Prosper.com: A Good Loan Option, a Gamble of an Investment Solution
Written: Sep 11 '09
|
| Full Review |
When we encountered expensive household repairs, medical expenses, and wedding costs all at once, my husband and I learned the folly of not having a fully funded emergency fund. We came up short and began evaluating our options. We wanted to avoid a credit card cash advance at all costs, but bank loans were higher in interest than we were willing to pay and getting one was a lengthy process. After asking for recommendations from a money-minded message board, we decided to check out Prosper.com. The site turned out to be our best loan option.
Website
Prosper provides peer-to-peer lending and investing. Potential borrowers create a free account and post a listing for a loan. The listing looks similar to an Ebay listing. Users provide detailed information for the listing including the purpose of the loan, their credit rating, monthly expenses, and other pertinent facts. The site even requires a picture of the borrower or a pertinent subject. Lenders can sign in to browse the listings and bid on loans they would like to invest in. Once a loan is fully funded, lenders try to outbid one another to be included in that investment by lowering the interest rate. It's a simple concept, but a very effective one for the borrowers who reap the benefits of the investor competition.
The borrower is in complete control of the creation of the loan. He or she can choose to decline the loan if the final interest rate is too high. There is no cost to create a listing, nor is there a penalty for cancelling a listing, so a user can repost a loan to try to get a better interest rate. Once a loan is accepted and finalized, the site charges a 3% closing fee, with a minimum of $50. Users must consider this amount when listing the loan amount, as it is deducted from the amount transferred to the borrower. Lenders pay only a 1% loan servicing fee.
Various factors influence the interest rate a borrower is able to obtain, including credit score and the amount that will be borrowed. Investors are more likely to take a chance on someone with average credit for a higher return.
Investors have several easy-to-use tools available to them for making investment decisions. The site can guide you in creating a diversified portfolio. If you choose to make the investment decisions completely on your own, you can ask questions of potential borrowers. Borrowers can choose to make these questions and their answers public for other potential lenders to see. The whole process provides all parties with all of the information needed to make informed decisions.
Prosper.com is very easy to navigate and understand. The entire borrowing and lending process is explained in detail. During my time spent browsing the site, posting listings, and subsequently managing our account, I have experienced no errors or problems loading the website.
My Experience
My husband and I created two listings during the funding of our loan. Though the process is easy enough to follow, we learned from browsing the site that the more information a borrower includes about his or her financial situation, the more likely the loan is to be funded. Our original listing included my husband's credit score, income, and the reason for the loan, but explained little else about our financial situation. The site allows you to post listings with or without calculating your debt to income ratio and showing proof of income. We decided not to declare income officially because it would required my husband to obtain his W4 which we didn't already have on-hand. When our first loan listing didn't get much response, we realized that lenders would probably appreciate knowing more about our monthly expenses and how we expected to pay the loan.
Our original loan listing also listed too low of an interest rate. We found that another way the Prosper loan process is similar to Ebay is that if you want a low interest rate, you start the rate higher to encourage bidding then let users fight it out at the end. Originally we ignored Prosper's guideline that suggested starting at a 20% interest rate and letting users bid the rate down. When we changed these two aspects in our second listing, we immediately started getting bids. Lenders asked a number of questions which we answered honestly, providing additional information as necessary. We made one of these questions public as we felt other lenders would benefit from the answer. A user requested clarification on our $0.00 monthly cellular phone cost which we neglected to state was paid for by our employers. Our loan was fully funded within a few days and by the time the listing ended, the interest rate had been bid down significantly.
Finalizing the loan was an in-depth process. Prosper is very security-minded and required verification of my husband's identity and our bank information from the beginning of the listing. We had to fax an enlarged copy of my husband's license in addition to a signed document and cancelled check. We also had to show proof of address by verifying we received a post card they sent. After the loan, there were several documents to sign, including the promissory note. All of the loan terms were very straightforward. We have three years to pay the loan in fixed payments, which are deducted automatically from our bank account. There is no penalty for paying the loan off early. The money was deposited to our account within a few business days. The entire process was relatively pain-free and the transaction went smoothly.
We have been paying the loan for over one year and have never had any problems. Our payments are taken out on the same day each month, which was clearly stated in our loan terms. We receive our statements on-time and email reminders of upcoming payments. Prosper is very good about communicating with us. We receive email confirmations of every task we perform on the site.
Managing our account is as easy as managing any other account online. Their online account interface is easy to understand. At any time I can log in, view my payment history, schedule additional payments, see past statements, and even view my listing and promissory note.
Investing is similar, though we have not yet tried it firsthand. Two good friends have invested money on Prosper with mixed results. Both said that some of their less risky loans have defaulted since the recession. I'll update this review when we decide to become lenders, but we plan to wait until our loan is paid and the economic climate has improved. We don't want to gamble just yet.
Overall Recommendation
Prosper was a great way for my husband and I to get the cash we needed at a reasonable interest rate. While investing may be a decision that needs careful consideration, I can say Prosper.com was an excellent place for us to get our loan.
Recommended:
Yes
|
|
|
|
Epinions.com ID:
noangels
|
 in Online Stores & Services |
 - Top 1000 |
|
Member: Jamilynn
Location: Staten Island, NY USA
Reviews written: 224
Trusted by: 41 members
About Me:
So glad to almost be done with Christmas shopping!
|
|
|
- Add to My Yahoo!: 
- Add to Google Homepage: 
© 1999-2009 Shopping.com, Inc.