Hi All,
If you frequent personal finance websites, you’ve probably heard about prosper.com. Prosper is a person to person lending platform that allows you to make loans directly to borrowers without going through a bank.
We DINKs have a little under three thousand invested in the service. We were optimistic about prosper at first, but I’ve since become a little more disillusioned with the company. This is largely due to the high rate of defaults in our portfolio – we had nearly a third of our first batch of loans default. Granted, we initially lent to persons with poor credit, but just this week two more of our loans had to be written off. To make matters worse, one of these loans had a “B” credit rating, which means that even some of our borrowers with pretty good credit are defaulting on their debt.
While I take responsibility for having made the decision to engage in high risk lending, our extremely elevated level of defaults gives me some cause for reconsideration about prosper as a company.
So, after poking around a bit online, it turns out that I’m not the only disgruntled lender. For example, the company has received an unsatisfactory rating from the BBB. In addition there have been allegations that prosper has misappropriated lenders funds, and has failed to aggressively follow up on collections and defaulted loans. Of course, misinformation and allegations are rife on the internet, so you should probably take these with a grain of salt.
However, all things considered, I may put prosper on the agenda for our next family meeting with to a mind to decrease our involvement in the service. Our high level of defaults and the allegations made against management suggest that we might consider taking our free cash elsewhere.
Thanks,
James
p.s. in the interests of full disclosure we currently have an advertising relationship with prosper.
