Hat tip to James at posted a TMF link about Prosper and I found it mighty interesting. I dislike what they did in the bankruptcy court, but since I’m not a lawyer and didn’t read about the proceeding, I can only tell that it sounds slightly shady. One the other hand, I am aware that I am buying a slice of a loan when I ‘lend’ money on Prosper.
Right now though, I’m not too pleased with Prosper. I ran some quick numbers. Currently, with one defaulted loan, I’m at 0% ROR. If all the rest of my loans stay current, I’ll be fine I think, but I have no intention of putting more money into it right now. I might only put them into 6 & 7% APR loans that are A or AA rated with verified bank accounts and homeowners as borrowers, if only to shop something better than a crappy 3%APR from ING.
I just don’t know what is happening to someone like Pensioner who threw in three-quarters of a million dollars. So many of his loans have defaulted, it’s not funny, it’s sad. I mean, why on earth would anyone touch an E grade loan? (I did, but I am not sure how. It was a filtering accident, and he’s the one guy who is reliably current with his loan. My one defaulting loan is C grade.)
It makes me sad that this experiment appears to be failing right now. I had high hopes for it, but at the moment, all I can do is ride out the end of the term for my existing loans for the next two years. Since I’ve only invested less than $500, it shouldn’t make too much of a difference on my net worth if I end up writing off all of the amount as bad debt.
UPDATED: A direct link to the Motley Fool article for Moom.
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The first link in your post is broken. Please could you fix it. Sounds intriguing.
Now I think you may realize why banks won’t lend to people with low credit scores, and why pay-day loan places charge so much money.