Prosper Financial

Interested in investing in Prosper and like some insight into Prosper financial comparisons with other popular investing options? Take a look at some quick comparisons. There are a few things to keep in mind while doing comparisons. One is that no interest is paid while your money sits in your Prosper account but is not invested. Second is that there you are lending money to others and they can default resulting in a complete loss of your investment. Although this risk can be managed by only lending to borrowers of certain credit cards, there is still a risk of default. Therefore for these comparisons we will assume that the money is invested as soon as it moves to Prosper and that all earnings are reinvested. We will also assume that we are bidding on loans with a C grade credit rating. Therefore as shown in the graphs below from www.marketingfacts.nl, the default rate is about 3 percent and the average lending rate is slightly above 15 percent.

Graph below shows the default rate for C grade borrowers to be about 3 percent.

Graph below shows the average lending rate for a C grade borrow to be slightly over 15 percent.

Prosper Financial - Prosper Lending vs. Bonds
There are several different types of bonds be various risk levels. We will assume a fairly safe bond and a generous average rate of return of 6 percent. For the comparison details, see Prosper Loan vs. Bonds.

Prosper Financial - Prosper Lending vs. CD
Lately I have been seeing CDs that are paying 6 percent, but the majority are lower than that, therefore we will use a more realistic average of 5 percent. For the comparison details, see Prosper Loan vs. CDs

Prosper Financial – Prosper Lending vs. Stock Market
The stock market certainly has had its ups and downs over the last 20 years. Average long term is typically about 9-11 percent, therefore we will take 11 percent for our comparison. For the comparison details, see Prosper Loan vs. Stock Market

Prosper Lending - Conclusion
As you can see Prosper compares very well to other investment options. However this does not mean that you can just go bid on any C credit grade loan and be successful. It is important to review the loan listing and understand if the person is a C credit grade and on their way to a D or E credit grade of if they are stable or on their way up to an improved credit grade. Obviously either of the last two are what you are looking for when bidding on a loan. Also note that there are different tax consequences when investing in bonds, stocks, Prosper, etc. depending on your investment approach and situation. Understanding the impact of taxes may lead you to one investment being more appropriate for your situation than another.

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