
Welcome to the Carnival of Peer-to-Peer Lending #7: “Rate Cuts Hit Prosper” Edition! When I first started investing in Prosper last December, the estimated return for a Conservative Portfolio Plan was 9.20%. Last time I checked, this number was down to 8.00% and it’s even having problem winning bids at this lower rate. I guess this is bad for me, but good for borrowers and the economy.
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I don’t know… never heard about Prosper until today. Checked it out… I think I am going to stick with my mix of stocks, bonds and cash for now. Plus, as a holder of municipal bonds, I am lending too – though admittedly my return is much lower than the advertised Prosper return.
Keep us posted.
I don’t think I would ever borrow through Prosper or other P2P lending sites. I don’t know… I guess I don’t fully understand how it works.
That’s funny. The average rates on my loans actually have gone up, even for the borrowers with good credit. I am starting to wonder about the accuracy of their portfolio alogorithm (spelling?).
@Vered – It’s an interesting concept, but definitely not for everyone. Basically there are thousands of borrowers and lenders in these networks. Let’s say a borrower needs $5,000, whole bunch of lenders would each loan a small amount (as little as $25), so a $5,000 loan may be borrowed from hundreds of lenders.
Most of my money is in cash, stock, and bond too. I basically have “play” money in these networks.
@Christine – I have read one of the borrower said he borrows from LendingClub because he gets better interest rate than other unsecured loans and there is no pre-payment penalty.
@Mark – You have to look at the “adjusted” return after fee, default risk, etc. You could get a 20% loan that is expected to return only 5% after adjusted for risk.
I guess I would be comfortable playing with very small amounts of money over there to begin with. I will give it some thought.
I did some calculations the other day comparing loan portfolios vs CD’s. The comparisons are without reinvestment of returns from loans, but it is still pretty interesting. I’m still working on a simplified model for including reinvestments while taking into account loan defaults.
http://www.step3prophet.com/20.....me-nu.html