My first Prosper Investment
Posted on June 28th, 2006 – 12:56 PMBy Kara McGuire
Moving Expenses, the heading states. A man named Kevin wants to move from Boston to New York and needs some start up cash. So I lent him $50 through Prosper.com. Here’s a link to the story I wrote about Prosper. It’s basically an online person to person auction site for unsecured loans.
Kevin has high risk credit, despite having no listed delinquencies in the past 7 years and no public records like bankruptcies. His debt to income ratio is also low. Why his credit is high risk is a mystery to me, but I’m willing to risk $50 in this grand experiment.
I chose to bid on his listing in part because of the extensive details he provided. I especially was encouraged by his statement that he was going to pay some of the loan back right away and that another lump sum was coming in the near future that could also be put towards the loan (although I bet it goes to start up costs in the Big Apple).
My potential payoff? Earning a rate of 22.75 percent interest.
I have $50 more to invest and will be looking around the site for a new prospect.
Anyone else using Prosper? What do you think of the concept?
147 Responses to "My first Prosper Investment"
Congrats. Investing money in Prosper will be interesting if nothing else. It seems like a novel idea currently, but it will interesting to see how the peer to peer (p2p) lending will pan out in next few years.
Zopa.com, similiar to Prosper, but currently operating in the UK, plans on making it’s US foray sometime this year. Should be interesting competition too.
As a early investor in Prosper, it’s somewhat early to tell, but the listings are starting to only be filled for higher interest rates, interesting stories and/or photos.
Overall, it’s a interesting concept, which given the time to shake out quirks and growing pains may prove to be another avenue to add to one’s investments.
KM - Did you do any discovery with your tax accountant as to the issues of lending people money at a particular interest rate? I’m guessing that $50 may not be enough to matter - but if you start having fun and lend a substantial amount at an interest rate higher than a bank - I think you have to report it.
The concept is COOL - but I’d do a little more research before jumping in.
Thought I read an article on Star Tribune recently about a doctor lending money at this auction site.
The interest rate sounds very tempting. However, it only takes a couple of defaulted loans to make the rate much lower than it has promised. But this sounds like an interesting investment idea.
It’s a good site, and I commend Kara for publicizing it. My parents have often compared me to a bank, so I guess it only makes sense for me to actually play the part. I haven’t signed off on any loans there yet, but I probably will next week (EFT’s are painfully slow).
Re: taxes - any amount of income generated from this interest is considered taxable and is reported to the IRS, and it is handled much the same way as interest-based income from something like a money market account.
I’ve been studying the Prosper model and wrote an analysis of Why Prosper Will Fail.
While that’s probably closest to my feeling about the site, I took on the counterpoint role as well, and wrote .
I’m interested to see which side of me is right.
Hopefully it’s the side of you that thinks the site will work. ![]()
I have many of the same reservations, but I’m willing to give it a shot with a small amount of money and see how it goes. Besides, if it works out, I’ll have a decent rate of return (no I’m not gunning for 25%, more like 10%) on a more interesting investment than a CD or mutual fund (which I already have plenty of).
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