Sorry jgibbs, I originally had the pros and cons written together, but it was a colossal wall of text. I'm learning to be more succinct (I hope).

Prosper isn't bad by any means, it just isn't for me. In order to make the most money off the interest it means the borrower must pay more in interest and stay in debt, which felt adversarial. Additionally, I felt most of the loan categories were encouraging needless debt that the borrower might not take on otherwise. Big $30k loans for a vacation, boat, RV, or engagement ring. Those are all things people don't need and even though I didn't engage those loans, most people just answer the questions in the beginning and let Prosper set up their portfolio automatically. And really, how financially responsible do you think the person is who wants a loan to fund their vacation? So, it also felt like Prosper was encouraging people to make bad loan investments.

Prosper will do everything possible to get the loan payments.Apparently, they hound people, even more than a bank. Eventually, the borrower goes into default and the information is sent to a collection agency. You wouldn't have to pay the collection agency upfront, but they do collect a percentage of the amount recovered from the borrower. I don't think there was a limit on how much they could charge and the collections agency was paid first. It's hard to speak on this since my borrower didn't go into default.

Thanks for sharing about Prosper. I hope you will come back and touch on loan defaults. Also, if you were paid back and had a good experience, why did you only make one loan?

FrugalFran wrote: That makes sense, Centsible. Do the people doing the lending actually use this as an investment platform? Isn't there a gamble involved with that because the borrower could default on the loan? If that happens, there goes the initial investment plus any hope of interest. I guess it's not too different from a volatile market, but still...

I like your new avatar, FrugalFran!

Prosper is seen as an investment platform, but it's also borrower friendly since the individual can make more than one payment in order to get the principal down and can even pay the whole balance off with no penalty. I only invested in one loan. I funded 100% of a military serviceman to move to their next destination. I felt safe with this because the borrower had an A rating, and unless the person gets a dishonorable discharge all of a sudden, they're guaranteed a paycheck each month. Also, I knew the army usually has soldiers pay the moving fees up front and then reimburses the receipt so it's reasonable that they might need extra funds until then. I joined Prosper in 2012 when there weren't many investment opportunities for someone in my financial range. I didn't have thousands of dollars to invest on robo platforms and the fees would've eaten into any profit I might have made. I don't think Robinhood or other apps were around at the time, but it's possible I just missed them. The interest rate was so low that putting money in a savings account was downright foolish. I had a good job with the opportunity for a 401k, but it carried fees and since my employer didn't offer to match payments at all, it didn't seem worth anything to me. I had $1k in a Roth IRA, still don't know why I did that. I can't withdraw any portion of it until I'm 72 without taking a penalty. I had already funded my emergency fund. So, this type of investing has its place. I think P2P lending can be a wise choice even today. There are some pitfalls too, but I've already written a wall of text, so I'll touch on those another time.

That makes sense, Centsible. Do the people doing the lending actually use this as an investment platform? Isn't there a gamble involved with that because the borrower could default on the loan? If that happens, there goes the initial investment plus any hope of interest. I guess it's not too different from a volatile market, but still...

FrugalFran wrote:
Very true, Curry, but I was thinking more along the lines of the lending being insured and ensuring that the lenders can't pull the rug out from underneath the borrower. I mean, if I have a loan with Chase, I feel semi-confidant that they aren't going anywhere. But if I am relying on one or more private individuals, my level of security would be reduced greatly.

I made one loan through Prosper a long while ago and the borrower gets the money up front. You can invest as low as $25 and I think the person must borrow at least $2,000 so you're likely not funding it alone. There's no way for the lender to pull the rug out from the borrower from what I recall. It's the same with KIVA, though that's not meant to be an investment platform.

Very true. We are still seeing tons of "innovation" in the tech scene so time will only tell whether companies like these will make it or not.

FrankN wrote: That is definitely true to a certain degree. It is still very early stages, and I will be interested to see how this all places out.

There were lots of these around, like Zopa which appeared and then disappeared. They seem to be a lot less popular now, and I wonder if things like Kickstarter, Patreon and Gofundme have cut into their market. People don't make money lending on those, but there's no risk of default or tax paperwork to do.

That is definitely true to a certain degree. It is still very early stages, and I will be interested to see how this all places out.

Curry wrote:

FrugalFran wrote: I can understand why you call it disruptive, Frank. I can only imagine what this would do to big lenders if it really took off and impacted the industry. This would have to become a very secure, easy-to-use lending medium, though, to get a large portion of consumers involved in it.

Secure is the key word there. People are still apprehensive when it comes to money and the internet. Rightfully so, but security measures are enhanced every day.

Very true, Curry, but I was thinking more along the lines of the lending being insured and ensuring that the lenders can't pull the rug out from underneath the borrower. I mean, if I have a loan with Chase, I feel semi-confidant that they aren't going anywhere. But if I am relying on one or more private individuals, my level of security would be reduced greatly.

FrugalFran wrote: I can understand why you call it disruptive, Frank. I can only imagine what this would do to big lenders if it really took off and impacted the industry. This would have to become a very secure, easy-to-use lending medium, though, to get a large portion of consumers involved in it.

Secure is the key word there. People are still apprehensive when it comes to money and the internet. Rightfully so, but security measures are enhanced every day.

Breakinger wrote: I've never heard of this idea before. I'm assuming that there is a limit on how much you can take out, right? Would you say that that amount is comparable to a personal loan through a bank?

I can't say for sure because the first time I ever heard about this was here, but I would think the amount is only limited by what the interested lenders are willing to give you. I don't see why it would have to stop at a typical personal loan amount and couldn't encompass larger things like a mortgage.

In the event the Peer-to_peer lending challenges the established institution it may well be a game changer and time for some good solid competition. Our banking system gave us the 2008/2009 situation and a good swift kick may just be the answer. I can recall a time when we had regional banking and it worked well. The ability of one bank was less important and consumers had many choices. I keep watching us bang our heads against the wall on the same things over and over (likely because we didn't learn anything the first time or GREED). There, that ends my rant! I was a fan of the Glass-Steagall Act of 1932 so we could keep banking, investing/finance and insurance separate with the idea of minimizing the greater risk and collapse of the whole.

I've never heard of this idea before. I'm assuming that there is a limit on how much you can take out, right? Would you say that that amount is comparable to a personal loan through a bank?

I can understand why you call it disruptive, Frank. I can only imagine what this would do to big lenders if it really took off and impacted the industry. This would have to become a very secure, easy-to-use lending medium, though, to get a large portion of consumers involved in it.

Yes, but also note Peer-to_peer lending is a very new (and disruptive) business idea. It has not materially been around very long. It will be interesting to see how it plays out.