ProsperŪ is a Peer to Peer (P2P) online lending and borrowing marketplace. People wishing to borrow money may request loans up to $25K and people willing to lend money are provided a listing of borrowers and may lend as little as $50 dollars towards a borrowers loan. This works because Prosper aggregates all the bids from lenders and combines them into a loan for the borrow. Prosper also divides up the payments made by the borrowers into payments for each lender on the loan. A simple process when computers are involved but not one that one would want to do manually as some loans can have as many as hundreds of lenders. For additional details on borrowing and lending, see below.
Prosper Loans - for those looking to borrow
Currently Prosper allows loans from 1K to 25K all on fixed 3 year (36 monthly payments) terms. Borrowers are allowed to pay off the loan early without any penalties. Although borrowers are only allowed one open loan at a time, husband and wife can each obtain a separate loan at the same time. The borrowing process is simple, a borrower signs up, goes through a verification process and then obtain a Prosper Score. Next step is to determine the loan amount to request, write a short description of why the loan is required and explain how the loan will be paid back and finally pick a starting interest rate for the loan. Last step is to post the listing so lenders can see it and provide bids of $50 or greater which when combined fund the loan. Lenders are allowed to ask questions which borrowers have the option to answer although it is generally in the borrowers best interest to answer. For additional details on borrowing and creating a successful loan description see our Prosper Loan page.
Prosper Lending- for those looking to invest
Lending on Prosper is easier then borrowing. A lender simple transfers money from their bank account to a Prosper account. That money can then be used to bid on loans the lender is interested in. To determine interest, the lender is provided with credit history details (for more information see the Prosper lending page below) and a loan description for the potential borrower. The lender also has the option to ask the borrower questions, however the borrower is not obligated to answer. For additional details on lending see our Prosper Lending page.
Prosper Financial- comparing Prosper lending with other investments
Various comparisons have been done comparing the return of lending on Prosper with various other investments. Prosper lenders typically receive returns ranging from 6%-29% depending on risk involved. The safer (AA credit grade) rated borrowers pay lower interest rates then the (E or HR credit grade) borrowers. See our Prosper financial section for various comparisons and details for lenders.
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