Prosper is a Peer to Peer lending website similar to Lending Club that connects individuals who want to lend money with others who are looking to borrow money. It is appealing to both borrowers and lenders because it offers great rates for borrowers and great returns for investors.
As an investor, Prosper allows you to skip the bank and deal directly with borrowers putting more money in your pocket. And, as a borrower, you can typically save several percentage points on your loan than what you would have received otherwise from a traditional lender.
Investing With Prosper
Prosper allows you to invest an amount of money, with which you can loan out to other individuals. The minimum amount to loan out is $25, and you can loan any amount beyond that to $25,000.
With lending, to ease your risk, it is recommended that you make a large amount of small loans versus one large loan. When you lend money, you can look at the level of risk versus return. When you lend, the risk is the borrower’s ability to repay. You can look at their credit to gain a glance at that.
You can also look at the reason for why the borrower is looking for money for a business, debt consolidation, or more. You can also lend in an automated way, by selecting a risk profile and letting Prosper do the rest. They will put you in loans that match your pre-selected criteria.
Borrowing Money Through Prosper
If you are looking to borrow money, Prosper could be a good choice. You can get loans for debt consolidation, home improvement, business loans, personal loans, and really anything else.
When you apply for a loan, you must give your personal information, review your loan options and see what rates you can get, and create a post. On your post, you should put relevant information, such as purpose, history, etc.
Once lenders invest in your loan, and Prosper finalizes everything, the money is deposited into your account. You monthly loan payments are fixed and will be automatically deducted from your bank account.
Fees and Costs Of Prosper
If you lend money, there are no costs to you. Prosper does charge a 1% loan servicing fee, which is assessed as part of each monthly payment from the borrowers. If, for some reason, your borrower does not pay, the loan is sent to collections, which also charges a fee on any recouped funds. If you borrow funds, there is a closing fee that varies based on your Prosper rating, and that fee is taken from the loan at closing, before the money is deposited into your account.
Social lending or Peer to Peer lending offers borrowers another avenue to receive funding for their needs from an alternative source. Maybe you can’t receive a loan for some reason from a traditional bank or perhaps you are looking for a better interest rate on the loan, Prosper can provide you with that alternate means of funding your loan. And, for investors, Prosper allows you to diversify your investment portfolio with a different type of investment than traditional stocks, bonds, and mutual funds.