A Good Look at Prosper Loan and What It's All About
In a nutshell, Prosper.com is a loaning online site that uses a peer-to-peer type of system. It is managed by a company known as Prosper Loans Marketplace, Inc. However, the real question is, do they live up to what they claim to be? This article is geared towards aiding individuals wondering about this system's viability so let's go ahead and see what we can find.
First of all, one thing that you need to know about Prosper.com is the fact that its business model functions as a link for individuals who are in need of microloans in order to fund small time investments. This kind of business model was not looked favorably upon by the U.S. Securities and Exchange Commission and was expected to fade away by 2006. Despite this though, peer-to-peer loan websites had endured. However, does that mean you are in good hands with Prosper.com?
For one thing, Prosper.com is certainly enticing to potential borrowers because of the lower fixed rates that they have on their offered loans. These rates are less expensive compared to those being offered by banks. Lenders who take the risk of lending loans with big interest rates are also rewarded by a system called risk premium returns.
The good thing about Prosper.com is that they can handle loans in lower amounts. This is great for investors because they have the option to lower their risk and dish out the minimal amount that they are willing to possibly lose should the whole thing go sour. This is also great for loaners since they would have the option to avail of lower amounts in loans with lower interest rates. This especially true for borrowers who just needs a little extra cash to get things in line and won't have to endure the high interest rates enforced by banks for their minimum loans which can be a lot more than they actually need.
The not so good thing about this venture revolves around the risk involved. Although Prosper.com enforces strict measures to confirm the identity of any loaner, it can be relatively hard to distinguish bad credits from good ones. An August 2008 report indicates that Prosper.com have a delinquency rate of 18.5 from the time it first started its operation which was fully acknowledged by Prosper.com. However, they've claimed to have taken appropriate measures to address the issue despite delinquency rates rising as year 2008 drew to a close.
Another thing to consider is the fact that Prosper.com has a rating of D+ by the Better Business Bureau which isn't so bad but you'll definitely appreciate it if they had a higher rating for a company that deals with money. Most complaints being forwarded to the Better Business Bureau were customer service issues which is pretty significant for any company.
The Bottom Line
In my best efforts to conclude this review, I would go as far as saying that Prosper.com is indeed a very enticing concept. There are indeed a lot of people that can benefit from this regardless if they are the loaners or borrowers if it can be made to work flawlessly. However, it cannot be denied that there are people out there who intend to take advantage of the system and just walk out. Prosper.com indeed makes an effort to verify the identify of any loaner and provides you with tools to assess granting prospective loans but they are hardly fool proof and can be hard to use in order to weed out any risk. Thus it would be best to limit your risk especially if you are just starting out in this kind of business and never give out any more than the amount that you are willing to use. You may also make best use of whatever means that Prosper.com has in place to minimize your risk and use the tools as far as it can get you. On the other hand, if you feel it's too much trouble than it's worth then you could always look for other alternatives that yield pretty much the same results. A good example would be casinos which are both similar to Prosper.com in a way that they are completely legal and allows you to deal with low dollar amounts. However, casinos can prove themselves a lot faster in giving you an update regarding the status of your loan.
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