Become a Lender - Help - Prosper

Become a Lender - Help - Prosper

This company has an interesting thought process on where to sell their loans after funding. They keep the servicing (.5%), but they sell the loans to buyers on a bidding process. It reminds me of an online bidding/auction atmosphere. You can loan up to $25000 increments, but you cannot exceed a $2 million dollar total. They range the borrowers into different risk groups to help determine how much you want to bid.

As a lender, it is your responsibility to follow some basic lending guidelines when making decisions about whom to lend your money to:

Diversify: If you place many small bids among many borrowers, the risk that you will lose all of your money on one borrower is much lower than if you place one large bid with one borrower. Prosper makes diversification easy by allowing you to create "standing orders." Standing orders place bids on your behalf based on the criteria you've selected so you don't have to search for borrowers and place all the bids manually, one at a time. Learn more about standing orders.

Know the risks and bid accordingly: On all of the bidding pages, you will be shown the historical default rate of borrowers on whom you are about to place your bid, and you should factor that into your bid. For example, if you are placing bids on C-rated borrowers whose default rate is typically 3%, and you want to make a net rate of return of 6%, you should consider placing your bid at 9.5% interest (including Prosper's 0.5% annual servicing fee). You should also view the marketplace performance page to see performance, delinquency, and default data on Prosper loans.

Know your groups: Finding a dependable group can result in dramatically lower default rates. If you find a group that you have high confidence in, lending to individuals in that group should bring you a higher return. Why? Because lending to individuals in good groups should typically bring a lower rate of default