Prosper (3 of 3)

In my final instalment of my prosper.com review, I want to address the unavoidable civic service aspect of investing on or borrowing from Prosper.

I say unavoidable because, for all the sound financial reasons to use Prosper, the social aspect of the site is so ingrained in how it operates that it is hard to avoid.

For the borrower, Prosper offers a way to opt out. After all, who isn’t a little sick of credit card companies trying to screw over their customers? What happened to customer service and ethical responsibility? Publicly, companies advise you to “save money” by going deeper and deeper into debt, while privately they use hidden fees to take more of your money at every turn. Unfortunately, there is little competition to punish the companies for behaving this way. However, Prosper is one of the few easy ways one can.

I will say this: it is true that Prosper is still a for-profit company and they do still take some of your money. However, much more of it flows to individuals, not a large corporation. So if that idea appeals to you, go with it. It is rare that taking a loan can serve as a way to help other people.

For lenders, the social overtones may be even stronger. After all, each lender is able to decide who to support and who not to. In many cases, the lender is able to make a respectable return on their money while still issuing a loan at a charitable rate (compared to the market at large).

I will say this as a warning. I have heard horror stories about well meaning people who have lost a lot of money trying to be entirely charitable and not at all selfish. The worst I heard involved someone who lost about $100,000 issuing 1% loans to the worst rated borrowers, believing that with a low enough rate they would pay. Unfortunately, some people take a loan never intending to pay back a cent. For people interested in Prosper to help people with bad credit, I can only reiterate my advice to balance several safe loans again your high-risk loans. The longer your money grows and returns to you, the more people you can share it with to help them, and even being cautious you can offer much lower rates then comparable lending institutions.

In short, Prosper seems like a cuddlier, more optimistic version of the lending system, but it is still directed by the cold, hard rules of finance. So please, feel free to take advantage of this wonderful service, but also protect yourself.

Regular posts will return tomorrow.

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One Response to “Prosper (3 of 3)”

  1. No One Says:

    Thank you for the very informative series on Prosper, I think it provides an importunity for people to help others, for some people a second chance, and a chance to make money.

    A win win win

    Nice Job

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