I got this email yesterday. Its from the peer to peer lending company prosper.com. Basically, the company is saying that the number of deadbeats on their website is increasing. I’m posting this as a bit of a consumer advisory.
If you are interested in getting into person to person lending, be aware that prosper is experiencing a high level of defaults. It might not be the best way to go if you don’t have a lot of extra money to lend out. You’ll need to plan accordingly.
At Prosper, we strive to make investing as easy, sound, and yes—fun—as possible.
In the past year, we have seen an increase in the number of borrowers that have entered into what we call “Primary Collections,” or accounts that are delinquent 31 – 121 days. We believe that the current economic environment, the worst in decades, is a significant contributing factor.
Regardless, we consider any delinquent payment to be unacceptable.
While the percent of accounts in arrears has declined recently (it appears to have peaked around year-end 2008), Prosper would like you to know that we take every delinquency very seriously. Along with raising the credit requirements of our first-time borrowers we’ve created the Prosper Rating system to better identify and quantify risk for lenders.
Although delinquencies are a part of being a lender, there are steps you can take to reduce the impact of a borrower delinquency such as diversifying your portfolio and adequately pricing for risk. To help, we are starting a series of blog posts covering this subject. You can read the first entry here.
Whether you’re a first-time or experienced investor, we think you’ll find this information useful. Please consider checking it out now.