Prosper Review: The Best Peer to Peer Lending site is featured on Best Crowdfunding Websites. Prosper is America’s first Peer-to-Peer lending site. Prosper personal loans are a way for people to invest in each other. The loan amounts range from $2000 to $35,000 and can be granted for all sorts of reasons: home improvement, car repairs, to purchase a car, fund business needs, consolidate loans or even pay medical bills. APR for the loans starts as low as 5.99 percent; borrowers’ credit rating does affect their interest rate. Repayment rates are set up to match the borrower’s ability to repay the loan, although most are planned for a 3-5 year repayment schedule.
All of this is very good; but what makes Prosper unique is the way the loan money is collected and the loans are granted.
First of all, Peer-to-Peer lending can handle financing small loans that banks find unprofitable to handle. They offer a considerable advantage over payday or title loans in that they are unsecured, and have a reasonable repayment rate as well as modest interest rate.
Second, and possibly more importantly, the loans are crowdfunded. Lenders can contribute as little as $25.00 of investment money. Many small lenders are needed to finance a loan.
Approved borrowers pitch their loan to investors; investors browse the loans, and select the ones that fit their repayment needs. This provides lender/investors with a means of growing their funds without tying up large sums of money for extended periods of time. The borrowers repay their loans on a fixed schedule; and the investors receive payments into their accounts as the funds are repaid.
Prosper has partnered with AmOne to give lenders even more options. AmOne is free to use. It instantly matches borrowers with their best options for loans. It also has free, ongoing guidance available for users. It is a Truste certified company, and is featured in Fast Company, Bloomberg, Crain’s and Wall Street Journal.
All of which is very interesting, but what is the real advantage of Prosper’s Peer to Peer Lending? In order to understand this, you have to look at it from both the investor standpoint, and the borrower’s standpoint.
The investor can contribute a little or a lot to a particular credit request. By investing small amounts in several different ventures, he or she can diversify their capital for a greater chance at good returns. Each investor has a good chance to build a high-yield income ladder through judicious investment lending. This can mean a lot to retirees and individuals whose IRA has recently matured and needs to be reinvested. But they are certainly not the only ones who can benefit from this type of investing. It allows investors to select different kinds of lending and different projected yields, creating flexibility not found in other markets.
The borrower is able to gain funds for needed projects or expenses at a reasonable interest rate. The personal loans are unsecured loans – which means that borrowers are not in danger of losing their home or transportation should a financial emergency arise. He or she has a better chance of being approved through the peer-to-peer lending system than through the banking system. And it is an ideal environment for individuals who prefer doing financial transactions via the Internet.
The loans are made through WebBank; which has FDIC and Utah Department of Financial Institution as watchdogs.
As with any lending situation, there is some risk involved in being a lender; but the higher the risk – new borrowers, or borrowers with low credit ratings – the higher the dividend. As previously mentioned, the loans are unsecured.
There is also the social factor. Investors are able to select causes/needs that they feel are worthy of support, rather than being locked into giving a set amount to a lending institution that then determines how the money is dispersed. Therefore, a particular investor might select some high risk loans, but also invest in more secure loans. The result is a combination of high returns – assuming the borrower repays as promised – and slower, but surer returns on more certain loans.
In many ways, the mechanics of borrowing and lending through Prosper are not so very different from any other money market. The big differences are the crowdfunding aspect of the loans, the greater ease of getting small loans, and the flexibility for lenders to be able to select which ventures to back.
Prosper offers a platform through with individuals are able to help others while helping themselves. It really doesn’t get much better than that. In this Prosper review, Best Crowdfunding Websites has brought to you an overview of how the process of Peer-to-Peer Lending works and how Prosper offers a platform for the process.