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.
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