Comments on: Prosper.com – Why Bother?

By: Shannon Brown

Shannon Brown — Tue, 16 Dec 2008 17:03:37 +0000

Really these are tough economic times, I would be reluctant to loan out my personal money right now. It has to be tough to repay these loans so I would not count on getting it back. Even once the lawsuits are filed the chance of getting the funds right now are slim.

By: Lazy Man and Money

Lazy Man and Money — Fri, 09 May 2008 04:14:17 +0000

People have been lending other money for thousands of years… by that measure peer-to-peer lending is more proven.

Prosper loans are very much stocks. They can either go up or down. Some go to zero, others perform well. If you diversify across a broad basket you limit your risk. With stocks we might call the basket a mutual fund. With the Prosper loans, you might call it a portfolio plan.

As for borrowers not having to pay their loans back, realize that this is also true of your credit cards. You don’t have to pay those either. Yet I see credit card companies doing quite well.

By: Mrs. Micah

Mrs. Micah — Thu, 08 May 2008 23:15:23 +0000

Since we don’t have the money for speculative investing, it’s been interesting to watch how Prosper and Lending Club fare without having my money there.

I’m not against potentially investing in them someday…just not yet. I’ve been waiting to see how they handle people who don’t pay and how easy it is to get out (you can sell stocks, but not loans).

By: Industry and Frugality

Industry and Frugality — Thu, 08 May 2008 23:04:17 +0000

Eden, I agree that prosper loans are a risky investment. However, the risk-reward rules still apply. You can get some great interest rates on prosper loans and I feel like you can reduce the risk below that of an average Joe buying individual stocks. However, I still rely primarily on index-based stocks/bonds for my investments. Anyway, your questions gave me the idea to write a post titled How I Minimize Risk on Prosper. Let me know what you think.

By: Eden

Eden — Thu, 08 May 2008 14:46:55 +0000

@Eric – You’re aghast? Lets be real here. We have hundreds of years of investments in stocks and bonds behind us. Those are proven investments. Of course you can make bad choices there too and the sheer number of available stocks and bonds means that you can name 10 losers for every bad loan on Prosper, but I could probably find an equal number of diversified investments (index funds or mutual funds) that would outperform Prosper with much less risk.

Anyway, I never meant to imply that was an apples to apples comparison. I think Prosper is legitimate for speculative dollars, but I worry about all of the websites I see pushing Prosper as an ‘investment’. I don’t think people really understand the risk.

By: Eden

Eden — Thu, 08 May 2008 14:41:51 +0000

@Industry – sounds live you’ve done well so far. I’m sure that making wise choices helps, but really how much do you know about the loans you are funding? A credit score attached to a profile someone filled out on the Internet? Not that everyone there is trying to get fraudulent loans, but the risk seems very high to me.

By: Eric

Eric — Thu, 08 May 2008 14:08:46 +0000

I love the stock market, but when you say “proven investments available such as stocks and bonds” – I am aghast. For every nonperforming loan on Prosper, I can point you to 10 stocks that have lost people money. It is all about balancing risks and if you don’t that that properly on Prosper, then you will lose money. If you don’t do that with stocks or bonds – you will lose money.

By: Industry and Frugality

Industry and Frugality — Thu, 08 May 2008 10:35:24 +0000

I originally tried Prosper just to see what it was all about. That was over a year ago. I’ve never added to the $200 I originally put in, but I do continue to reinvest that original amount. I’ve earned over 12.5% on average and have never had any loans default (knock on wood). I think some people are just making bad decisions in regards to the loans they choose to fund; however, prosper should definitely be aggressive about getting on those who are not making their payments.