Prosper.com is a personal loan and investing site with over one million members and over two hundred fifteen million dollars in personal loans funded since 2006. Using a unique person to person lending model, prosper.com connects borrowers and lenders and allows them to establish a mutually beneficial financial relationship. Prosper offers borrowers rates as low as 5.9% and lender returns as high as 10.1% (this varies, of course based on your borrowing and lending situation).
What is Person to Person or Peer Lending?
Lenders, or investors, have two options for investing in borrowers. They may browse detailed borrower portfolios and choose who they wish to invest in and how much to invest in each borrower. Or, to avoid the lengthy process of selecting individual profiles, lenders can set up criteria and then allow Prosper to automatically invest according to the set criteria. Investors also can buy and sell existing notes.
Once a loan is fully funded by investors, Prosper deposits the amount of the loan to the borrower and sets up a payment plan with fixed monthly payments to begin repaying the loan. The lender receives a direct deposit to their Prosper account each month.
How Much Does it Cost?
Prosper.com clearly lays out all fees associated with borrowing, and there are no fees until the loan is in effect. Borrowers pay a closing fee that is based on both the amount of money they borrow and their Prosper rating. Fees for failed or late payment are clearly explained. Lenders pay an annual service fee of one percent. Lenders do risk a loan going to collections if the borrower defaults. The fees associated with collections will vary based on the agency Prosper assigns to the loan.
Advantages to Borrowers
While excellent credit is helpful, Prosper gives borrowers the opportunity to sell themselves to investors based on criteria other than financial history. Loans on Prosper have many uses from typical situations such as buying a home or car, consolidating debt, and business loans, to more unusual loans such as funding an adoption or wedding.
Borrowers can use Prosper’s tools to see what a possible loan will actually cost them, what their monthly payments will be, and their fees for the loan.
There are also no pre-payment penalties so a borrower can pay back their loan quicker and lower their interest owed.
Advantages to Lenders
By directly connecting borrowers and lenders, Prosper provides a unique service that allows benefits to both borrowers and lenders and eliminates the high fees and complexities of a traditional financial institution. It also allows for lower interest rates for borrowers and higher returns for lenders. For a borrower, Prosper can mean the the ability to get a loan where a traditional bank may not allow it.
Check out Prosper for yourself for more details.