Prosper update

I've been participating (investing?) at Prosper for several months now. I've received the payment every month on time, and started building up a small cash balance. So far it seems to be working out well.

I decided to transfer in a bit more money, just enough to bring my balance up to $100.00 including what was in the account already from payments received. I've since bid on 2 more loans for $50.00 each. The loans have closed and are pending review.

So far I've made 3 $50.00 loans.
Loan #1: 20.00% interest
Loan #2: 17.95% interest
Loan #3: 16.40% interest.

Now, before I get accused of being a loan shark, remember that these interest rates are set by the market forces in play at Prosper. The borrower posts the amount he needs and an explanation about why he needs it and what he plans to do with it, along with a maximum interest rate he will pay. They also show a very high level credit report on the borrower, along with a letter grade to summarize his credit history.

The market (lenders at Prosper) then start to bid on his loan - how big a piece of his loan they will take, and the lowest interest rate they will accept. The more people that deem the borrower a good risk and participate, the lower the rate goes, like a reverse Ebay. Every loan I bid on completed at a rate higher than the lowest rate I said I would accept in my bid - at least 2 points higher or more.

Obviously I'm still cautious about Prosper, but let's say that I'm cautiously optimistic.

Update on Prosper

I just thought I'd give a little update on my experience with Prosper so far. I posted about it earlier, primarily as a response to another blogger who (I assume) deleted a comment I made about it thinking I was spamming for it. I got responses from others that it sounded interesting, so I decided to do a followup post.

I bought into my first loan a couple of weeks ago. I bought in for $50.00 to a $15,000 loan that will pay back to me 20% interest. It is a 3 year loan (as they all are at Prosper) and will pay me back $1.88 per month for 36 months unless it is paid off early. He actually mentioned in his posting that he hoped to pay it back early, and that is one reason I picked it - it would make a good trial run. If it is paid out over the whole 3 years, that $50.00 investment will pay back to me $67.68. A decent investment I believe. The first payment is due to me 9/22/2006 and I will update here as things progress.

I also recently got a newsletter from Prosper (they do this regularly) that informed me about a new publicly available page at Prosper.com about their loan performance and deliquency numbers. This is information about all outstanding loans, and is searchable by date range, etc. Check it out here if number crunching is your thing.

Again, I get absolutely no kick back from Prosper for this. They aren't paying me for "blog ads" or anything. In fact, I doubt they even know I'm writing about them. It just sounds like an interesting idea and something I'm willing to toy with. I'll let you know how it goes.