Prosper (web site)

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Prosper is an online auction website where people can lend money directly to each other. Borrowers set the maximum rate they wish to pay and lenders set the minimum rate they wish to receive. Prosper matches borrowers with lenders and manages loan repayment.

Prosper Marketplace was launched on February 13, 2006. In its first 6 months of operation, Prosper handled over $7.7 million in interpersonal loans. It is officially only open to US residents. The idea for the service is derived from group banking concepts, such as rotating savings and credit associations (ROSCAs). Similarly, Bangladesh economist Muhammad Yunus, founder of the Grameen Bank, won the Nobel Peace Prize for pioneering micro-loans to lift millions out of poverty.

Using Prosper, lenders and borrowers list and bid on auctioned loans. These unsecured loans are amortized over three years, with no pre-payment penalty.

Prosper generates revenue by collecting a one-time 1% fee on funded loans from borrowers, and assessing a 0.5% annual loan servicing fee to lenders. Prosper also publishes performance statistics on the website, which show over US$22 million in loans as of November 13, 2006. ^[1]

People who want to lend set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. People who lend can easily diversify using "standing orders", which automatically make many small loans to different borrowers. All transactions are in US dollars.

Prosper was founded by Chris Larsen, who also founded E-loan, and John Witchel, a veteran entrepreneur whose expertise in massively scaleable architectures and high-performance computing helped spawn a number of successful start-up companies. The company is based in San Francisco, CA and is backed by Accel Partners, Benchmark Capital, Fidelity Ventures, and Omidyar Network.

1 Criticisms
2 See also
3 References
4 External links

[edit] Criticisms

One of the major drawbacks of the prosper website is that it supports only US moneylending, since international moneylending would be difficult to enforce. Another source of much annoyance are lending delays (though in many ways, these are comparable with those of most online ACH transfers, plus loan verification time). Lenders who transfer funds into the system face the industry-typical 3 business day ACH transfer delay to allow funds to clear. Then the lender bids on a listing that has a lifespan of up to 10 days; granted, the end time of a specific listing is known to all potential lenders, and can be set to as little as 1 day). If the listing ends funded, there can be a variable (0 to 7 day) delay if the listing is flagged for additional verification. When payments are initiated by a borrower, the 3 day ACH delay again applies.

[edit] See also

Peer-to-peer lending
Microfinance
Zopa — a similar service based in the UK.

[edit] References

^ Prosper Marketplace, Inc.. Prosper: Marketplace Performance. Retrieved on 2006-11-13.

Prosper: The eBay of Loans?. Business Week Online. Retrieved on 2006-03-09.
It's Like Lending to a Friend, Except You'll Get Interest. New York Times Online. Retrieved on 2006-03-09. (article erroneously states that Prosper.com pays interest on cash balances in lender accounts.)