What is Digg?34 Comments
- Egoist, on 10/12/2007, -0/+6Except that now your tiny little coop that has a limited amount of funds now includes the entire world with virtually unlimited capital. I'd say that's an improvement.
- wheel, on 10/12/2007, -7/+13In Soviet Russia, money borrows you!
- Egoist, on 10/12/2007, -0/+6I assume that most of the borrowers aren't the types that can get loans with banks, so the rates will be higher because they are higher risks.
I wouldn't go it alone, but I like how groups are supported on the Prosper site. The idea being that you can offer maybe $1,000 total and loan out a little here and a little there with the group that supposedly reviews each borrower. I saw one where the only APR offered was 27%, so assuming that it actually gets paid, that's a hell of a return. And because your portion of the loan is so small and spread out over a large area, your risks are mitigated.
There is definitely risk, but no investment is risk-free. The bittorrentesque idea of lending intrigues me. - khafra, on 10/12/2007, -0/+4I've been lending on Prosper for 4 months now. It's a great idea, and the execution seems solid, but it does tie your money up for a while with uncertain returns. Think Certificate of Deposit with bigger returns and risk.
- djn1976, on 10/12/2007, -0/+3Hi all - Dave from Zopa here (I'm a co-founder) - just wanted to clear up something about who our borrowers are and how risky Zopa is.
Unlike certain other P2P lending sites, we don't allow people to borrow who fall into high risk categories - we serve the top 50% of the UK borrowing population - what would be called the 'prime' segment in banking language. We carry out the same fraud and credit checks that a bank does, and in some areas do more than a bank does to safeguard lenders money. To date (after 18 months up and running) we have had only 1 (yes, one) borrower who has failed to repay, and zero fraud.
Zopa is not a scam or a quick way to lose a buck (or more) - we are a serious organisation that is changing the way that people in the UK can lend and borrow - and we want to bring our model to the US soon.
We're so confident it's safe - we not only have a page explaining all this ( http://www.zopa.com/ZopaWeb/public/lending/why-its-safe.html) but we're about to offer an insurance product to lenders that means you're guaranteed to get your money. We offering this via a major international insurance company - and they wouldn't do it if we weren't credible.
Finally - it is possible for both lenders and borrowers to get great rates - we have people borrowing at the lowest rates in the UK right now, but not everyone can get those rates. Lenders who are prepared to lend to riskier borrowers at higher rates can get a higher return.
Hope that helps - let me know if you have any more questions,
Cheers
Dave - Egoist, on 10/12/2007, -0/+2What's the rate of defaults, though?
- betasp, on 10/12/2007, -0/+2My grandfather retired at 45 from lending people money who could not get it through traditional sources. He never had to break any legs, or shatter any knees. He made smart informed decisions about who he borrowed to and what they money was for. Heck, he even loaned me the $2500 it took for my first computer (at 4.5% apr). I have no issue with sites like Prosper. If done correctly, it can be a win-win for both parties.
- noodlez, on 10/12/2007, -0/+1@jadey
consider yourself lucky. the average american pays about 14% on their card. higher if they have bad debt or a lingering balance (and lower with good credit). which is why a lot of the people on prosper are looking to consolidate their cards with a high rate.
but those people have poor credit and a high debt-to-income ratio, so they need to offer a high rate if they want people to cough up the monies. - PossFIMH, on 04/12/2008, -0/+1The link below gets NEW lenders/ Borrower a £30 credit. (UK folks)
http://uk.zopa.com/member/PossFimh
I won't lie I'll get a credit too but hey.... I've been lending quite happily for a while.
OFFER EXTENDED TILL END OF JUNE 2008 - piper5ul, on 10/12/2007, -0/+1Note: Copy of comment left on centernetworks.com
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Good introductory article - however, must point out that Prosper is relatively new in the US. One of the initial 'social lending' (if you will) companies in the US is Circlelending (http://www.circlelending.com/). They have been around since 2002 and I think they have more appeal than Prosper at the moment. They also have been growing steadily over the past couple of years.
Zopa is definitely more 'web 2.0' than any of these, esp in the layout / design / interaction. I guess financial institutions in the US needs to come up with cooler UIs :)
That being said, check out Circlelending. - Lone07, on 10/12/2007, -0/+1And don't forget the fundraising/donation equivalent:
http://www.fundable.org/ - KaserPro, on 10/12/2007, -1/+2pfft.
This is just a web version of a northern (england) building society/ coop
once again the blog-o-sphere has re-invented the round wheel, and made it hexagonal. hurrah! - PossFIMH, on 04/12/2008, -0/+1The link below gets NEW lenders/ Borrower a £30 credit. (UK folks)
http://uk.zopa.com/member/PossFimh
I won't lie I'll get a credit too but hey.... I've been lending quite happily for a while. - Jadey, on 10/12/2007, -4/+5Zopa is pushing great returns for a lender and low rates for a borrower. You can't have both- and it looks like you don't. On both sites the lending rates seem extremely high. Maybe rates are just that much more reasonable in Canada, but on both sites I'm seeing rates between 11 and 25%. That's ridiculously high. These are loan shark rates. From a institutional lender, the highest rate I pay is 6% on my Visa.
There's also that I would not in a million years lend money to a stranger because of a sob story they stuck on a web page. I'm not even that comfortable buying stuff on eBay because I have no idea who these people are. Online social lending seems like a terrible idea. I'm definitely not in. - aphexcoil, on 10/12/2007, -0/+1I am an active lender on Prosper with 6 active loans. So far, my experiences with Prosper have been excellent. I will share a few thoughts with you about the entire experience:
First, there is risk involved -- however, if you loan money out to multiple people and diversify in this fashion, you will spread your risk out. My goal is to keep between 20 and 30 active loans at any one time -- with each loan amount being between $50-$100.
Second, you will get late payers and an occasional default. This is part of the risk model and the higher interest rates reflect that. This is why someone with poor credit has to pay 20% or more in interest for an unsecured loan. However, with a diverse portfolio, even a few defaults will keep your overall ROI above 12% -- which is in line with other investment options such as stocks.
This isn't for everyone -- some people aren't comfortable with risk and that's why they deserve the lower interest rate from a mutual fund or money market account. For those who understand advanced risk / reward practices, Prosper is a great way to make more than triple the return of today's money market accounts. - mrgomel, on 10/12/2007, -0/+1One more thing: slapping buzzwords on things to make them sound nice and progressive is simply bad. It kills our language because the words lose their meaning, they even become the opposite, a parody of their former selves. Calling things "social" is a cheap marketing stunts. When money is at stake there will be a lot of anti-social behavior. At some point "Social" will start to mean "scam".
- tom6a, on 10/12/2008, -0/+1Here's a good resource for p2p lending.
http://prosperlending.blogspot.com/
(Zopa just closed operations in the U.S.) - rhettnyedotorg, on 10/12/2007, -0/+1You're from Canada too and obviously not seeking capital like I am. What equivalents to this Zopa is there in Canada, if any, yet?
- oceanmajk, on 10/12/2007, -2/+3dude... your grandfather lent you money at 4.5%? What a scrooge!
- mpilone, on 10/12/2007, -0/+1If you're interested in social lending, you might want to checkout some of these resources:
This page mines Prosper.com data to give stats and also lists many of the defaulted loans:
http://www.ericscc.com/index.php?page=home
A six-month review of Prosper.com and links to many peoples experiences:
http://www.investorgeeks.com/articles/2006/08/15/prospercom-a-6-month-review/
One thing to note is that Prosper.com charges the lender 0.5% APR on the balance of the loan. If you are only lending $50 at 15%, but getting charged .5% on a 5,000 loan you can quickly cut your gains. Also, don't forget the default rate (which is estimated around 7% of loans right now). - madmonkey21, on 10/12/2007, -0/+0this is pretty poor coverage of what Zopa actually does - the author has basically copied the homepage text. it fails to cover how funds are allocated, how borrowers are screened, etc.
- arniebuteft, on 10/12/2007, -0/+0There must be a lot of brave souls out there, with a more carefree attitude towards their money... I can't ever imagine participating in something like this. These people already have lousy credit (that's why they're turning to these sites, instead of banks), are they really gonna care if one more loan gets reported to a credit bureau? It's just a great way for them to get some quick free cash.
Sure, there are going to be a few honest gems in the bunch, regular people who had a spot of hard luck and really want to get back on their feet, but I wouldn't want to try and pick those people out of the mix, just based on their own representations.
I have heard of another model for social lending, which has a pool of borrowers who all have some kind of social relationship with each other, and who are all jointly liable for a loan made to the group as a whole, and the loan isn't given out in one lump sum, but gradually. Think of it as an allowance given out monthly, and if one member of the group stops paying back, the entire group takes a hit, and the allowance gets cut. There is social pressure that can be exerted on the non-paying member, and (because the loan money is disbursed gradually, instead of in a lump sum) incentive to get the group back into compliance. However, a scheme like that is more suited for small business startups, than simply giving someone rent money for another month.
Think about it this way: would you lend $100 to some dude you just met on the street, with his promise that he'll bring you back $103 next month? - oceanmajk, on 10/12/2007, -1/+1That has nothing to do with "Web 2.0"... it's the internet plain and simple. Tell your grandma to watch out!
- mrgomel, on 10/12/2007, -1/+1In economics lending is a "no perfect information" problem. Banks exist because they solve this problem better than a single person would.
What we have here is the attempt to create a different distribution channel. In time it will have the same problems as other places where money is the issue. Really well organized scammers, etc.
A classic bank pools your capital with that of thousands of other people. In this case you pool the money with only a few. It's risky which means that your average, or expected return will be lower anyway. It's probably as risky as the stock market.
Think about it that way: the bank will give you a no risk 5% return, and Zopa wants to give you 20% return. Which would you take? And what if on one in ten occasions the money you lended in Zopa gets completely stolen? In such an case the no risk option could be better. - amartinezfonts, on 10/12/2007, -0/+0You have an error in how you describe Prosper's fees. Actually, you're not getting charged a 0.5% annual servicing fee on the full balance of the loan ($5,000), you're getting charged a 0.5% annual servicing fee on the principal balance of the loan that you own (in your example, starting at $50 and decreasing with each monthly payment).
An easier way to think about the lender servicing fee is that if the interest rate on the loan is 15%, take 0.5% off of that for a net interest rate of 14.5% - cfsynergydotcom, on 10/12/2007, -0/+0I've been lending on Prosper since June. I have about $4000 in loans out now at an average of 15% and so far no late payments. I only lend to verified homeowners with C or better credit that have verified bank accounts and agreed to autopay. Military is a very good bet because they can get in trouble if they dont pay.
I think Prosper/Zopa ect. is a brilliant idea. And I really like seeing the banks/credit card companies get screwed. Try asking your bank for a $500 or $1000 loan. Good luck.
This is going to do to lending what Cragislist did to newspaper classifieds. - khafra, on 10/12/2007, -0/+0@Egoist: Currently, one of my 4 loans is overdue on his payments. He was a D credit rating, and I'd bet the default percentage is substantially similar to what banks experience. I only contributed $50 to his loan; and I'll probably stick to safer ratings in the future.
- jadooger, on 10/12/2007, -1/+0can't complete my registration to become a lender on Zopa... keeps complaining about my home phone not being a landline - I am in US... must be applying some type of a UK based check that I am not aware of... not very "web 2.0" after all :)
- headzoo, on 10/12/2007, -6/+4Web 2.0 == Advanced spam and scams at every turn. The scammers and spammers are eating away at the Internet at the cyclic rate. A 10 year old girl can't even start a harmless blog without getting slammed with spam from day 1. My grandma can't buy anything on eBay without dodging all the phony auctions being run by scammers.
So don't be too shocked when the matchstick men turn out in droves to take advantage of people on these sites. Like everything else on the web today, they will ruin the experience for everyone. - Brajeshwar, on 10/12/2007, -5/+2Is the site dead, even before it is dugg?
- inactive, on 10/12/2007, -6/+2The site is up and running, and there is nothing to do with a zune, heh
- inactive, on 10/12/2007, -6/+1If your site get's dugg, you must pay for more traffic
- bbrosemer, on 10/12/2007, -8/+1Is this a Zune add I dont want to have Social forced upon me by a bunch of surfing kids...
- bbrosemer, on 10/12/2007, -9/+1It was a joke...
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