What is Digg?93 Comments
- whackaxe, on 10/12/2007, -1/+12Lend 50,000$ to me. I promise i will pay it back as soon as i have unblocked the funds in my late uncles's (the very respected general Mobutu of Nigeria) frozen assests which amount to 100,000,000,000$ thank you for your time. if you cannot help me with a loan, please send your bank details
- BritOverseas, on 10/12/2007, -0/+9Obviously, some of you need to take some economics classes and stop beating up on people with bad credit.
A good percentage of people in debt get that way for reasons beyond their control (college tuition, divorce, medical bills etc), this does not however make them financially corrupt or stupid. Most of that debt comes from credit/store cards and bank/car loans. Unless you have a GREAT credit rating, your interest rates for credit cards is 15-20% and bank/car loans around 10-15%. Trust me when I married my Wife her credit was terrible (due to a previous divorce) and we have just spent the last 3 years fixing it so I know this for fact.
Although she is not a bad person, she had a lousy ex, who was financially retarded, this was really not her fault. However, if she had gone to any lending institute to try to borrow money to sort out these problems, they probably would have laughed in her face, or, charged her HORRENDOUS interest rates to do so, thus is the nature of banks and why this model could be a good idea.
This site seems to be a good idea but as some previous posters have said, it is possible to get better rates from CD's in some cases, but, CD's can be long term and a pain in the ass to deal with, so you have to take the risk of taking on the higher rated loans (there are some ther for 20%+), life is nothing without risk.
I for one have been looking for some way to diversify some cash (I prefer property but it grows slloowwllyy) but the loans here do not seem to be big enough to do what I want, I guess I would have to spread it about a lot to do so, which of course, mitigates my risk. - Electricpixel, on 10/12/2007, -0/+5from NYT
http://www.nytimes.com/2006/02/13/technology/13ecom.html
February 13, 2006
E-Commerce Report
It's Like Lending to a Friend, Except You'll Get Interest
By BOB TEDESCHI
THE Internet has become a great place to track down friends — or friends of friends — for advice or for a date. Now you can ask them for money, too. Prosper.com, a start-up company based in San Francisco, started operations last week, offering a mixed brew of eBay, Friendster and the local bank.
Prosper's users lend money to and borrow money from other people on the site at what the company says are better interest rates than those available through traditional financial institutions and without some of the risk that comes from typical person-to-person loans.
"We looked at eBay and said, 'Why can't we do this for money?' " said Chris Larsen, Prosper's chief executive.
Mr. Larsen, who founded and led E-Loan, an online lender that was bought last year for $300 million by Popular Inc., says Prosper could save borrowers and lenders money because it was a leaner operation than traditional financial institutions. He noted that consumers make, at most, about 4 percent on their savings accounts, which banks then lend to credit card customers at 14 percent or more.
"That's just a huge spread," Mr. Larsen said. "We think if you allow people to participate directly, it's a more efficient marketplace. People can make a better return on their deposits, which then become the source of credit to others."
On Prosper.com, prospective borrowers register with the site and allow the company to review their credit history. Then borrowers post a loan request of up to $25,000, along with an upper limit for the amount of interest they are willing to pay. Loans are not secured by collateral and are paid off over three years at a fixed rate, with no prepayment penalty.
Lenders essentially deposit their money with Prosper — which holds it in an interest-bearing account with Wells Fargo— and either review the loan requests individually or fill out a form permitting Prosper to allocate money to borrowers who meet certain criteria.
Chief among those criteria is the borrower's rating from the credit reporting bureau Experian, but borrowers can also join or create groups with defined interests or characteristics that, they hope, will make them more attractive to some lenders.
Among the groups on Prosper are aficionados of the Porsche 914 model, associates and employees of a Berkeley cafe and Vietnamese-American students. Borrowers, who typically post their loan requests and any group affiliation, along with a description of who they are and why they need the money, then wait a maximum of two weeks for lenders to bid in ever-lower interest increments for the right to issue the loan.
To help lenders minimize risk, Prosper permits them to finance just part of a given loan, so a typical lender may offer, say, $100 at 6.5 percent interest toward a loan to someone with excellent credit.
Once the bidding is complete, and if enough lenders bid enough money to finance the loan at a single rate acceptable to the borrower, Prosper transfers the money to the borrower's account and establishes a monthly repayment system that withdraws money from the borrower's checking account. (Should a borrower default, Prosper hires a collection company on the lender's behalf and alerts credit bureaus.)
Prosper makes money by charging borrowers 1 percent of the loan amount, while lenders pay 0.5 percent of the loan's balance each year.
The community aspect of the site, Mr. Larsen said, is an important component. "It's satisfying to place money in little bits with people who have stories, and in groups that you know and trust and want to support," he said. "And if you're part of a group, the theory is that you'll perform better as a borrower than if it was some disconnected credit card company."
Some prominent venture capital firms, including Accel Partners and Benchmark Capital, have rallied around the idea. Jim Breyer, an Accel partner who serves on the board of Wal-Mart Stores, is a Prosper director, as is Bob Kagle, a general partner at Benchmark, who also serves on eBay's board.
Mr. Larsen said the site's two-month testing period went well, and as of last week, Prosper had attracted lenders with a total of about $750,000 to lend.
Although Prosper is among the first to try this business in the United States, the idea has a track record abroad. Zopa.com, which operates in Britain, introduced a similar service in March (also with backing from Benchmark Capital) and has attracted more than 50,000 registered users, said Richard Duvall, Zopa's chief executive. At any given time, he said, about 15 percent of the users are either lending or borrowing money.
Mr. Duvall would not disclose the privately held company's revenues, but said he was "very pleased with our numbers" — so much so that he planned to start a site in the United States to compete with Prosper this year. Mr. Duvall said Zopa would also soon let users affiliate in groups, as Prosper does.
According to Asaf Buchner, a financial services analyst with the Internet consultancy Jupiter Research, that component could be critical to these sites becoming profitable.
Mr. Buchner notes that Prosper's group leaders receive a commission on the group's lending and borrowing activities, which they sometimes share among the group.
"If the sites are able to recruit strong group leaders with strong affiliations, they shift the marketing burden to those people, who have the incentive to go after others to become part of the group," Mr. Buchner said.
The group approach enticed at least one of Prosper's lenders, Stephen Russell, who registered with the site during its testing phase, and who is the brother of a Prosper engineer. Mr. Russell, the chief executive of a San Francisco technology company, 3VR Security, has put up $25,000 to invest on the site. He has also started a group to lend money to people affiliated with the Climb High Foundation, which trains women in tourist destinations to become climbing and trekking guides.
"I'm not just optimizing the rate of return on my assets," Mr. Russell said. "It's also a way to facilitate lending that'll help women in developing countries. That takes the lending and borrowing process one step further." - Night201, on 10/12/2007, -0/+4The person who started this company was on CNBC about 2 weeks ago talking about this site. It sounded pretty cool.
- sometemple, on 10/12/2007, -0/+4i'm a member. it's a very good site, and they do things right, IMO. Problem I have has nothing to do with Prosper, though. I got sucked into a 28% interest rate on a credit card and I want to refinance it on prosper, but Ohio has an 8% ceiling on personal loans. I don't have great credit, so no one will lend to me. It's okay for my bank to charge me almost 30%, but if I try to refinance it, it has to stay at 8%. The fact that I can't get a loan proves to me that Prosper's members aren't taking any stupid chances.
- Fell, on 10/12/2007, -0/+4There is so much negativity on here, but this is revolutionary as far as I'm concerned. The banks of North America have spent considerable time with the government preventing initiatives like this in the past, at the community level. I think it's great, we'll see how it develops.
And when it comes to Canada… - Mutifus, on 10/12/2007, -0/+4Looks, even SHREK has applied!
http://www.prosper.com/public/lend/listing.aspx?listingID=402 - Beautyon, on 10/12/2007, -0/+3The regulators will be all over this if it suceeds. Like VOIP, as soon as it gets popular, the FEDS want backdoor access (control); better that it was based in another jurisdiction to eliminate this possibility, in the way that Skype cant be touched / tampered with because it is based in Estonia.
- MajorMesses, on 10/12/2007, -1/+4Pretty serious website - over $20 million in venture capital raised - but definitely not the next eBay. (1) There are more people who want stuff than there are people who want loans. (2) People can probably get better interest rates at their brick-and-mortar banks. (3) Someone denied by a bank and driven to the internet to get a loan is probably not the ideal candidate for that loan in the first place - it would serve lenders well to steer clear. Interesting idea.
- rhawk301, on 10/12/2007, -1/+4The founder of this company is the real deal. He started eloan.com, and I know him personally. I will be checking this website out.
- geminitojanus, on 10/12/2007, -3/+5"Excellent idea."
Will you give me $4,000 then? I swear I'll pay you back. - gregwbrooks, on 10/12/2007, -0/+2Everyone's got different risk tolerance, but I can see spreading a few thousand across some of the higher-interest loans to see how it pans out. Might I lose the money? Yes, but the returns are high enough to justify some risk.
Can't imagine that kind of risk? Think it's got too many scam possibilties? Then it's not for you. The beauty of an open market is that things like this can crop up to fill a niche. - prence, on 10/12/2007, -1/+3"Actually, they have the balls to broker arrangements with collection agencies should your loan default"
AKA there goes any money you might have possibly made in addition to some of the money you actually lent out. Doesn't sound so hot to me heh.
And @ BritOverseas, just because you're married to someone with bad credit doesn't mean that you should take away all the blame for every idiot in the world with bad credit. If your interest rates on credit cards are 15-20% ... THEN DONT GET ANY ***** CREDIT CARDS!@# I'm 75% done with my college education and every penny has been paid for with working my ass off the past 3 and a half years; and even if I had needed student loans, they have low interest rates and you don't have to pay them back for 4 years for a reason. Free reign for stupidity? I don't think so. - celeb, on 10/12/2007, -0/+2This is definitely a great idea if it has the backing... The interest makes up for a bit of the risk, and the fact that the complete loan isn't coming from one person makes up for a bit more... Now as long as you have the legal side swen tight you should be ok. Definitely undermining the banks who had a monopoly over loans and would keep the money with the people, as it should be.
- inactive, on 10/12/2007, -0/+2I'm happy with my 4.6% CD at the bank. No risk. They had 4.9% a few weeks later though, dulbt!
If I ever hit the lotto, I'd put it all in CDs and just live off the interest, while still never touching my net worth. - davidswelt, on 10/12/2007, -0/+1Zopa (www.zopa.com) does the same. I gave them £500 recently, but unfortunately they've only manged to lend out less than £200.
The problem is that borrowers expect fairly low interest rates, which are (assumed 2-4% failure rate) at or just above the rates I'm getting on a standard online savings account (around 4.0-4.5% p.a. here in the UK at the moment).
Cutting out the middleman is a fantastic idea though, and banks have made too much money for long enough. At least that's what I thought. Problem seems to be that banks are efficient lenders. The spread as mentioned above might show that. Maybe some people with better insights into the financial sector can tell us more.... - Osmanthus, on 10/12/2007, -1/+2This is a crazy idea. The loans are unsecured, so if the borrower doesnt pay, you get nothing. In theory you could sue them for payment, but this site presents two problems. Some loans are anonymous, which seems to prevent any sort of recourse. But even if you have the identity of the borrower, if you 'spread your risk' the way they say by making a lot of small loans, you won't be owed enough by any individual to allow you sue them effectively. How would you collect a $100 dollar loan from someone across the country?
- lordsandwich, on 10/12/2007, -0/+1"This is a crazy idea. The loans are unsecured, so if the borrower doesnt pay, you get nothing."
Actually, they have the balls to broker arrangements with collection agencies should your loan default:
"Fee for collection services:
30% of funds recovered in the first month*
Fee decreases by 30% each subsequent month. For example, 21% in second month, 15% in third month, etc.
Fee increases by 5% for any payment collected which brings borrower balance current.
* Actual remittance may be lower due to recovery of Prosper borrower fees by collection agencies."
Seriously, WTF?? They assume even LESS liability than freaking PayPal! Not to mention the complete lack of government oversight (which, in the case of financial institutions, is something you want more of, not less).
If this isn't a scam, then it's the most insane use of Internet bandwidth I've ever come across. - ThirdPrize, on 10/12/2007, -0/+1Scary! Still I know where my next holiday is coming from. Do they want an e-mail address as verification?
- inactive, on 10/12/2007, -0/+1yup.
- inactive, on 10/12/2007, -0/+1It's clear that most of you who instantly wrote this off didn't do any prior research.
Those of you afraid to take financial risks will be serving my meals, fixing my car and building my houses.
So will your children. - lidflipper, on 10/12/2007, -0/+1I think it's a great idea for lender and borrower. You just have to diversify properly to ensure any defaults don't hit you too hard.
- Agekay, on 10/12/2007, -0/+1This is brilliant. I really think that this will be as big as eBay.
- toyotaboy, on 10/12/2007, -0/+1I question the insurability of loans, but a great concept. I often thought about how great it would be if I could get higher than 4% return on my money without risk.
could this spawn online loan sharks as well? (yes, you can have $10k, but my interest rate is 50%! and if you don't pay me by friday, I break yer legs!) - n8r0n, on 10/12/2007, -0/+1automagically stated:
"I'm happy with my 4.6% CD at the bank. No risk. They had 4.9% a few weeks later though, dulbt!
If I ever hit the lotto, I'd put it all in CDs and just live off the interest, while still never touching my net worth."
CDs are not a great way to build wealth. Sure they can be ok for those that want a no-risk means of low return. You are better off putting your money in a good money market account or some good growth mutual funds. - redbeard25, on 10/12/2007, -0/+1Interesting from the perspective of being able to set up an ad hoc credit union:
http://www.prosper.com/public/groups/group_home.aspx?group_short_name=0Abiz - kevinrose, on 10/12/2007, -3/+4win for the borrower, a bit risky for potential lenders
- cujofan, on 10/12/2007, -0/+1http://www.businessweek.com/technology/content/feb2006/tc20060213_147523.htm?campaign_id=search
- rudolphdude, on 10/12/2007, -0/+1"I'm happy with my 4.6% CD at the bank. No risk. They had 4.9% a few weeks later though, dulbt!
If I ever hit the lotto, I'd put it all in CDs and just live off the interest, while still never touching my net worth."
So you are happy making 0.6% on your investment? Jan 06 inflation rate is 3.99% (Thanks to oil)...you might as well stick it under your bed. - jsl423, on 10/12/2007, -0/+1There may be some questions about the business model...certainly, this is an unproven marketplace in the US (with some level of a baseline in the UK). I'm not saying this is a sure thing but there once was a time when nobody in their right mind would consider buying a widget from someone unknown person across the country through a website called auctionweb. I say put the marketplace in the hands of the people and it will thrive. I for one am interested to see how this evolves.
- mattgilberg, on 10/12/2007, -0/+1if prosper.com became involved in giving lenders some type of insurance or the lender having the option to purchase insurance from prosper, in the case the borrower won't pay up, then this website would be the *****!
- Gottschalk, on 10/12/2007, -1/+2This is an exceptionally great idea that is equally difficult to implement. However, I do not think that most people can lend others $5,000+. If you can't get money for a car or home from a bank then I probably don't want to lend it to you no matter what the interest rate. Charging a high interest rate because of default risk only works over many trials, so you get a distribution in your favor. The one-shot probability is not in your favor. The real use of the web should be microlending which is more what I envisioned with this thing and the problem there is that the cost of lending must be nill so there must be a streamlined way for lenders to get payment without litigation, like wage garnishment.
- Lung-Dart, on 10/12/2007, -0/+1Looks like a good idea to me. And yes its high risk for the lender of course. The only problem is that the interest rates do not counteract the risk.
Not a wise investment, but this is where I would check this out to compete with my banks for loans for sure. - modpancake, on 10/12/2007, -1/+1That's scary as all hell. I wish the best of luck to anyone who actually goes through with this...
- BritOverseas, on 10/12/2007, -0/+0>And @ BritOverseas, just because you're married to someone with bad credit doesn't mean that you >hould take away all the blame for every idiot in the world with bad credit. If your interest rates on credit >cards are 15-20% ... THEN DONT GET ANY ***** CREDIT CARDS!@# I'm 75% done with my >college education and every penny has been paid for with working my ass off the past 3 and a half >years; and even if I had needed student loans, they have low interest rates and you don't have to pay >them back for 4 years for a reason. Free reign for stupidity? I don't think so.
See, now if you would have read my comment properly then you would not have had a rant. I am no longer married to a person with bad credit, we have paid out a lot of money and spent a lot of time and energy to sort it out and the use of "college debt" was merely an example (don't forget, some people do not go on to stellar earnings straight out of college). My point was, that a lot of the time it is beyond an individuals control that their credit gets trashed (as was my Wives case). What about those poor people who have had their identity stolen? Is that their fault? Most of the time, no. Does it mess with their credit, sure? Does it mean that they should pay more to borrow money, I don't think so.
People harsh on other people too quickly and without thinking about what and why they say things, THAT was my point. - miaow, on 10/12/2007, -0/+0its good they are there to put pressure on banks, but as a lender it doesnt seem much of an investment. you can almost get the same with a decent savings account than you can lending to a good-credit borrower.
you would need to lend to riskier borrowers to make any money, and hope the estimated loss % is correct. Even then you have to keep giving money to get that rate over the year.
I also hate the idea of the borrowers contacting you by PM. maybe im too pessimistic. i presume you dont need to allow them to contact you.
theres no profit margin in it unless you keep loaning to higher-risk borrowers if they are willing to take a reasonably bad APR%.
as people have mentioned, the margin between savings, credit unions and good credit rating borrowers is too small to make it worthwhile for a low-risk lender imho. Its possibly good for bad-rated borrowers.
i hate all the cool language on zopa too. - Qubous, on 10/12/2007, -0/+0To all the Haterz. If you you don't get accepted into a reputable group no one will lend to you. The reputation of all the people you presumably know personally is on the line. Such social pressure is strong incentive. Don't lend to crappy groups.
- cujofan, on 10/12/2007, -0/+0Article about prosper.com in Business Week, similar to the NYT article above...
- Browncoat, on 10/12/2007, -0/+0I love this. I actually had thought about offering a loan on ebay before but this site is perfect. Sure it has some risk, if you like taking risks, ie investments, then this could be a cool way to make some extra money. Not only that but getting a loan would be easier for some as well. If I ever need a loan I know where I'm going :)
- equusdc, on 10/12/2007, -0/+0"Americans have an average debt of $9000."
Wow. I feel like such an over-achiever now what with about ten times that. Okay, $0 of it would be "plastic," which I gather is what you were referring to. - TKDWILSON, on 10/12/2007, -0/+0""""(1) There are more people who want stuff than there are people who want loans.""""""
Ha ha ha. Yeah, who do you know that has taken out a loan? Just about everyone.
Eric Wilson - kartbart, on 10/12/2007, -1/+1This only proves one point: Make an idiot and someone else will always make a better idiot.
You can get 4.5% interest on a CD with almost zero risk. You can get an average 7 to 8% on mutual funds. So unless some nutcase is willing to shell out 12+ % the risk is not justified.
Now, lets analyze this nutcase. Americans have an average debt of $9000. So given that the average American is such a reckless spender and material hog, why on earth do I think they will repay my loan?
Stupid is as stupid does as stupid lends as stupid gets. - dognose, on 10/12/2007, -0/+0"However, I do not think that most people can lend others $5,000+."
It breaks up the loan among bidders, you can pitch in just $25 for that loan. - inactive, on 10/12/2007, -0/+0Stories of people borrowing money is much more interesting:
Check This:
http://www.prosper.com/public/lend/listing.aspx?listingID=894 - flinx, on 10/12/2007, -0/+0Two words: Credit Union
There are small CU's all over the place. Find a small one that meets your needs and it's the best of both worlds. - lordsandwich, on 10/12/2007, -0/+0^ Borrower credit rating: less than 540
Get it while it's hot!! XD - HuDiNi, on 10/12/2007, -0/+0it just Amazes me to find so Many Dumb Asses that Think they know something !
You guys are Worse than a Gaggle o Geese ! but That's o.k. guys.
just Keep pattin yourselves opn the back, thinkin how Smart you are (not) not to get caught Up
in Internet Banking !
but Just in Case you get Back to the Real world Fellas:
the Internet banking industry Is and will Remain, for those that Do something real,
and Not for Loosers that just Talk about what they Think they can do !
You're Welcome ! - bzerkster, on 10/12/2007, -0/+0I shopped this idea around with investors about five years ago (onlinelend.com), with fairly negative results (such as those above!) -- It was the same concept but without the groups and more of a lending auction. I also thought the primary market would be secured home loans or business loans secured by physical assets such as inventory.
I'm very glad to see the concept launched as I think this will be the next generation of lending.
Much of the criticism of the concept so far has been focused on the risks of lending. Let the lenders assess those risks -- that's why they are getting paid interest. Of course, they should be given all the necessary information to be able to determine the risk.
Banks are in the business of doing exactly this, and they seem to be doing OK. - lordsandwich, on 10/12/2007, -0/+0https://www.prosper.com/public/lend/listing.aspx?listingID=851
Loan amount: $25,000.00
Borrower APR: 6.43%
Borrower credit rating: - Pepper, on 10/12/2007, -0/+0Debt alert! ;)
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