Prosper (web site)

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Prosper is an online auction website where people can buy loans and request to borrow money. Borrowers set the maximum rate they wish to pay and loan buyers set the minimum rate they wish to receive. Prosper matches borrowers with loan buyers and manages loan repayment. These unsecured loans are amortized over three years, with no pre-payment penalty.

Prosper Marketplace was launched on February 13, 2006. 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 of people out of poverty.

Prosper generated revenue by collecting a one-time 1% fee on funded loans from borrowers, and assessing a 0.5% annual loan servicing fee to loan buyers. These fees were increased to mark the 1 year anniversary (see below). Prosper also publishes performance statistics on the website.^[1] All transactions are in US dollars.

Prosper was founded by Chris Larsen, who also founded E-loan, and John Witchel. 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

The main criticism by loan buyers has been the relatively high rates of deliquency and defaults. Collection agencies have been notoriously unsuccessful at curing loans. Borrowers may criticize the site because their listings go unfunded. Only about 1 in 8 listings ends funded. Group leaders may require a fee of up to 4% per year from borrowers in addition to the other fees. Loan listings starting around February 13, 2007 will incur increased fees:

AA - A (760+ to 720): 1% closing fee for borrowers and 0.5% annual fee for loan buyers

B - D (719 to 600): 1% closing fee for borrowers and 1.0% annual fee for loan buyers

E- HR (599 to 520): 2% closing fee for borrowers and 1.0% annual fee for loan buyers

Persons transferring money to prosper wait 4 business days. As a group, E and HR borrowers have resulted in negative return on investment for loan buyers. Borrowers who choose automatic funding have a significantly higher default rate.^{[citation needed]} If a borrower attempts a payment but fails, a $15 failed payment fee is charged to loan buyers (depending on state lending limits).