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New Features make Lending on Prosper Better than Ever

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Prosper.com released a few new features recently. These features might be interesting to all lenders or potential lenders. Here's a run down on some of the new features and how they could affect Prosper's peer-to-peer lending market.

Portfolio Plans - Prosper now provides an automated method to bid on set portfolios. You can choose from 4 model portfolios that range from conservative (estimated return of 8.37%) to aggressive (estimated return of 11.06%). Prosper uses data from over a year of loans to determine the estimated return. I'm not sure if that sample size is large enough to depend on, but it might be interesting to try. This reminds me of some of the options I saw in many 529 college savings plans. I think this has two obvious advantages for lenders.

  • It could be an attractive option if they don't wish to spend hours reading and bidding individual profiles.
  • It also gives guidance to those that might want to just diversify their investments outside of mutual funds. If you don't care to learn the skill of finding quality loans, simply set up an automated bank transfer, choose a portfolio plan, and be lazy.

0% Fees on AA Loans - This is pretty big for those looking to place conservative loans. You already knew that low fees are good for other investments like mutual funds. The same concept applies here.

Interest Rate Cap is Increased to 36% - It was previously capped at 30%. I had difficulty making money with some lower grades even at 29%. In fact, I lost significant money on those types of loans. Perhaps at 36% it is possible for lenders to make money on loans from borrowers with lower credit grades.

Guidance on bidding - When you place a bid, Prosper attempts to calculate the estimated return. This is extremely helpful I found that some of my standing orders placed a couple of interesting recent bids. I thought that getting 18% from a B grade borrow with low DTI and low delinquencies would yield a pretty return. It seems like there were too many credit inquiries in the last 6 months reducing my estimated return on this potential loan to around 4%. Now if only there was a way of placing bids based on these estimated returns. Prosper, please allow me to set up a standing order for anything that has a 12+% estimated return. I know this is close to the aggressive Portfolio Plan, but this would give more diversity to the lending.

Now might be one of the best times to lend money on Prosper.com. For more on the changes, you might want to read this post on RateLadder.com.

Last updated on July 29, 2011.

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18 Responses to “New Features make Lending on Prosper Better than Ever”

  1. RateLadder says:

    Thanks for the mention… As a 3rd party tool developer I am most excited about the authenticated API.

    However I agree… I would bid (perferrably at the last second) on any listing with a 12+% return.

  2. Dave says:

    Can you put any more ads on your site? I can’t tell what is info and what isn’t

  3. Lazy Man says:

    Dave, your wish is my command. Advertisers, if you are interested, please contact me.

    On a more serious note, I work hard to make sure that it’s easy to read the content. If you focus your eyes on the middle of the screen there’s only one AdSense block near the content. Also, subscribing to the RSS feed is a great way to avoid most of the ads.

  4. You listed only the positive changes, not the controversial ones (second loans) or negative ones (expired listings hidden)

  5. Lazy Man says:

    I saw the ability of second loans to be more of an impact for the borrower. As for the expired listings being hidden, I think the significance of that might have gone over my head. I barely have enough time to look over my own loans and figure out what’s working and what’s not. I definitely don’t have time to go back and look at expired listings hidden, so this one doesn’t impact me (and I’m guessing quite a few people).

    Lastly, I also didn’t mention the Facebook application or the authenticated API (as RateLadder adds here). These may be important to some people, especially the Facebook app, but I wanted to limit the confusion and focus on the big impact items as I saw them.

  6. RateLadder says:

    I think dave is referring to my minor league outfield wall of a blog. Your site is better than ever in terms of deisgn and ad integration.

  7. Danny Tsang says:

    I might have to give in and give prosper a try. I’ve been sitting on it for so long. Did you ever write a post about how your loans are doing and what your return is so far? thanks

  8. Lazy Man says:

    You could click on my Prosper.com category tag on the left and read most of them. Unfortunately, I started off taking on a bunch of sub-prime loans. I’ve since gotten better and brought it up to around 4-5%. If you consider that’s from being in the hole, I think it’s done fairly well.

  9. Mike says:

    Lazy Man –

    Hiding the expired listings is viewed as very negative for lenders. Several are quite pissed about it, actually. Lots of people have been attempting to do deep analysis on loans that have gone belly up. When you’re not allowed to compare details on loans that have failed versus those that haven’t, it makes it very difficult to adjust your lending to actually make money.

  10. don’t forget to read my post about getting advertisement dollars from Prosper.
    an extra $xx/mo isn’t too bad for less than 15 mins of work!

    http://www.livingoffdividends.com/2007/10/25/get-advertising-revenue-from-prosper/

    also check out the comments for tips on lending criteria.

    [Editor: I took out the money per month listed here.]

  11. Lazy Man says:

    Mike: I realize that it’s not a positive. I also realize that several people are quite unhappy and leaving Prosper because of it. I read the forums. I don’t think the vast majority of lenders are going back and doing analysis on loans (that they had nothing to do with) that had gone belly up. Plus I have all the analysis I care about with that with the bidding guidelines. To some this is critical, but I still feel it’s a minority and not worth mentioning here.

  12. Pinyo says:

    I don’t see how increasing the cap help anyone. If they can’t pay back at 30%, they sure can’t pay back at 36% now.

  13. Lazy Man says:

    Some people do pay the 30% back. If you have 50 loans of E grade credit at 30% and 10 default, you’ll do worse than if you had 50 loans of E grade credit at 36% and 10 default.

  14. Argonautica says:

    Thanks for the heads-up, LM. I had been letting Prosper coast for a bit after making some of the same mistakes you described and hadn’t heard about the new portfolio manager. I gave it a try- I figure it can’t do any worse than the poor picks I made after spending an inordinate amount of time reading loans.

    BTW- anyone else having trouble posting comments here in Firefox? Just wondering what I’m doing wrong.

  15. The Div Guy says:

    LM,

    Do I read you right that you are making 4-5% on your Prosper loans? If that is the case, it doesn’t seem worthwhile from a risk return standpoint. It also seem like a lot of work.

  16. Lazy Man says:

    Considering that I started with a strategy that had me down by 10% for 6 months, being up 4-5% cumulative now means that my current strategy is probably making 10%+, but I have no way to measure from the change. My strategy requires no work – most weeks I don’t even log into my Prosper.com account. See this post for that strategy.

  17. I scored an interview with Chris Neilsen from Prosper, I’m definitely going to ask some questions about the new portfolio plans, it’s an interesting concept, now if only they would do something meaningful with the money you get as payments, say put it in a money market account.

  18. Quotes says:

    Hey LM. Thanks for the heads up. I try to stick to AA and A grade borrowers. I was not aware of the AA fee reduction. Thanks.

    “The trouble for most people is they don’t decide to get wealthy, they just dream about it.” –Michael Masterson

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