Where You Can Borrow and Lend With Prosper.com

Prosper.com is back in business with the blessing of the SEC. Not all of the states are on board, however, and Prosper is working to gain approval in the rest of the states. Here's a quick and easy list of where Prosper has gained licensees so far (updated late July, 2009).

Borrowers

Lenders

Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Kentucky Louisiana maryland Massaschusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming

California Colorado Delaware Georgia Hawaii Illinois Minnesota Montana Nevada New York South Carolina South Dakota Utah Washington Wisconsin Wyoming

Source: Prosper.com/help

Jessica Ward is a freelance writer based in the Seattle area. She writes on finances, business and family.

Prosper Lending Review - the year in review

Happy birthday to Prosper Lending Review! We have been blogging for over a year now. In June 2007 my brother Matt told me about Prosper, a P2P lending site, that he had been funding loans on for about a year. I was immediately intrigued. On June 15, 2006 we launched Prosper Lending Review – a blog about the P2P lending marketplace with a focus on Prosper lenders.

Since then we have watched Lending Club grow, GlobeFunder launch, Virgin Money purchase Circle Lending, Zopa move to the U.S. and Fynanz launch. We expect to see Loanio launch soon and keep watching Canada to see if CommunityLend or IOU Central will open their doors. It's an exciting time for P2P lending and we are happy to be part of it.

Here's a look back at the past year. These are the most popular articles on the site as measured by the number of unique visitors.

• A Prosper scam: The story of Jessica Wolcott
• Revolution Money Exchange offers $25 sign-up bonus
• How does Prosper compare to other investments?
• Prosper: A hands-on education in risk management
• Why does Revolution Money Exchange require my social security number?
• Borrowing money to lend on Prosper: Wise or Foolish?
• When to bid on Prosper loans
• Why would a borrower use Prosper instead of a bank?
• Fynanz to tackle peer to peer student loan niche
• P2P Lending Review: Best of 2007
  

These are the top 10 referring blogs and forums over the past year.

• Prosper's official forum - The official forum was a great source of traffic before it closed in November 2007. The archived forum can be found here. I do not receive significant traffic from the new forum.
• P2PNoBank - blog aggregate run by Rateladder
• Prospers.org - great unofficial forum and wiki
• Prosper Report
• Rateladder
• Personal Loan Portfolio
• Lazy Man and Money
• Ted's take
• Lending Club's official blog - I have written a few guest posts for Lending Club.
• Prosperousland

What are people looking for when they come to Prosper Lending Review from Google? Here are the top 10 search terms driving traffic from search engines:

• prosper lending
• revolution money exchange
• prosper review
• loanio
• prosper blog
• revolution money exchange scam
• fynanz
• jessica wolcott
• prosper scam
• prosper lending review

Again, it's an exciting time for P2P lending. Stay with us over the coming weeks and months as we continue to follow the P2P lending marketplace.

Top P2P lending articles in February

Here is a quick look back at the most popular articles here on PLR for February:

• A Prosper scam: The story of Jessica Wolcott - This article is consistently the most popular post and continues to bring new readers even though it was written over six months ago.
• PayPal competitor Revolution Money Exchange offers $25 sign up bonus
• How does Prosper compare to other investments? - another long time favorite
• Fynanz to tackle peer to peer student loan niche
• P2P Lending Carnival #4 - thanks for everyone's participation!
• Prosper: A hands-on education in risk management
• Borrowing money to lend on Prosper: Wise or Foolish?
• Prosper Days 2008: Keynote from CEO Chris Larsen
• Prosper Days 2008 wrap up and a look back to 2007
• Why would a borrower use Prosper instead of a bank?

P2P Lending Carnival #4

In June of last year I reviewed the top Prosper blogs. Since then, the number of bloggers covering P2P lending has increased significantly and the content covers much more than just Prosper. I'm proud to host the 4th edition of the P2P Lending Carnival. There are a huge range of articles in this edition including some heavy anti-P2P lending posts. Prosper, Lending Club, Lending Hub (Australia), Kiva, Virgin Money, and IOU Central (Canada) are covered. We have posts from borrowers as well as lenders. So enjoy...this represents the "best of" P2P lending articles over the last 2-3 weeks. Past editions have been hosted by Lazy Man and Money, Brip Blap, and Rateladder.

6 Ways To Manage The Risk of Peer to Peer Lending - This is a post by SVB on the official Prosper Blog. She wants to make the leap into P2P lending and takes a look at how to overcome her risk aversion. She has some great tips. I look forward to following her story as she starts lending.

5 Ways to Help Get a Prosper Loan Funded - Jacob from Early Retirement Extreme has lent out more than $12,000 over the past 18 months and has a few great tips for borrowers.

Is Person to Person Lending Safe? - Cash Money Life responds to reader's questions about the safety of P2P lending. "Just like any other investment," he writes, "you need to do your research to determine the level of risk you are willing to assume and the percentage of your portfolio you are willing to invest."

Peer Lending Lessons From the Dating World - In case you missed it, the CEO of Lending Club, Renaud Laplanche, was interviewed on CNBC's Power Lunch. During the interview, a comparison between P2P lending and dating was made. Money $mart Life discusses the comparison and offers some "peer lending 'dating' tips" of his own.

Get a Better Rate for Your Small Business Loan from Virgin Money - Ben takes a look at the story behind Richard Branson's purchase of Circle Lending and its rebranding into the Virgin Money empire.

Is Peer to-Peer Lending Ready for Prime Time? - Moolanomy considers P2P lending "riskier than the stock market" but thinks there is still the potential to earn money as a lender.

Prosper Taxes and Prosper Taxes: Help Me… Help You - Rateladder and Lazy Man both take a look at the confusing tax situation for the various forms of income and loss including interest, defaulted loans, late fees, referral rewards, collection fees, service fees and group leader rewards.

Prosper vs. Lending Club SmackDown–Who has the best interest rates? - The Dough Roller makes a detailed comparison of the interest rates at Prosper and Lending Club from the borrower's perspective. DR writes, "How they set interest rates is fundamentally different. Prosper follows an EBay auction style format...Lending Club sets the interest rate based on a formula...there is no bidding." DR finally concludes, "Whether you are a borrower or lender, the starting place should be to determine the interest rate you would pay or receive at Lending Club....At present, I suspect that many Prosper lenders are underestimating the risk of default, which results in better interest rates for borrowers at Prosper, and better interest rates for lenders at Lending Club." This is a well researched article and the best comparison I've seen so far. The comments are very good as well. As Don points out in the comments, Prosper uses ScoreX Plus from Experian which differs from the FICO credit score Lending Club uses so a strict comparison can't be made between the two when looking at interest rates. For more Prosper bidding tips take a look at Matt's article about when to bid on a Prosper loan.

7.2M In January Prosper Loans, But How About February? - Mike from Prosperous Land takes a quick look at recent loan stats. He is one of my favorite Prosper bloggers and I'm glad he started posting more often. For a look at two of his articles about recent Prosper drama read Prosper Approaching Nuclear War and Junk Mail Seller Revisited.

Lending Club Loan in Review - LuLu, a college student, borrows money from Lending Club and pays off her Discover Card, Citi Card and consolidates other debts.

IOU Central Launches P2P lending in Canada - WiseClerk, the best site for information about international P2P lending, takes a look at Canada's first P2P lending service.

My Opinions on P2P Lending - Ana rants against P2P lending. "I don’t think P2P lending is a good idea at all, not only for philosophical reasons but also for practical reasons," she writes. She feels these sites encourage unhealthy debt and would even avoid being a lender to avoid the ethical dilemma of "slapping those chains of debt onto another person."

Why I Started Lending Money With Prosper And Lending Club - After seeing the rates drop on his high yield ING savings account, David from My Two Dollars is turning to P2P lending.

Peer to Peer Lending: Neat Idea, Bad Investment - Adfecto thinks that bonds or the stock market are better investment options due to high default rates. He says, "I started out very excited and the more I learned, the more I ran the other way." Adfecto, I'd be interested in your comments on Matt's risk management article.

P2P Borrowers: The Greatest Tenants You Can Find - Mike compares a peer loan to a real estate investment. He writes, "I have come to think of the people I loan money to as the ideal tenants for my virtual real estate business."

Pennsylvania loans or what were early Prosper lenders thinking? - Brett takes a look at the high rate of defaults on Pennsylvania loans. We have also wondered about Pennsylvania in the past. In addition, Brett looking for some help critiquing his new Prosper portfolio.

How to Write a Good Application for a Personal Loan - The Lending Hub (not to be confused with the Lending Club) is a new P2P lending start-up in Australia. They share some tips on how to write a good loan request as a borrower. Their tips are solid and apply no matter what company you are seeking funding from or what country you are in. Stay tuned...later this week we will have a guest post from Ivan, Lending Hub's CEO.

Thanks everyone for submitting articles. If you want to be included in Lending Carnival #5 you can submit your blog post here.

'Snarky' blogger critiques Prosper borrowers

Before Prosper deleted their forums (archive available at prosperreport.com) lenders would often critique borrowers and share information in an effort to avoid borrowers who were likely to default. Sometimes those discussions would turn up quite a bit of scandal - the most notorious was Jessica Wolcott. Now these discussions have moved to other web properties, mostly propsers.org and various blogs.

One of these blogs belongs to Kyle M. Stevens. He says he started the blog to "poke fun at some of the Prosper listings." His blog is less than two weeks old but it has already captured the attention of MSN's money blog. Donna Freedman writes, "It was just a matter of time before some snarky blogger began commenting on the applications for loans at Prosper.com, the peer-to-peer lending site. If you apply for a loan at Prosper and your credit history isn't great, you might show up on Prosper lender Kyle M. Stephens' radar screen. You'd better have a thick skin or a generous sense of humor."

Brip Brap hosts second P2P lending carnival

Brip Brap just published the second P2P lending carnival. Here are the featured articles:

• Me vs. Debt: Hey Prosper Lenders! Question from a Borrower… - Amanda asks borrowers if it would be a good idea to refinance her Prosper loan with another one now that she has a different financial situation. (Note: I've noticed two borrowers have refinanced their Prosper loan on Lending Club - here and here.)
• Maximize the Chance of Funding Your Listing with Not-So-Obvious Tips
• Prosper Vintage Curve Update — 1/1/2008
• My Second P2P Loan On Prosper - also worth reading the 30+ comments on this article
• Fynanz to tackle peer to peer student loan niche - thanks for adding one of our articles!
• Prosper Lending: Interest Rate & Bidding Guidance
• P2P lending trends to expect in 2008 - I really like this article submitted by WiseClerk. I think it's a great addition to our review of 2007.
• Lending Club Statistics: Rejecting Most Loan Applications - another provoking article and good discussion in the comments
• What is Peer to Peer Lending?
• How I Overcame My Fear of Lending Money on Prosper.com

Earlier this month, Lazy Man and Money initiated the P2P lending carnival series. It's good to see the blogging community work together like this to share P2P lending information. Thanks to everyone who submitted an article and Brip Brap for hosting!

Lazy Man features P2P Lending

Lazy Man and Money runs a great personal finance blog. I found his site while searching for the top Prosper blogs back in June 2007 and have been a regular reader ever since. He writes about many subjects but often covers Prosper. Today he announced the first ever carnival of peer to peer lending. Here are the featured articles:

• Prosper and Lending Club Advice for New Lenders
• Five Investment Prerequisites to P2P Lending
• My money lending experiences on Prosper
• Review of the best in peer-to-peer lending in 2007 - thanks for mentioning us!
• Prosper Vintage Curves From Private Data
• Diggin’ For Gold Around The Portfolios
• Credit crisis has given social lending a friendly pat on the back?
• Pre-Payment Pays Off: New Feature for Prosper Borrowers

Thanks Lazy Man for hosting the carnival! The next edition of this carnival will be hosted at Brip Blap. You can submit an article here.

P2P lending blogs - Lending Club and Prosper

Last month I started blogging for Lending Club. The focus is more personal finance than peer to peer lending. Here are a couple of my recent posts:

• How salaried employees can increase their hourly rate - a discussion of an article I found on OmniNerd.com called Paid Twice a Month versus Every Two Weeks.
• Seven steps to wealth - What does Dr. William D. Danko who wrote The Millionaire Next Door - The Surprising Secrets of America’s Wealthy have to say? Believe it or not, the wealthy are not usually those that make the most money.
• Avoid Lending Scams - In connection with my blogging here on PLR I received a letter from a lady who was a victim of a lending scam. On the Lending Club blog I shared excerpts from her letter and tips from the FCC on how to avoid these scams.
• Gambling away wealth - Gambling is one of those money suckers that can quickly consume your income before you know it.

I've enjoyed being part of the blogging team and have learned a lot from the other personal finance bloggers. Two recent articles from DebtKid were quite popular on Digg - 7 Mistakes Geeks Make With Their Money (and How to Fix Them!) and 7 Dating Tips - Ideas for How to Save Money.

New Prosper blog - Propser started a new blog two weeks ago and today they announced that Rateladder will be the editor-in-chief. Rateladder runs several peer to peer websites (RateLadder, ProProsper, and P2P No Bank) and has been a lender on Prosper since July 2006.

So far I've been quite impressed with Prosper's blog. They have pulled in several great writers with different perspectives. Here's a quick run down of the highlights:

• LazyMan, runs Lazy Man and Money blog - Do You Need a Budget? and How Many Income Streams Do You Have?
• Brett McKay, author of The Frugal Law Student - 6 Ways To Save on Traveling This Holiday Season
• The Silicon Valley Blogger (SVB) from The Digerati Life - 10 Super Strategies To Manage Your Debt
• Omahajay - Lender experience
• Mapgirl from Mapgirl’s Fiscal Challenge - Why I Love Being a Prosper.com Lender
• Eric Petroelje from ericscc.com - Follow the Leader: Watching Lenders and Groups on ericscc.com
• Mike from Prosperous Land - Diggin’ For Gold Around The Portfolios

In addition to a variety of guest posts, the Prosper blog also has updates from Prosper staff. This is a welcome addition and something I asked for when I reviewed the top Prosper blogs last summer. Previously Prosper had communicated with users through their forum and John Witchel's (Prosper CTO) blog on prospers.org. That prospers.org blog has since been removed and there is quite a online battle right now with some dissatisfied users. The blog is certainly a step in the right direction to communicate effectively with the public.

NuWire features Prosper lenders

NuWire Investor has published an article about Prosper Lending which features two prominate Prosper bloggers - Kevin Gillett who authors Rateladder and Technologyguy who authors Lazy Man and Money. We just talked about rateladder and lazy man in our review of top Prosper blogs. NuWire's article was written nearly two months ago but was just made available to the general public in their free section. Here are quotes attributed to the lenders:

Many investors were intrigued by the idea of replacing banks in the lending equation. “It was a very interesting idea to me,” Kevin Gillett, a Prosper lender and the author of www.rateladder.com, said. “I love the idea of cutting the banks out of the picture.”

Prosper “basically allows me to be the bank, which I really like,” said a Prosper lender who goes by the user name of Technologyguy and authors the site www.lazymanandmoney.com.

Prosper has the advantage of independence from the stock market, “so even if it can’t blow the doors off returns that you might see hyped up about it, if it can return 10–12 percent and be orthogonal to the stock market, I think that alone is enough of a reason to invest in it,” Gillett said. Prosper is creating a “completely different asset class,” he said.

Another interesting part of the article is the statistics about the success of Prosper lenders.

Most of Prosper’s 11,500 lenders are seeing competitive returns so far, according to Eric’s Credit Community, a website that analyzes the official data released by Prosper. After adjustments for default risk, 75 percent of all Prosper lenders are seeing a return of more than 10 percent, and 98 percent of lenders are achieving more than 6 percent.

Diversification increases results; of the borrowers with more than 25 loans, 81 percent are seeing returns of more than 10 percent, and 99 percent are achieving more than 6 percent.

Based on the tone of lenders in the forums you would think the returns are even lower than this. Perhaps those that have lost the most are just the most vocal. Technologyguy talks about his concern about not receiving interest on idle money. This is something John Witchel, Prosper CTO and co-founder addressed back in April. Witchel said it is not the priority right now, "it's not the dominant variable. Marketplace liquidity and default performance are the dominant variables that Prosper can influence."

Technologyguy said he would like to see Prosper provide interest on money that sits in a lender’s Prosper account. Right now, he said, he receives no interest on funds that are not invested, and “the money sits around for a long time when it’s being transferred from your bank account into Prosper.”

He said after finding and bidding on a loan, it can take up to yet another month before the loan is fully funded, verified and active. Since the money receives no interest during those waiting periods, “it really cuts into the amount of gains that you can make.”

Kevin and Technologyguy also discuss their concerns with standing orders. Both would like greater flexibility to time standing orders.

Gillett has relied mainly on standing orders and only recently began to experiment with manual bidding. He said recent changes in Prosper have made standing orders less effective. The problem, he said, is with loans that are not autofunding, which means that “as soon as they’re 100 percent funded, they continue to have the auction open and the bids continue to come in” and the interest rates get driven down.

Gillett said his standing orders “would fire and my money would be tied up in this loan that started off at a great interest rate and then by the time the loan actually closed, I was bid out of the interest rate.”

“eBay has taught us all that the optimal auction strategy is to show up at the last two minutes and outbid everybody and win the listing,” Gillett said. “You weren’t in the loan early, no one knows you’re coming, and…that way, you get the best interest rate possible.”

“The time remaining criteria would allow my standing order to basically act as I’m acting in a manual bid, which is to say, watching the interest rates, watching the loans, and then when the loan gets within 30 minutes of the end of its auction, then to have the standing order fire,” Gillett said. Such a system “is absolutely necessary if you’re going to be a standing order bidder these days,” he said.

Lenders with multiple standing orders face special challenges, Gillett said. He uses five standing orders that build a bid ladder, but “they fire in completely random order and I have no control over the order that they fire in.”

Rather than bidding at the most attractive interest rate first, the orders fire randomly. “So I’d like a little bit more transparent control over when the standing orders fire,” he said.

Review: Top Prosper Blogs

Prosper is a social lending marketplace. In this post I wanted to look at one part of that online social aspect - blogging about Prosper.

I've spent several hours searching the interweb and come up with a list of Prosper blogs. I'm sure that I've missed some and ask for reader's help in identifying any additions.

Rateladder.com - Rateladder is clearly the most prolific Prosper blogger. He has his pulse on the Prosper community and certainly provides a valuable service. He has averaged more than a blog post a day since launching in December 2006 and is still going strong. His most popular post is Prosper.com and your emergency fund. Kevin, the blog author, also runs ProProsper.com which provides tools for Prosper lenders.


Wiseclerk.com - Wiseclerk is an interesting blog that started about the same time as rateladder. The focus is much broader with attention to all P2P banking sites including a lot of international coverage. Here's a direct link to wiseclerk's Prosper blog posts and posts about Prosper groups. Wiseclerk is the blog's primary author but there are also several other guest authors. My only confusion with wiseclerk is the header says P2P-Banking.com while the site is hosted on wiseclerk.com - odd. In addition to the blog, wiseclerk offers several useful statistical reports.


Jutia Group - Jutia Group is a finance blog. Stephen Oakes, the author, is the group leader for the aptly named Jutia Group on Prosper. His 45 active loans are earning over 20% since February and he is much more bullish than most investors, "Although picking solid stocks is my expertise and passion, I've found that making diversified loans earning over 20% every year is an absolute no brainer." In my opinion, his best post is about standing orders - not only does he provide a brief tutorial but he shares his own criteria as an example.


Lazy Man and Money - Lazy Man blogs about all things money but his favorite topic is Prosper with over 30 posts. He freely shares the mistakes he has made and has changed his investment strategy from focusing on high interest rates to focusing on AA, A, and B loans. This reminds me of Matt's risk management advice.

Prosperous Land - Mike doesn't post often (maybe a half dozen times a month) but when he does it it's quality. The most valuable post for me was his analysis of default rates on auto funded loans. Based on his stats, they will fail at 2x3 times the rate of non-auto funded loans. He also presents some shocking statistics on how borrowers without verified bank accounts almost always default.

Prospers.org Blogs - Prospers.org allows anyone to host their own Prosper blog and currently has eight bloggers which include zcommodore (brand new blog), PrinceOfEgypt (not updated since May), Caladia (nice Prosper anniversary post), Bamalucky (self-described as daily rants and anti-prosper), and bmay2 (group leader of NuBeginnings). The two I'll highlight are Fred93 and Jwitchel. I'll also point out that here on Prosper Lending Review we plan on allowing guest author posts in the near future. This may be a valuable option for people who don't want to start their own blog but have valuable insights to provide to the community outside of the forums. Email me if interested.


Fred93 - Fred is a top lender with over $700,000 invested. He has only blogged three times but they are weighty posts. He has soured on Prosper and has published a couple open letters to Prosper (1, 2). He says, "Sadly, I have to report that my disappointment with Prosper’s management has continued to increase month after month, and my enthusiasm has continued to decline. I’m pretty sure that the majority of things that are wrong can be fixed. However my confidence that Prosper’s management will fix them has simply declined with time as I’ve witnessed their response."

Jwitchel, Prosper CTO Blog - Prosper.com does not have an official company blog. This surprised me, but they make up for it by directly interacting with users in the forums. There is an official company announcements section of the forums and several Prosper employees are active in the forums. John Witchel, Prosper's CTO and co-founder, made the decision to host his blog on Prospers.org instead of the company's official site. In his first post he says, "Following up on my promise to start communicating more, I thought I'd start a blog and Prospers.org is kind enough to hook me up." His posts have been very informative yet somewhat infrequent (four in the last two months). He has blogged about the Prosper collections process, debt sales, debt to income ratio, pre-vetting borrower's income, and interest in idle money among other topics.

There are several blogs, while interesting, are no longer updated.

Money Walks - Lender's perspective on Prosper with an emphasis on data analysis. My favorite post, Blame the Lenders? Or the Borrowers?, shows that HR and E-grade loans make up 80% of the listings. Wow! Money walks, if you read this, I'd love to see these stats run again to see what the marketplace looks like now. I wonder if it has changed in the last six months. Money Walks has not been updated since February.

DebInVenice - coverage and pictures of Prosper Days February 2007.

SeattleEditor's Prosper Blog - has not been updated in over a year but has some good gems among the older posts.

Prosperlicious - Very active blog from March to August 2006 but nothing since.

Group blogs

Craiglisters Group - good tips for borrowers.

Vets helping vets - military group blog with Prosper news, group news, and tips for borrowers.

In addition to blogs, there are many 3rd party statistical tools and group websites. I plan on reviewing those as well in the future. If you know of any websites that I should take a look at please email me or leave a note in the comments. Also, if there are any blogs I have missed please let me know.

As for this blog, Prosper Lending Review, we hope to build a long term resource for those involved in the peer to peer lending community with a focus on Prosper lenders. Right now we have two authors. I'm Tom, also known as Spider5 on the forums, and am relatively new to Prosper. Matt (mateo) has been lending successfully on Prosper for about a year. In our first two weeks I think we have already built a wealth of good content. If you haven't yet, I invite you to subscribe to our daily updates by entering your email in the box on the top right. We plan to continue publishing high quality content. So far here are our most popular posts:

eBay + MySpace + ? = Peer to peer lending - industry review
Do Prosper lenders discriminate?
Prosper lending 101 - review of Prosper's online seminar for new lenders
A Prosper scam: The story of Jessica Wolcott - could be a movie made from this
Prosper: A hands-on education in risk management - avoid HR and E's
Why would a borrower use Prosper instead of a traditional bank?
Prosper lending - How to avoid bankruptcies
When to bid on Prosper loans - not like eBay

I've created a blog roll on this site to make it easy to find your Prosper blogs. In addition, I've created a shared Google Reader page for Prosper blogs and the five most recent blog posts are published on this page. Right now the feeds included on the shared Google Reader page are Wiseclerk, Prosper Lending Review, Prosperous Land, Rateladder, and all Prospers.org blogs. If you have anything you want me to add please send me an email or add a comment.