S Look At What Prosper Is

Category: Finance.

If you are looking to borrow money there are numerous sources available. If you have money that you are looking to invest, there are also many sources but which to you choose?

Unless you have bad credit! The Prosper lending association claims to help both types of people. So let& #65533. It is the purpose of this article to look at what Prosper is, how it works for borrowers and lenders, and the group structure that is available. S look at what Prosper is. Prosper claims that it is the first P2P lending company in the United States and is founded by former E- LOAN founder and CEO Chris Larsen. Prosper is an online auction website where people can buy loans and request to borrow money.

The site claims that it allows people to borrow or lend money at market driven interest rates. Using Prosper requires only your social security number, your income level, your bank account and your driver& #65533. Prosper claims that it fully discloses the complete workings of their system and say they have 330, 000 users and have funded$ 70 million in loans. S license number. For the borrower, Prosper allows members to request loans of up to$ 25, 000 with the average funded loan being$ 5, 00Loans can be obtained to either refinance higher interest debt such as credit cards or payday loans, to invest in real estate, to invest in other income producing or appreciating assets, or to invest in small businesses. Prosper charges a number of fees, including a 1% closing fee to the borrower.

The interest that a borrower will pay is determined by the individuals credit score and can be as high as 29% for high risk borrowers. Prosper states that it is not designed for someone who wants to get a fast loan because it breaks the loan up into multiple pieces to distribute risk, and then funds from the lenders offering the most attractive interest rates. The top rate depends on the state the borrower lives in. After a loan is funded, the borrowers can look at the funds on offer, and choose whether to take at that rate or wait for a better deal. Borrowers may be required to fax documentation and if required will have 7 days to submit this documentation. Once a loan is funded, a borrower will typically receive their loan within 2 to 7 business days. Borrowers who fail verification do not get a loan, and are permanently suspended from Prosper.

Lenders specify the amount of money they want to lend, the maximum amount to bid on each listing, and the minimum interest rate they& #65533. While it is possible that a high risk borrower can get a loan, there is no guarantee because Prosper is not doing the lending but rather individual lenders. Re willing to receive. Unlike the borrower, lenders are not charged any servicing fee. After selecting a minimum interest rate, the lender bids in increments of$ 50 to$ 25, 000 on the loans they choose to fund. Many lenders are attracted to prosper by the higher then average interest rates related with high risk borrowers. S state.

These rates can sometimes be as high as 29% , depending on the borrower& #65533. Prosper says that the lenders can see the number of delinquent accounts a prospective borrower has, the number of delinquencies in the past seven years, total credit lines and any credit inquiries in the past six months, among other details. While many lenders are drawn to Prosper because of the high interest rates, the risk is also higher then for borrowers with better credit and lower rates. Lenders must wait until$ 25 accumulates in their account before they can withdraw funds. Borrowers can also become part of a group, where the group's reputation is based on the group member& #65533. A group is essentially made up of complete strangers will give you a fair chance to explain your need and get it filled.

S repayment patterns. Prosper strongly prefers, but does not require, that potential borrower to join groups. Groups are rated by the past payment performance of their borrowers, and it is in each group leader's interest to be selective about the members that they allow to borrow money as a member of their group. Groups serve various services for borrowers on Prosper and groups with successful repayment histories should attract more lenders offering lower rates. Groups have been allowed to buy a five star rating by making payments for borrowers with the underlying idea being that groups whose members repay their loans reliably will earn a good reputation among the lender community. Prosper is structured so that group leaders may receive compensation for their efforts, based on the number, and quality of, size loans originated on behalf of borrowers in their groups.

Because of this, future borrowers from those groups will be perceived as less risky and therefore be able to borrow at lower interest rates. In conclusion, it does appear that Prosper can work for some people. There is no fee involved for the borrower if the loan is not funded so they have nothing to lose by applying. While borrowers with bad credit do have a better chance of securing a loan because the lender likes the higher interest rate, there is still no guarantee that they will be funded. The lender is taking some risk, especially if funding, however a high risk loan but Prosper says that the borrower must pay with automatic loan payments through a bank account which does minimize the risk to the lender.