One of the reasons why I find Prosper.com appealing dawned on me this morning. It’s not a good reason, but I’m not so sure it’s bad, either .Â It’s probably just a feature of their business model. The fact of the matter is that Prosper is just fun.Â Here’s why:
- The Human Connection. You get a picture and story of the person you are helping.
- Daily Gains. Unlike mutual funds which can go up and down, you can see your Total Account Value grow each day. This is a huge motivational factor for me. Right now I’m just getting little over $1 a day in this area, but psychologically a $10 a day growth would feel like a lot of freedom.
- Reinvesting the Gains. It’s a very good feeling to see that enough people have paid you to make yet another loan. In 6 months, my Total Account Value has grown by $125, so I’ve been able to make two extra loans on just the interest.
- The Gains Themselves. I choose to take on a lot more risk than many might. That’s just part of my nature. So when I’m making an average of 20+% on the money lent, it feels like I’m beating the system. It is a lot of fun to expand that growth rate with a calculator. Logically, I know I’m not going to get that when risk is factored in, but that doesn’t kill the fun factor for me. Even when I factor the risk in and look at it logically, it seems like a good deal.
Lazy, I’m with you. Prosper does have a certain draw for the reasons you cite. I especially like the “I’m funding new loans on the interest alone!” comment. It’s true, how can you not like that??
I just added more money to the system and am looking for more loans to fund myself:
How are taxes figured? Being as it is interest accrued, wouldn’t that be taxed at your highest rate? If so, what is the effect of taxes (and defaults) on your realized rate of return?
I believe you are right about the taxes Major. I wish it would be a little more tax efficient. At my tax bracket (I think it’s going to be at 25% or 28% – I haven’t full calculated it), the 15%+ estimated, risk-adjusted, gain is pretty good. I think that’s better than can I do with more tax-efficient investments.
Apple User Group says
I totally agree with the human connection, it is the addictive part of the process. It can be a bit of a soap opera, we laugh, we cry, in the end were all looking to improve our lives… (Editor’s note: removed commercial promotion)