Lending Club opens referral program while Prosper shuts their program down

For a little more than a year, Prosper managed a referral program which rewarded new lenders with a $25 bonus and the referring party with bonuses as high as $50. Over time the program experienced many changes but remained a valuable means to drive new business to Prosper. Last week Prosper entered a quiet period and yesterday they sent the following message to members of their affiliate program:

We are writing to inform you that the Prosper Referral Program has been shut down and is no longer in effect. Our lender activity is limited. Click here to learn more.

As a result we request you take down any reference to Prosper immediately.

Thank you for your immediate attention in this matter.

It is uncertain what "any reference to Propser" includes. Presumable it only refers to advertisements. While we have typically used referral links when linking to Prosper we have not served Prosper ads for quite some time.

Websites which rely on referral income can now turn to Lending Club. Lending Club started a referral program with Commission Junction earlier this month. Here are the details of the program:

Description: Lending Club is a social lending network where members lend and borrow money from each other at better rates, bypassing the banks.

We have already issued more than $20,000,000 in loans at better rates than banks' and we are looking to spread the word of this great alternative.

We will reward publishers for every user they refer that fill out the loan application form, independent of the loan issuing or not.

Lending Club accepts only US-based credit worthy borrowers with 640+ FICO score and no current delinquencies.

Here are some answers you may be looking for before you advertise for us:

What will you pay for?
We will reward publishers for sending us qualified traffic:
$35 for first 10 applications/month
$40 for each additional loan application

What is your conversion rate?
Our current conversion rates are very high (upwards of 60%) if the user is looking for a loan and has good credit.

Do you have a dedicated affiliate manager?
Yes. We have asked CJ to manage the program initially, and in addition, we have a dedicated SEM resource on board.

What is your average order amount?
Typical order amount is between $80-$150(fees charged once a loan is issued). We don't charge a fee for application, and about 80% of the applications actually become loans.

Is your website attractive and easy to navigate?
Very much. We won the Webby award 2008 as best banking and payments site as well as a 2008 WebAward for Outstanding financial services site.

How does your commission structure compare with other advertisers in your category?
We feel we are very competitive and in most cases, we pay higher than other advertisers.

If a publisher consistently performs, will you increase their commission?
YES. We are willing to discuss better pay-offs based on performance, quality of borrowers and volume.

Based on my own experience with various referral programs I'm optimistic towards Lending Club's new referral program. With Prosper, hundreds of new members have joined Prosper after clicking on links from this site but very few have become borrowers or lenders. Prosper did not pay a referral bonus until the borrower made their first payment so, even if the borrower converted, it was still several months until a payment occurred.

Lending Club pays immediately after a person fills out a loan application, so their referral program is much more likely to result in referral bonuses and much more likely to result in payments. Hopefully Lending Club will expand their program to lenders as well as borrowers in the near future.

Here is an example of one of Lending Club's new ads available through Commission Junction. Click through for the improved landing page.

Prosper referral program ends

Since announcing their referral program one year ago, Prosper has grown from about 300,000 members to nearly 800,000. Under the bonus program, both the referring lender and the new lender received $25. Over the last year the program has been modified several times. In addition, the program has been extended past several deadlines. According to Brad Prescott, Prosper's Director of Marketing, existing referral links will not generate referral payments for referrals that occur after 11:59PM PST on June 30, 2008.

Those that signed up prior to June 30th will still receive the $25 bonus when they fund their first loan. Prosper is expected to announce a new referral program this month with the goal of working directly with a few dozen, quality referral partners as opposed to hundreds of partners operating under a "one size fits all" approach.

Referral programs have been used by most peer to peer lending companies to grow their user base.

• Lending Club started off with a $5 referral bonus which they eventually increased to $25. Their program was halted in April 2008 when they entered their quiet period to register with the SEC. In addition, Lending Club briefly offered a 5% bonus to large lenders. It is expected that Lending Club will restore their referral program, perhaps in a different form, when they open again.
  
• Fynanz just announced a $25 referral bonus program with a 3-5% bonus to large lenders.
• Although it is not a peer to peer lending company, Revolution Money Exchange also has a $25 referral bonus program which has been very popular with our readers.

Although Prosper has announced that their referral program ended on June 30th, I received an email confirmation for a new referral generated on July 1st. This is no different than email confirmations generated prior to the end of the program and confirms a bonus will be generated if the new user becomes an active participant in the marketplace within the next 90 days. The Prosper referral page is unchanged and still allows you to invite friends with the same wording indicating a bonus will be awarded. Despite the deadline, perhaps it is not too late to sign up for the bonus. Prosper would be unwise to terminate awards until they make clear changes on their website, stop sending bonus confirmation emails and stop serving $25 bonus advertisements.

Fynanz offers huge bonus to lenders

Earlier this year, Lending Club offered an incredible offer to new users who invested more than $5,000 - they would immediately give the lender a 5% bonus. It was very popular and due to the terms of the deal many were able to earn even more than 5%. For example, one lender earned an instant 12% on his investment. Lending Club's offer has expired but there is another chance.

Under a similar program, Fynanz is offering a 5% bonus to lenders under a promotion they call their 'higher education stimulus package.' Fynanz is a new peer to peer lending company with a focus on student loans. We interviewed their CEO earlier this year and covered the launch in March.

In addition to the 5% bonus, Fynanz is rolling out a referral program where new referred lenders receive a $25 lending bonus. Both parties get the $25 bonus. These referal bonuses have been very popular with Prosper, Lending Club and Revolution Money Exchange. For example, one reader talking about RME commented, "Set my account up-no prob this morning. Set one up for my wife too-$25.00 for me--$25.00 for her and I got a $10 refer fee. Easiest $60.00 I ever made." By signing up for Fynanz using a referral link and then signing up your spouse, you have already made $75. To get the initial $25 bonus when signing up you must use a referral link such as this one:

Here is the full announcement from Fynanz:

Fynanz Higher Ed Stimulus Package

At Fynanz, we're concerned about the recent economic challenges that Americans face, and specifically, the impact they're having on students. We strongly believe that the opportunity to advance oneself through education is a core American right. As such, we're excited to provide relief with the Fynanz Higher Ed Stimulus Package.

This stimulus package won't be debated in Congress or delivered to the President for consideration. We're cutting out the bureaucracy by putting students' interests first and releasing this robust package without delay. All members of the Fynanz community should know that this package is making student lending more attractive for lenders - at NO additional cost to borrowers. Here are the details…

1. $25 Lending Bonus*

Fynanz will give registered users (whether they’re a lender or a borrower) a $25 Lending Bonus when they refer a friend who lends to at least to one borrower. Additionally, referred friends will receive a $25 Lending Bonus as well. So, spread the word – Every lender you refer earns you a Lending Bonus. Every lender you refer gets a Lending Bonus.

First become a verified Lender or Borrower. Then come back to this page to get your unique link.

2. Get 3% Lending Bonus!

Education is the most important investment a person can make. Your support encourages students to make that investment and we want to help you extend as much support as you can.

That's why we're giving lenders a Lending Bonus. When you lend $3,000 or more in the Fynanz Student Loan Marketplace, you'll receive a 3% Lending Bonus*.

PS: You don't have to do anything special. Just become a lender and lend. We're keeping track.

3. Get 5% Lending Bonus

And when you refer 5 friends that lend at least $50 each, we'll increase the 3% Lending Bonus by 2% retroactively*. That's a 5% Lending Bonus – our way of saying thank you for helping students and growing the community!

Yes! As per #1 above you also get an additional $125 Lending Bonus for referring 5 lenders...

*The Fine Print

• Only registered lenders who have lent to at least one borrower in the Fynanz marketplace, and borrowers who have borrowed through the Fynanz marketplace are eligible to receive the Lending Bonus.
• Lending Bonus is non-transferrable, not redeemable for cash and can only be used to bid on loans listed in the Fynanz Student Loan Marketplace. Lending Bonus will appear in your account as a separate line item. Fynanz will compute the Lending Bonus due to you at the end of each month.
• Winning bids must be placed by September 15, 2008 to be eligible for Lending Bonus calculation. Lending Bonus must be used to bid on loans prior to December 31, 2008.
  Lending Bonus is earned on the aggregate amount you lend across all the loans you make, provided you have lent at least $3,000 in loans between April 15, 2008 and September 15, 2008 up to a maximum of $50,000 in aggregate loans.
• To get the additional 2% Lending Bonus you must refer 5 or more new lenders to Fynanz, and each must lend a minimum of $50. The additional 2% Lending Bonus will be credited retroactively to the full amount you lent from April 15, 2008 to September 15, 2008.

The first month after opening there was only one open loan request but there are now 17 students looking for help. When Fynanz launched in March their CEO told us, "We expect the momentum to pick up in early May and grow steadily through August and September," Chaman said. Fynanz is enticing new lenders in preparation for a surge in loans over the next couple of months.

Sign up for Fynanz using this link and receive a $25 bonus.

RME gives $750 to our readers

Six weeks ago I wrote about Revolution Money Exchange (RME), a new PayPal competitor. It is well funded (over $50 million in venture capital) and they don't mind spending the money in order to rapidly grow their user base. Their $25 sign-up bonus promotion, which was set to expire today, has been extended for another 30 days.

Over the last six weeks 30 of our readers have signed up for RME and received $750 in sign up bonuses. When you refer someone else you get an additional $10. One reader commented, "Set my account up-no prob this morning. Set one up for my wife too-$25.00 for me--$25.00 for her and I got a $10 refer fee. Easiest $60.00 I ever made."

We will use the $300 RME bonus we have received to attend the FINOVATE conference in San Francisco and bring you news from more financial start-ups including the new peer to peer lender Loanio.

If you want more information see our previous posts about RME or sign up now.

• PayPal competitor Revolution Money Exchange offers $25 sign up bonus
• Why does Revolution Money require my social security number?
• Revolution Money Exchange improves referral program

Revolution Money Exchange improves referral program

Many exciting new companies are launching at the intersection of finance and technology. Mostly I write about peer to peer lending, but last month I wrote about Revolution Money Exchange - a PayPal competitor.

Much to my surprise, the article is now the most popular article on this site. A follow up article, Why does Revolution Money Exchange require my social security number?, is the third most popular. Lately, more people are coming here looking for information on Revolution Money than P2P lending.

Like Prosper and Lending Club, Revolution Money offers a $25 sign-up bonus. Last week they improved the referral program making it easier to promote on websites.



Previously you could only refer friends by emailing them. Now there is an ad that you can place on your website. After you sign up with the $25 bonus you can refer friends and earn a $10 bonus. Here's their ad:



And, yes, it does work:


When you click on the ad, you are directed to the following sign up page:


In my opinion, this is far better than Lending Club or Prosper's landing page. Compare all three if you want:

All three offer a $25 sign up bonus. When people click on an ad offering $25 they expect to learn how to get the $25. Revolution does that and keeps it simple. In my opinion, Prosper tries to present too much information on their Landing Page. Lending Club, on the other hand, makes no mention of the $25 bonus on their landing page. In addition, Lending Club might do better if they just request an email on the initial landing page instead of security questions and a consent form. Keep it simple.

Many people have signed up for Prosper and Lending Club via this website but a very small percentage of those become eligible for the $25 bonus. With Prosper you have to make a loan of $50 and with Lending Club you have to verify your bank account and transfer funds to your account. Revolution Money is much easier - they transfer the $25 in your account immediately. Then, if you want to pull it out you have to verify your bank account.

I think some people signing up for Prosper or Lending Club through a $25 referral button become confused at the requirements to get the $25 and do not follow through. Revolution Money has a much higher conversion rate.

So, I'm quite pleased with Revolution Money's improvements to their referral program and I challenge Prosper and Lending Club to continue to improve their programs.

Instant 5% bonus becomes nearly 12% for one Lending Club lender

Odnal has been a lender on Prosper for awhile and recently started lending with Lending Club when they offered 5% bonus for lenders who invested more than $5,000 by February 3rd. Most of his loans have finally funded and he is very happy with the results. He provides a report on his blog:

"...I managed to get the minimum $5,000 invested in a portfolio, as well as an extra $375 from loans that had expired and I resubmitted. The bonus was based on how much you submitted, regardless of whether or not the loans got fully funded and approved or not. That means, the bonus was based off of my portfolios totaling $5,375 for a bonus amount of $268.75.

...When all is said and done, I will have $2950 in loans with a bonus of $268.75. That means, instead of just a 5% bonus, mine ended up at 9.11% of the loans that got funded. If I count my $75 in referral fees ($25 for signing up, $25 for referring my wife, and $25 in her account), I’ve already earned 11.65% on the money I have lent.

So far I like Lending Club."

I seriously considered lending $5,000 but let the time run out. I regret not taking advantage of the 5% bonus offer now. Lending Club - please bring it back!

PayPal competitor Revolution Money Exchange offers $25 sign-up bonus

Peer to peer money exchange site, Revolution Money Exchange launched nearly four months ago. At the time, chairman Ted Leonsis said, "We want to become for social networks what PayPal is for EBay." Former AOL chairman Steve Case is behind Revolution Money and hopes that merchants use it to circumvent the traditional fees of 1.9 percent that credit card networks charge.

Revolution Money Exchange is aggressively courting new members with a $25 sign-up bonus. They advertise that it takes 24 hours for the $25 to be credited to your account but it took me less than a minute to sign up and a minute later the bonus was immediately available in my account.

Revolution Money doesn't charge many fees. It's free to register, add money, send money, receive money, request money and withdraw electronically to a bank account. There are fees to withdraw money by check or to receive a paper statement.

I'm sold. I'll be using Revolution Money Exchange instead of PayPal. Even if you don't use PayPal it's worth a couple minutes for the sign-up bonus.

Of course, if you haven't signed up for Prosper or Lending Club yet you can also get a $25 referral bonus there too. Some quick math - If you signed up for all three of these services and then referred your spouse you would make a quick $160. Of the three, only Prosper requires that you actually use their service by lending at least $50 to a borrower.

Update (3/26): Revolution Money Exchange has made it easier to get the $25 bonus. Here's the link. After you sign up you can refer others and receive a $10 referral bonus.




Update (2/25): Why does Revolution Money require my social security number?

18 days left for 5% Lending Club bonus

Patrick Gannon, Lending Club's Senior Vice President, says that Lending Club's growth has been "fantastic" over the past month and wants to increase publicity of their 5% bonus during the last 18 days of the program.

"With all of the growth in loans and loan requests," he writes, "we want to reach out as widely as possible to current and now prospective lenders with our special offer: Lending Club will give a 5% cash bonus to all lenders who lend $5,000 or more between December 14, 2007 and February 3, 2008. This bonus can be used to lend or can be withdrawn to your linked checking account." Although there are no special sign-ups needed to participate in this program, if you want an additional $25-50 referral bonus you need to sign up through a referral link. Lending Club announced the accomplishment of the following milestones:

• Lending Club has reached $6MM in issued loans, and have over $3MM of loans in funding today
• The number of lenders has doubled in the last month
• The next system release (due in the next few days) offers a new set of lender tools that makes lending and account management even easier and incorporates feedback from many in our lending community

We listed a few of the $3MM in loans with their interest rates in these previous blog posts:

• Sample Lending Club loans (earn 7.12% to 18.36% returns)
• Number of borrowers on Lending Club increase
• Refinance a Prosper loan through Lending Club

Lending Club improves referral program

Update (Oct 2008): Lending Club changed their referral program again.

Back in July we wrote about Lending Club's $5 referral bonus. Today Lending Club announced a new referral program that provides lenders with a bonus of up to $50 for referring friends to Lending Club. Lending Club's Rob Garcia answered a few questions about the program on the P2P No Bank forums. Here's an excerpt:

What are the terms of the program?

The referral program was initially introduced back in July as a $5 prize for any friend who joined. We quietly revamped it on Oct 25 to increase the prize to $25 for any friend who became a borrower OR lender. This was a test to see how users will receive it, and we noticed users liked this idea better. Today, we officially launched the program and the rules are:

When you refer friends to Lending Club and they become borrowers or lenders, we will deposit a bonus into both your and your friend's accounts:

• $25 when your friend successfully submits a loan application


• $25 when your friend opens a lender account with $1-$999


• $50 when your friend opens a lender account with $1,000 or more

Can I point my referrals to a different page?

Yes. You can use 2 different links.

LINK 1: http://www.lendingclub.com/landing.action?referrer=ScreenName
This one drops referrals on our home page, and if the user creates an account within the same session, you get the bonus. Use this for friends that still may need to read more on the concept before signing up:

LINK 2: http://www.lendingclub.com/refer.action?referrer=ScreenName
This one drops referrals on the sign-up form. Use this for friends you think are ready to sign.


Does the referred user have to sign up immediately or is the referral stored?

The information is stored in the session, so the referred user has to sign up while in the session. Information is not saved in our back end or a cookie. The session will "expire" if the user closes the browser. This means that if the user closes the window, and comes back next day to sign-up, and types up "lendingclub.com", the system will not recognize the referral.

In addition to changes in the referral program Lending Club announced several other improvements and changes which you can read about on the blog. They include:

• You know can be a borrower and a lender. However, before borrowing to lend you may want to read Matt's analysis of borrowing to lend strategies. Also, you can open multiple loans.


• Lending Club now has a performance statistics page.


• You can now ask borrowers a question.
  

Disclosure: I currently blog for Lending Club. Read my Lending Club posts here.


Update (12/13): Lending Club has produced the following image for websites to use:

Prosper T-Shirts for Referring Lenders

Several months ago Prosper introduced a referral program. Under that program Prosper members can receive $25 dollars for referring a lender, and up to $125 for referring a borrower. I referred my brother and my wife, both of whom became lenders and funded loans on Prosper.

Much to my surprise today in the mail I received a thank-you card from Prosper thanking me for referring a friend. Along with the card there was a free t-shirt. Looks like this might be one of Prosper's new marketing campaigns.





Thanks Prosper!

Prosper referral program extended

Prosper announced that it is extending its referral program through December 31, 2007. It was originally supposed to end today. To date 13,000 new Prosper members have signed up through the referral program.

Full details on the referral program can be found at Prosper's Referral Program website. When referring a borrower members receive 0.5% of the loan amount. When referring a Lender members receive $25. The new lender also receives $25 once their first loan is funded.

See our previous coverage of the referral program here.

Prosper improves lending and borrowing experience

Prosper just announced some significant site and policy updates. Loan listings now include borrower's past activity, borrowers can make payments with their Prosper cash balance, borrower activity including all past activity will be reported to TansUnion in addition to Equifax, and the referral program has been extended through the end of the year. These changes have been well received by the Prosper community after the recent controversy.

Here's an excerpt from the announcement:

Listings now include borrower's past Prosper activity

Borrowers taking a second (or third or fourth?) Prosper loan will now have their Prosper payment activity recorded on the listing page and on their member page. This includes total loans, principal borrowed, on time payments, total number of loan payments which brought a loan current which were made at less than and more than one month past the due date, total payments billed, credit grade history with dates, and credit grade change.

Advanced search and standing orders have also been updated to allow lenders to search and bid on loans that meet certain criteria in these departments.

Borrowers can make payments with Prosper account

Borrowers can now make payments on their Prosper loans using funds from their Prosper cash balance, if they have at least $25 available.

Borrower activity reported to TransUnion

Borrower payment activity is now reported to TransUnion, one of three major U.S. credit reporting agencies. Payment activity is already reported to Experian. We hope to start reporting to Equifax, the third major credit reporting agency, shortly.

All historical Prosper loan activity to date, including payments, delinquencies, and defaults on active and ended loans will also be reported to TransUnion.

Improved messaging on listings cancelled during review

One big point of frustration for borrowers whose listings are cancelled during review is that they don't receive a specific reason for why their listing was cancelled. This can range from the serious (name on bank account doesn't match borrower's) to the benign (hasn't yet verified bank account ownership).

From now on, when a borrower's listing is cancelled during review, the borrower will receive a message with a specific reason (or reasons) why their listing was cancelled, whether they may re-list or not, and possibly a note from customer support about what they should do before their next listing to ensure that the listnig will not be cancelled. Lenders will also receive a message with a specific reason.

Loan numbers tied to listing numbers

Borrower loans are now tied to their listings, both on the borrower's member page and in the API. On the borrower's member page, you can see each loan's balance and payment performance in a simple table.

Invite friends from Outlook, Gmail, Hotmail, AOL, Yahoo mail, etc...

When you invite your friends to Prosper (and earn referral awards), no more need to copy and paste their email addresses into the "Email address" field. Just click the "Add from my address book" button, and go to town.

Search help pages

Now you can search the Prosper help pages using keywords.

Referral program extended to Dec 31, 2007

The referral program has been extended until Dec 31, 2007. Invite a new borrower and earn 0.5% of his or her loan value when their loan gets funded, or invite a new lender and you both get $25 when your friend funds his or her first loan.

Over 5,000 members have successfully referred a friend since the program started in June. Everyone who refers a friend by August 31 will receive a stylish black Prosper T-shirt, and also be entered in our "Prosper in Las Vegas" sweepstakes.

Lending Club announces new features

This week we have been paying a lot of attention to Lending Club's video contest. That's not the only thing going on over at Lending Club. I just received an email announcing two "new" features and notice their blog mentions four others. First, the two from email:

LendingMatch™ and borrowing minimums are now $500
You can now use LendingMatch™ to generate portfolio recommendations with as little as $500. It is necessary to lend at least $500 to use LendingMatch™ because the algorithm tries to allocate your investment into at least 20 fractions of loans, for diversification purposes. Since the minimum investment in each loan is $25, you need at least $500 in total. The minimum amount you can lend without using LendingMatch™ remains unchanged at $25. You will also see smaller loans on the site, as we have reduced the minimum loan amount to $500.

Invite your Facebook friends and earn referral bonuses
You can invite 10 Facebook friends per day (in accordance with Facebook's privacy policy) to Lending Club and you'll receive $5 for each person who becomes a member. Let all of your friends know that you have money to lend them!

LendingMatch is Lending Club's answer to the diversification problem. As Matt mentioned in a previous article, most Prosper lenders do not diversify. Mostly, this is because they do not have enough invested. If you are invested in one loan and it defaults you lose all your money. Diversification is very important.

As I mentioned back in July, Lending Club "quietly launched a referral program." Now they are making it more public via email to lenders and a blog post.

The other four new features mentioned on their blog post are:

• Minimum loan request for borrowers is now $500 instead of $1,000.
  
• The my account area now contains detailed portfolio analysis and individual loan information.
• Adjustments to the expected monthly payment amount to deal with rounding issues.
• Borrowers from Arizona can now request loans.

Lending Club offers $5 referral bonus

Update (Oct 2008): Lending Club changed their referral program again.

Update (Jan 2008): Lending Club has improved their referral program. Sign up for Lending Club by following this link and get $25 or read more about it here.

Almost three weeks ago Lending Club quietly launched a referral program inside of Facebook. When logged into your account, there is “invite friends” text and a small cash graphic in the upper right corner on most pages. Clicking on this link sends you to a referral page which explains, “We will deposit $5 in your Lending Club account for each friend you invite who signs up for a basic Lending Club membership (basic memberships are free and there are no obligations).” You must be a Facebook member to join Lending Club and the referral form only permits you to invite your Facebook friends. To prevent spamming you are limited to inviting 10 friends per day. When you select one of your friends to invite they will be sent the following message from you through Facebook, “I found a site I thought would interest you. Lending Club is a p2p lending service: you can be a lender or a borrower, bypass the banks and get better rates.”


About a week after launching the referral program, Lending Club CEO Renaud Laplanche told me, “It seems to be working nicely: daily registered members increased 20% since then, although it’s not obvious how much should be attributed to the referral program.” Nearly 12,000 people have installed the Lending Club application in Facebook.

Lending Club and Prosper both have referral programs, but they are very different. Under the Prosper referral program, which ends August 31st, a borrower must receive a loan and a lender must fund a loan in order for the $25 referral bonus to be paid. This can be a long process and many potential borrowers or lenders will not complete the process even after creating an account. Only a small fraction of the 330,000 registered Prosper members are lenders or borrowers. Lending Club’s bonus, while only $5 instead of $25, is much easier to receive since the new member does not need to actually become a borrower or lender. Although you do not have to immediately commit to becoming an active borrower or lender, the referral program will be very beneficial to Lending Club because all referrals are from people that know each other as Facebook friends.

Of course, the Lending Club referral program would create even more growth if they expand outside of the Facebook social circles. I look forward to adding a referral link on this site, for example. Another way they could significantly increase sign-ups is by paying the person who just signed up. It would be nice if the referral emails said something like, “If you sign up now you will receive a free $5 in your Lending Club account since you were referred by [name].” Having the $5 in their Lending Club account would also provide an incentive for new lenders and borrowers to set up their bank account. PayPal can trace its explosive growth to a $5 referral program where each party received $5 when they signed up. These types of programs are especially popular on college campuses which seem to be the demographic which Lending Club is targeting.

To test drive the referral program, I had one of my Facebook friends sign up for Lending Club. He signed up three days ago. Unlike Prosper, there is no confirmation email that lets you know your friend signed up and they payment is not immediate. I will let you know how long the referral payment takes once I am paid.

Wiseclerk has some good information about referral programs for other peer to peer lending sites including Zopa, Smava and Boober.

Update (Jan 2008): Lending Club has improved their referral program. Sign up for Lending Club by following this link and get $25 or read more about it here.

Update (Oct 2008): Lending Club changed their referral program again.

Prosper referral deadline nears

Update (2/2008): Prosper continues to extend the deadline of the referral program and it appears that it will be an ongoing program. Lending Club also offers a $25 sign up bonus.

Last month Prosper announced a great referral program. New lenders receive a free $25 when they sign up. If you sign up and then sign up your spouse (as Matt described in an earlier post) you effectively make an immediate $75 on a $100 investment. The referral program ends on August 31. Here's a referral link if you want to sign up now.

If you are interested, here is some more information about the Prosper referral program in their own words:

What is the referral program?

Prosper's referral program was established to encourage our most ardent supporters (our members) to bring their friends and family to Prosper. In return for bringing active borrowers and lenders, Prosper pays cash awards to referrers.

Here's how it works:

1. You add a special link to Prosper on your web site, blog, discussion forum, MySpace page, Facebook page, in your email signature, and so forth. Create a referral link now.
2. A friend clicks on your Prosper link.
3. Your friend joins Prosper within 30 days of clicking on your link.
4. Within 90 days of joining Prosper, your friend gets a funded loan (as a borrower) or funds a loan (as a lender).
5. As soon as your friend's first monthly payment clears (as a borrower), or first loan originates (as a lender), you get cash in your Prosper account.

What are the requirements for earning referral awards?

To qualify for referral awards, you have to meet the following conditions:

1. The invitee must have clicked on a link with a referral code.
2. The invitee must come to Prosper directly from a link outside of Prosper.com or any other Prosper-owned domains.
3. You can direct invitees to any part of the Prosper web site, excluding the Prosper discussion forums or the /prm directory.
4. The invitee's Web browser must accept cookies.
5. The invitee must be a new member, and must join Prosper within 30 days of clicking on your link.
6. The invitee must take an action (borrow money or make a loan) within 90 days of joining Prosper.
7. If the invitee is a borrower, he or she must make the first monthly payment successfully.
   You can only earn one borrower award and one lender award per new referred member.

How will I know if one of my friends registered? Is there any way to test this system?

When a friend you have referred joins Prosper, you will receive an email notifying you that your friend has joined. Keep in mind that you won't receive any awards until your friend has taken a loan and made a payment (as a borrower) or funded a loan (as a lender).

Once your referred friend borrows or lends, you'll receive another email notifying you that the referral award has been paid.

In my experience, when I refer someone there is immediate feedback when they signup. I received the following email.

Thank you for referring a new member to Prosper. [name deleted] just joined Prosper, and if he or she becomes an active participant in the marketplace within the next 90 days, you will receive one of these awards:

• Borrower: 0.50% of the loan amount when his or her first monthly payment clears.
• Lender: $25.00 when his or her first loan is funded.

Although the referrer gets immediate feedback, the new lender will not know he or she has signed up under the referral program until they complete the requirements and actually fund a loan. This has confused some new lenders. For example, after clicking on the link http://www.prosper.com/?referrer=Spider5 the user is redirected to http://www.prosper.com/Default.aspx. I had a friend call me back when he was trying to sign up saying he didn't think it was working. Don't worry. The referral will still go through. Prosper has been good about paying people promptly after the requirements have been met. If you are still on the fence about signing up for Prosper, you should at least start the process now in order to take advantage of the $25 referral bonus. You still have 90 days to fund a loan. Here's a referral link if you need one:

Although borrowers do not receive a bonus when they sign up under the referral program, it is still advantageous for them to do so. If I have a borrower that signed up as my referral, for example, I would be interested in helping them get funded. I might help promote their listing among other lenders or bid on them myself. Since a large number of loans go unfunded, having a lender's assistance can be helpful.

Update on Prosper's referral program

Earlier we wrote a post about Prosper's referral program. It has been more than a month since the launch of this program.

To test this program I referred my wife to Prosper. She opened an account, transferred in $50, and funded a loan. Immediately after the loan was funded I got the following email from Prosper:

Thank you for referring [name deleted] to Prosper. He or she funded a loan today. As a result, we have deposited a referral award of $25 into your Prosper account.

My wife also got a corresponding email from Prosper. It read:

Congratulations on funding your first Prosper loan! Because you were referred by Mateo, we have deposited an invitation award of $25 into your Prosper account. View your account now. The member who referred you, Mateo, also received a referral award for referring you to Prosper. You, too, can earn money by referring friends to Prosper. Learn more about Prosper's referral program.

Corresponding messages also showed up under the messages tab in our Prosper accounts. The next business day after the loan had funded, $25 had been transferred into my Prosper account, and $25 had also been transferred by Prosper into my wife's account. It looks like Prosper is quickly paying out the referral award money as soon as the requirements of funding a loan are met.

Some lenders are trying all kinds of creative ways to earn money from the Prosper referral program including Google Adwords, links in online forums, submitting articles to Digg, and posting referral award ads on their personal websites. A quick Google search returns 47,000 search results related to the Prosper referral program.

Prosper referral program

Prosper announced their referral program one week ago. The details are pretty simple - refer a lender and you both receive $25 after the new lender funds a loan or refer a borrower and you receive 0.5% of your friend's loan amount as soon as your friend's first monthly payment clears. So far, the program has received little attention. Prosper has not advertised it prominently on their site. You actually have to look around a little to find it. Perhaps they want a slow release?

They did send out an email yesterday which revealed a few more details. They said when you refer your first active borrower or lender, they will send you a "stylish" black Prosper t-shirt. They are also running a ticket to "Proper in Las Vegas" Sweepstakes. Each time you refer someone you are entered in their drawing.

They also announced the top 10 referrers after one week. Here's the list along with information on why they might be doing so well.

#1 - loansearchers - loansearchers is the group leader for Loan Searchers. Although the group started in March it does not have any members, listings or loans. Their group description indicates they have many online resources. It looks like that must be true and they have used that same online community to move to the top of the referral list. Here's what their group description says:

While new to Prosper.com, we have over 4 years experience in helping consumers find lenders. We advertise online which helps to bring new consumers into the Prosper.com community. We will be utilizing many of our other online resources to strengthen our group and community. We will strive to create one of the most dependable and marketable wiring between lenders and consumers as possible on Prosper.com.

#2 - nonattender - nonattender is the group leader for -------ians. The group has 6 members and 1 loan.

#3 - TechnologyGuy - TechnologyGuy authors lazymanandmoney.com and often writes about Prosper. I just read through some of his posts and they seem pretty informative. He is also a member of the RateLadder group.

#4 - JaredD - Hmm...Jared's from Nevada. I guess he's not too motivated to win that trip to Las Vegas. :)

#5 - AdvisorGarage - Runs Advisor Garage, a site for entrepreneurs. He advertises Prosper on his site and has started the Advisor Garage group which targets "entrepreneurs looking for micro loans before they get to the angel or venture capital stage." The group has 23 members.

#6 - lifesettlementadvisor - Brand new Prosper member. Signed up on June 11th after the referral program was launched. Looks like he has made more money from the affiliate program than from lending through Prosper.

#7 - FitzNDR - Group leader for New Day Rising Loans which describes itself as "An extremely selective group that is designed solely to get good borrowers funded." He has a strong portfolio with no late loans in the six months since he started lending.

#8 - RateLadder_com - Group leader for RateLadder and runs rateladder.com. He also runs the statistics site ProProsper. He blogged about making the Prosper's top ten referral list and said he has "4 borrowers (3 with listings) and 2 lenders (both with bids) and 10 others without a role yet."

#9 - cardinal04 - Group leader for Stanford Students & Alumni. The group has 42 members and 3 loans. Cardinal04 has a degree in Biological Sciences from Stanford in 2004 and now works in the biotech industry.

#10 - tehc0w - Member of SA Goons, a large group with 166 members, 1 listing and 16 loans.

Not surprisingly, most of the top referrers are already very active in the community. Over half are group leaders. Several of the others run prosper websites or blogs. We wish them all very well. Perhaps we will try to interview some of the referral leaders to see if they have any tips for the rest of us.

An introduction - lending through Prosper

Grameen Bank and its founder, Muhammad Yunus, won the Nobel Peace Prize in 2006 for their work making small loans to poor people with big dreams. Prosper is a website that tries to extend the microcredit idea via the web to all people, including but not just limited to the very poor. It's been called the eBay of Loans by Forbes Magazine, the #1 website of the year by Time Magazine and has received plenty of other rave reviews. Prosper describes their service here:

The way Prosper works is intuitive to people who have used eBay. Instead of listing and bidding on items, people list and bid on loans using Prosper's online auction platform. People who want to lend set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. People who lend can easily diversify using "standing orders", which automatically make many small loans to different borrowers.

Although it may seem somewhat risky, Prosper takes many more steps than eBay to prevent fraud. Everyone's identity is verified. Credit scores are checked. Those borrowing money basically go through the same rigid process required by any normal lender. Monthly payments are made by automatic withdraw from the borrowers savings account. So far Prosper has been very successful with over $67,000,000 in loans. It provides loans to people who need it at a lower interest rate than they would be able to get through a bank or credit card and provides lenders (you) a higher interest rate than they might get through a savings account, certificate of deposit, or other investment.

My brother Matt has been lending money on Prosper for nearly a year. He's careful about who he lends money to. Mostly he loans money to people with AA credit ratings. So far he's earning more than an 11% return on his money. None of his borrowers have been late with a payment. This is his lending profile.

Some people choose to lend money to people with poor and high risk ratings. Although the average interest rates can be as high as 26%, the default rates are also quite high for E and HR. Prosper reports defaults to the credit agencies and hires a collection agency, just like a normal bank or credit card company would.

With a careful investment strategy, it looks like Prosper may provide good returns with managable risk. Here are some of Matt's lessons learned from his months of studying and investing on Prosper. He has posted these on the Prosper Forums:

Its up to the lenders to read the text. I don't rely on that for the loan though. I look at verified stats, and things that the group leader can vet. Something in the listing could encourage me not to lend, but I don't think anything written in the listing could get me to fund a listing that I wouldn't fund based on the verified stats alone. I am happy with Prosper overall. (forum post - Would you stop lending if...)

No lates for me yet, but I enjoy reading these threads to see what to avoid. So far I am learning to avoid:

• New business Ventures
• People with high number of inquiries
• Nurses who can't spell Nurse
• Real Estate Ventures
• All HRs and Es
• People going through divorces
• Georgia
• Autofunding loans listed for a short time period
• People who should be able to get more traditional financing (for something like a car purchase)
• Anyone who has an abnormally low interest rate just because of a really nice looking photo

Anything I am missing on my list? I am sure some loans will still default for me, but just trying to learn from the collective experience out there. (forum post - The official 1 month late loan club...)

Shameless plug here. Prosper just announced a new referral program where they give $25 to both parties when you invite a friend to the program. If you decide to start up you should use this referral link to sign up so that you start of with an extra $25 in your account. Of course, I don't mind the $25 either. :) Details about the referral program.

This referral program reminds me of PayPal. They had amazing growth when they offered a free $5 to both parties when you refered a friend. That's when I signed up. It will be interesting to see how Prosper grows with this new referral program.