loan for, how much, what group you belong to (if you belong to one), your credit grade, and additional data from your credit report which helps determine your grade. You can request a loan from $1,000-$25,000 (may vary by state), and you can also specify the maximum interest rate you want to pay. You decide how long you want your listing to be posted for bidding. You can add as much or as little personal information as you'd like, such as pictures or web links to a current project, like the independent film you're working on. You can review the details of your listing, including the estimated Annual Percentage Rate (APR), monthly payment, disclosures, and other legal terms.If you belong to a group that requires listing review, your group leader will have up to 7 days to review your listing and approve or decline the listing. You may withdraw your listing at any time during this process.
Once your listing is active and posted on the Prosper marketplace, you'll be able to see it and track it on the "Lend" tab. You can easily monitor the bids you are receiving on the bid history page. Learn more about bidding.
Monday, October 23, 2006
Who can borrow at Prosper
A Prosper borrower is any person who is a U.S. resident with a bank account and a Social Security number or Individual Taxpayer ID. Borrowers must first be approved by Prosper's anti-fraud and identity verification systems before they can post a loan listing. Approved borrowers can request unsecured loans from $1,000 to $25,000 (may vary by state ) at rates they select. It is recommended that borrowers join a group before creating a listing to attract more favorable interest rates. No matter how good or poor your credit rating, or how high or low your level of income, all registered borrowers are allowed to post a listing on Prosper.
What kinds of loans are available on Prosper?
Borrowers can request 3-year, fully amortized, unsecured loans up to $25,000 (may vary by state ). In other words, you will have three years to pay off the loan in full with set monthly payments. You don't have to offer any collateral, like a car or your house, to guarantee the loan. There are no penalties for paying off your loan early or for making partial prepayments.
How quickly wiil I get my money?
Borrowers typically receive their loan within 2 to 4 business days of a match.
Saturday, October 21, 2006
Group Leader Rewards
What are group rewards?
Group leader rewards are cash incentives earned by groups and group leaders when a new loan gets fully funded or an on-time monthly payment is made.
There are two types of group leader rewards:
Match reward: This is a one-time reward that is accrued by a group leader when a group member's loan listing gets funded. See the chart below for specifics.
Payment reward: This is a monthly reward that is accrued when a borrower's monthly payment is successfully paid on time. Payment rewards also vary by the borrower's credit grade. So a high grade means a smaller payment reward (because they are lower-risk). Group leaders can choose to receive all, some, or none of the payment rewards generated by their group members.
| Group rewards by credit grade |
| Grade | Match reward | Payment reward |
| AA, A | $20 | 1% |
| B, C, D | $10 | 2% |
| E, HR, NC | $10 | 4% |
How are rewards paid?
The group leader will receive match rewards one month after a group loan is funded as long as the loan is still outstanding (not repaid) and payment is current.
Payment rewards are paid after a 3-month withholding period to ensure the loan isn't bad right out of the gate. After 3 months, all current month payment rewards earned for that month are paid. At the end of the loan term, any remaining rewards withheld are paid in full.
Because, at this time, group leader rewards are paid directly to the group leader's primary bank account on file at Prosper, the group leader must have earned at least $25 in group rewards before a transfer is made. $25 is the marketplace-wide minimum transfer amount.
Can I choose how much to receive in payment rewards?
Yes. In fact, some group leaders do choose to receive payment rewards at all. For those who want to receive payment rewards, they can choose to take 25%, 50%, 75%, or 100% of the base group leader rewards in the table above. For example, a group that receives 75% of base group leader rewards will add 0.75% to an A or AA borrower's listing, 1.5% to a B, C, or D listing, and 3% to an E, HR, or NC listing.
Why would a borrower join a group that takes group leader rewards?
Here's the thing: groups are designed to help secure lower interest rates for borrowers, even after the group leader rewards are factored in. A borrower can get a good rate in either case: - If they are in a group that does not take group leader rewards, the rate will be lower because the group leader reward will not be added.
- On the other hand, if they are in a group that takes group leader rewards, the borrower may be perceived as less risky by lenders because of the presenc the group leader and the value of the group's reputation, which would drive the interest rate down.
There is one last benefit to lenders of a group that takes group leader rewards: if one of those borrowers defaults, the lenders will share the first 3 months of earned group leader rewards. Every little bit counts!
Friday, October 20, 2006
Group Leader
Each group begins with a designated group leader who is responsible for setting up a group home page and inviting members. Some group leaders form groups based on their community interests or prior affiliations, such as membership in a club, social organization or religious association.Group leaders have two responsibilities:
- Set up the group home page.
- Invite borrowers to join the group and create loan listings.
If you are not registered with Prosper, you will be asked to fill out a quick registration form. Registration is free.
Once registered, click the "Become a Group Leader" link. You will be asked to provide your social security number and a few other personal details so that we can check and protect your identity. There is no fee to become a group leader.
Next, you will need to provide some basic information about your group. This will include the group name, a short description, a group "shortcut" (this will be a short web link for potential members to access when you invite them), and categories (see below).
Prosper is basically a community made up of all kinds of groups of borrowers. Potential lenders, borrowers, and future group members will search and find each other through Prosper's classification system of group categories. When you create your group, you will need to categorize it (you may select up to five categories). For example, if you are a group of soccer players, you would categorize your group under "Sports & Recreation / Ball Sports / Soccer."
Once your group information is complete, all of this information will be sent to the Prosper Group Services team, who will review your group application, and make a decision on your group application within a few days.
As a group leader, you can choose to receive group leader rewards as your group members repay their loans on time. You should add your bank account information to Prosper so that we will know where to send your group leader rewards.
While you're waiting for Group Services to review your new group request, you should view and update your group's home page! In fact, the more information you add about the group you want to create (including the description, pictures, and links), the more speedily Group Services will be able to approve your group. Learn more about editing your group profile, description, and pictures.
Can I lend or borrow if I'm a group leader?
Yes, you can lend and borrow on Prosper if you're already a group leader. If you want to borrow money, however, you will not be able to do so as a member of your own group; you will have to join another group. You are not allowed to borrow money as a member of your own group to avoid any conflict of interest.
Can I create more than one group?
Not at this time.
Can I recruit existing borrowers who don't have groups?
How friendly you are! But unfortunately at this time you cannot recruit existing borrowers. Since a borrower's interest rate is often tied to the existence (or absence) of a group, it is Prosper's policy to not let borrowers with currently active loans join a group. This may change in the future.
What are the most inportant tasks of a new group leader?
First, you should update your group's home page as much as possible. This is your voice to both potential borrowers and potential lenders, so you should spend some time making it attractive, or at least complete. Add some photos of your group, and include those on the page. Tell as much as you can about your group in the description—don't be shy! The more lenders and borrowers can learn about your group, the more likely they will engage with your group. Learn more about editing your group profile, description, and pictures.Second, get out there and recruit borrowers! Since you will earn money when borrowers in your group listings that get funded, you should be knocking on the door of anyone who would make a good member of your group and might have a need for a loan. Prosper makes this easy by allowing you to invite people directly through their email system, and providing a shortcut link that you can put in your emails and even on your personal web site. Learn more about inviting new group members.
Thursday, October 19, 2006
Joining a Group
Once you find a group you'd like to join, click "Join this group" on their group home page.If you are not registered with Prosper, you will be asked to fill out a quick registration form. Registration is free.
Once registered, you will send a short note requesting membership to the group's leader. Along with your note, we will include your name, email address, and telephone number, in case the group leader wants to contact you to discuss your request. Share as much as you feel comfortable with. The group leader should get back to you within seven days about the status of your membership request. You can withdraw your request to join a group at any time, and request to join another group instead. Once you are a member of the group, you can create your own loan listing as a member of the group.
Do I need to join a group to get a loan?
No. While borrowers aren't required to join a group in order to post listings on Prosper, they are likely to receive more favorable bids as a member of a group with a good reputation. However, if you're not interested in joining a group, you may get a loan on your own. Just sign in and click the "Create a loan listing without joining a group" link on the "Your Account, Get Started" page.
Can I join more than one group at a time?
No. It is important that your reputation be tied to, and in the hands of, one group and one group leader only while your loan is active.
Can I leave my group?
You can leave your group as long as you don't have an active listing or loan. In that case, just go to "Your Account > Group", and click "Leave group".If you have an active listing or loan, you will not be able to leave your group until the listing is withdrawn or expires (without becoming a loan), or until your loan is paid in full.
| What's next? After being accepted into a group, you should create a listing for a loan. |
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