First of all, one thing that you need to know about Prosper.com is the fact that its business model functions as a link for individuals who are in need of microloans in order to fund small time investments. This kind of business model was not looked favorably upon by the U.S. Securities and Exchange Commission and was expected to fade away by 2006. Despite this though, peer-to-peer loan websites had endured. However, does that mean you are in good hands with Prosper.com?
For one thing, Prosper.com is certainly enticing to potential borrowers because of the lower fixed rates that they have on their offered loans. These rates are less expensive compared to those being offered by banks. Lenders who take the risk of lending loans with big interest rates are also rewarded by a system called risk premium returns.
The good thing about Prosper.com is that they can handle ABC8 loans in lower amounts. This is great for investors because they have the option to lower their risk and dish out the minimal amount that they are willing to possibly lose should the whole thing go sour. This is also great for loaners since they would have the option to avail of lower amounts in loans with lower interest rates. This especially true for borrowers who just needs a little extra cash to get things in line and won’t have to endure the high interest rates enforced by banks for their minimum loans which can be a lot more than they actually need.
The not so good thing about this venture revolves around the risk involved. Although Prosper.com enforces strict measures to confirm the identity of any loaner, it can be relatively hard to distinguish bad credits from good ones. An August 2008 report indicates that Prosper.com have a delinquency rate of 18.5 from the time it first started its operation which was fully acknowledged by Prosper.com. However, they’ve claimed to have taken appropriate measures to address the issue despite delinquency rates rising as year 2008 drew to a close.
Another thing to consider is the fact that Prosper.com has a rating of D+ by the Better Business Bureau which isn’t so bad but you’ll definitely appreciate it if they had a higher rating for a company that deals with money. Most complaints being forwarded to the Better Business Bureau were customer service issues which is pretty significant for any company.