Prosper? Or a Plan?

[gtwise]

I have set up an account with Prosper to lend but I have not been able to pull the trigger on putting money in. 10% return at the risk levels Prosper.com lending has plus the total lack of ability to liquidate the funds (by transfering loans to other lenders) made me concerned. I think there are better places for my money than Prosper.

[Anthony Marrone]

I share your liquidity concerns re: Prosper. However, I feel that Prosper (or any other p2p lending) should be a part of a larger investment strategy. Also, I think many people choose Prosper because they can identify with the needs of many of the borrowers and feel for their inability/lack of desire to borrow from traditional brick-and-mortar banks.

[gtwise]

Originally Posted by Anthony Marrone

I share your liquidity concerns re: Prosper. However, I feel that Prosper (or any other p2p lending) should be a part of a larger investment strategy. Also, I think many people choose Prosper because they can identify with the needs of many of the borrowers and feel for their inability/lack of desire to borrow from traditional brick-and-mortar banks.

Prosper just doesn't fit my investment style. It is too hands-on. You have to babysit every borrower and make sure you get your money, it seems pretty time consuming. If you hedge your losses by only investing part of your investment portfolio into Prosper, yeah it might work. bUt I just think there are a lot better investment opportunities out there with similar or better rewards with a lot less hands-on work.

As for the borrowers on Prosper: I think the written sap stories are just that. I would take every single individual's monthly finance breakdown with a huge grain of salt. They might say one thing but do something completely different. The ones with A+ credit should be able to get a 9.9% fixed rate on a credit card and not worry about Prosper. Consolidating at 18% when your current loans are at 14-15% just make no financial sense. These people will rack up debt again on those cards and now they will have a CC payment PLUS the Prosper.com payment. It's like taking out a home equity loan to pay off your CC debt then running them up again. Happens more often than not. People with good credit should be able to do a lot better than prosper and makes you wonder why they would go to prosper. People with bad credit are people I would not loan money to in the first place.

I think someone put it very nicely before when it comes to Prosper: People on Prosper.com are people who were turned down by banks. What makes you a better judge of character than banks who do it for a living?

[rstlne]

Originally Posted by Anthony Marrone

I share your liquidity concerns re: Prosper. However, I feel that Prosper (or any other p2p lending) should be a part of a larger investment strategy.

Very true. Prosper should be treated as just one part of a diversified investment portfolio because there are economic scenarios where it is not an appropriate investment vehicle. For example, in periods of rising inflation, you would not want to own fixed-rate loans because those won't compensate you for the devaluation of your capital. (In fact, the Prosper borrower has the advantage there because he gets to pay off the same loan amount in cheaper dollars.)

Currently, I only have a very small percentage of my net worth invested at Prosper but it's just as well. There aren't very many loans listed on Prosper that fit my strict criteria.