Money. An interesting idea. thoughts?

[flying_gringo]

stumbled across this the other day, and perhaps it can help those still working on ratings, or be an alternative investment for others with funds to put to work.

www.prosper.com

its a modern bent on peer to peer lending. You can function as either a borrower or lender and earn the interest (while accecpting the risk) rather then letting the banks do this for you. Prosper sets up all the servicing and verification of ID's, and if need be turns things over to collections. They're very real loans and seem to be well organized.

To me it seems a little more hand on the throttle then the stock market and with the benefit of diversification. I'm giving it a shot - and invested myself. So far (its only a few months old) I've got money working earning just shy of 20%.

now before some call this spam - I've got no ties to the site or its owners. I don't profit if you go look at it or not - I just like the idea.

if your interested - zopa is a british company doing the same thing - and they plan their US launch Q2 '06.

I've suggested it to some folks who have decent credit for use in their flight training financing as it seems financing for that is drying up according to some. There's even a lending request out by a learjet pilot if you can find it.

many of you folks seem to have good objective insight- I'd love to hear your thoughts.

fg

 

[Metro752]

the mob aint gonna like dis

 

[gringo]

I actually heard about this on WLS Chicago the other day. Sounds like an intersting idea, but what happens when your money skips town? What kind of recourse do you have?

 

[retired guy]

Ben Franklin, aka. Poor Richard said it a long, long time ago "A fool and his money are soon parted"

 

[paulsalem]

Better to remain silent and be thought a fool than to speak out and remove all doubt.

-Lincoln


I'm not disagreeing with you, just seemed like the perfect retort to your quote.

I'm thinking of giving it a shot, you can loan as little as $50. So its not that big of a risk.

 

[flying_gringo]

to answer on your question what happens if they don't pay, from their website:

"Once the borrower is more than 15 days late, the borrower will be charged a $15 late fee. The late fee is divided up pro-rata among the borrower's lenders.

Once the loan is one month past due, it is turned over to a collection agency to pursue collection from the borrower. If the collection agency cannot collect payment from the borrower after a reasonable period of time (within 3 months), the loan will be considered uncollectable, and written off as a loss. The status of the loan will change to "Written off." See below for more on the next steps. The borrower will not be able to borrow ever again from Prosper, and since we report delinquencies to credit reporting agencies, this default will adversely affect their credit report."

- https://www.prosper.com/public/help/topics/lender-manage_defaults.aspx

its all automated - and well spread out from a risk standpoint. I've been watching other zopa and waiting for something like this here. So far Zopa's default rate is low. Really low. Zero. I know it won't last - but take a read.

http://www.benchmark.com/news/europe/2005/12_04_2005.php

now they are a different model - the loan only to folks with good credit - but because of this their rates are much lower. I'm not basing any of my investments on zero defaults - but if it works - it could be interesting.

I would like to see a secondary loan market - but that's supposedly in the works - and a topic for their boards - not this one.

would you invest? would you borrow from it?

fg

 

[smellthejeta]

I'm going to spend some more time looking at this, at might throw a few hundered over that way and see how it works. Am I sucker? No. Gotta do due diligence first however.

One of the reasons I'm intrigued by this is that I've thought of a similar business plan. If you think about it, banks can pay you interest at crappy rates at less than 1% for a savings account, and about 5% ish on a CD. On the flip side, they can charge 16%+ (maybe even 24% or 30%+ on a default) on credit credit card debts. They take some profit on either side of the loan. Now, what if the dude who is paying 24% on his credit card debt is willing to pay me 14% on a direct loan?