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Prosper Changes: What They Mean to Me and You

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I got an e-mail yesterday from Prosper's CEO Chris Larsen. I wasn't alone, I'm sure that at least every lender got one. As Prosper gears up for it's first birthday, they've found the need to make a few changes. Here I will outline them and what they mean.

New Customer Service

Instead of outsourcing their customer support overseas, they'll bring the operation in-house. I've never needed customer service, but this is a big win for lenders and borrowers.

Friends and Endorsements

Members can recommend loans to other members. Unfortunately for me it seems like it's mostly about the borrowers. If they had something like this for lenders, the first thing I'm going to do is add Kevin from RateLadder.com to my friend list.

Additional Credit and Employment Data

Lenders get more data from borrowers. This is a huge plus for me. I'm very much a by-the-numbers kind of guy, so the more numbers the better.

Questions and Answers

Lenders can ask questions and get answers in a nice chat. I never looked into asking questions before. It seemed like a lot of work and went through e-mail. I don't need my e-mail all piled up with Prosper questions and answers.

Estimated ROI

There is a new estimated ROI (see bottom of page) section of the site. I used this tool to determine that I'm not going to do grade E loans anymore. They return a negative 8.43%. Yes that's -8.43%. It looks like C and D loans are possibly the best bets returning 9%+. Of course, if I can find loans with less risk or more return than average, it looks to be a good investment opportunity.

Credit Grade Changes

Anyone with a 520 or lower credit score will no longer be able to borrow at Prosper. I guess they consider them deadbeats. Such a very, very small percentage of those loans got funded that it's not worth it to Prosper. Grade HR and E will be in the range from 520-600.

Fee Changes

This is the big hit for lenders. Instead of the 0.5% that Prosper earned before, it will jump to 1%. Prosper has always seemed like the Ebay of loans. With the fee increase, it seems they really are. On the borrower's side, I didn't follow those fees that much before, but E and HR will now pay a 2% fee to Prosper which seems like it might be higher than the past. It looks like this is going to pay for the customer support above. I'd personally rather not have the customer support if I had the choice.

Identity Theft Guarantee

Prosper will payback a loan in full if it's a case of stolen identity. I think that's noble, but it isn't one of my highest concerns.

Lastly, I'd like to thank Prosper for recognizing my post How to Beat the 10% Compounding Myth in their Prosper in the Blogs section.

Posted on February 13, 2007.

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3 Responses to “Prosper Changes: What They Mean to Me and You”

  1. I was playing with the ROI tool too (since 4:30 this morning). Still not totally clear what it is saying. At first glance it seems they made some trade offs between easy of use and transparency. I am hoping that they clarify a bit in this morning session: http://www.rateladder.com/2007/02/13/rateladder-at-prosper-days-day2/

  2. fin_indie says:

    The ROI tool is interesting, but looking at my own loans (A through D), the numbers are definitely not what I am seeing. I’m not sure if they’re trying to set low expectations in the hopes that new lenders think the going rates are a good deal or what. Either way, something is definitely off.

    Also, on the fee increase: I totally missed that in my breeze through the changes. That’s a HUGE deal. I couldn’t agree more: customer service is not something I see myself using and I’d rather pay the old rate.

    For me, the only material change is having more borrower data available. The rest of the stuff doesn’t matter.

  3. JohnR says:

    I have been a moderate prosper lender for several months. My net returns really are coming close to what they have posted on the web site. These changes mean to me that i am likely goign to become a ‘former’ lender. Keep in mind, their quoted ROIs are based on things before the fee changes. Subtract 0.5% for increased lender fees and the rates are not as good. Noe, is your money 100% invested at all times? I think not. When I take into account the time it takes for the loan to open and the fact that the money I get out each month will need to be reinvested, I am sitting at about 85% invested. Take this into account, and my ‘real’ ROIs are about 9%. Not as hot as I thought. Plus, I’m finding that I do a lot of research on each decistion and I only have about $3500 invested. So the time I put into it isn’t much worth it. The fun is wearing off… I might just throw the money in an index fund. I bet I can do better in that with no time committment.

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