Giving Up On

I'm going to give up on I think they have a good idea, but it doesn't really work for me. I have a couple problems with it:
  • The 3 year loan period. I realize this is to help the borrowers to give them a lower payment, but right now, I prefer loans of 1 year or less.
  • Small payments. I am unwilling to lend large amounts of money on unsecured loans to people. A small loan amount combined with the 3 year repayment period equates to tiny monthly payments to me.
  • I don't think their peer review system works. They push "groups" as a way that people will police each other to help prevent loan defaults. Supposedly, if a group member is behind on loans, the other group members will encourage the late payers to make their payments so that the group as a whole looks good to other lenders. I don't see this happening. With my one late loan, there has been no response from the borrower to the one polite email I have sent. The borrower belongs to a group and the group leader also was a lender to this person. His emails have not been answered either. She is still a member of the group too. I can see people using Prosper only one or two times - it's not like eBay where one person will be conducting many transactions. As a result, the "feedback" or community policing has little to no effect. If people want to take the money and run, they will. This is especially true of high risk borrowers. Their credit report is already not good, so I don't think the threat of another ding will deter them too much.
For people wanting to get into hard money lending, Prosper is a good starting place. It is an unsecured loan, but you can start lending with just $50. You will get the experience of lending and receiving payments, the headaches of late payments, and all the other little details and worries that are part of money lending, all for a low entry cost. If you like it, however, I suggest leaving Propser and moving on to making larger loans through private parties secured by tangible assets.


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