The biggest peer-to-peer lending network in the world is Prosper Loans Marketplace, with more than 7,000,000 members registered with the company and more than $2 billion in loans distributed since the company began in 2006.
Here is the detailed guide to the Prosper loans marketplace, where you will learn everything regarding prosper loan servicing and how it works.
About Prosper, the Company
Over the years, the company has positioned itself as one of the must successful companies in the peer-to-peer lending industry.
One of the founders of Prosper is Chris Larsen, who was also a co-founder of E-Loan.
The company has its headquarters in San Francisco, California and has the distinction of having some of the best executives in the financial industry on staff.
The company has also attracted the interest of many notable financial and technology luminaries, allowing Prosper Loans Marketplace to raise more than $74.5 million in venture capital funding in a series of funding rounds.
Some of the most notable names associated with the company include Jerome Contro of Crosslink Capital; Capital One Co-founder Nigel Morris; Court Coursey of TomorrowVentures; Larry Cheng of Volition Capital; Jim Breyer of Accel Partners; and Tim Draper of Draper Fisher Jurvetson.
The company focuses on filling the financial needs of borrowers that are unable or unwilling to obtain loans from traditional lending institutions.
Lenders that sign up with the company are able to choose from a wide pool of available borrowers that have various levels of risk and a wide range of interest rates.
Loan requested through the website can range between $2,000 and $35,000 and can have repayment terms ranging from one to five years. The minimum investment amount for each loan is $25.
How Does Prosper Work?
The Online Loan Marketplace
Prosper originally operated like an online auction marketplace, where lenders could bid on the loans that they would like to fund and borrowers could list a maximum interest rate that they were willing to pay for the funds.
In recent years, the company’s lending model was changed to one that assigned interest rates based on specific criteria.
Neither the lender nor the borrower has the ability to change the interest rate assigned to the loan request and no negotiation of the interest rate is allowed.
The loan listing created by the borrower to apply for the loan contains a wealth of information about the borrower to help lenders make their decisions on which loans to fund.
The loan listing will include the borrower’s credit score and their credit history along with some pertinent personal information, endorsements from friends and acquaintances, and any community affiliations the borrower would like to list.
Based on the information in the loan listing, lenders choose which loans they would like to fund and how much money they would like to extend to the borrowers they choose.
If the borrower chooses, they can include additional personal information in their loan listing to increase their chances of having their loan fully funded. The additional information included may detail why the person wants the loan or their plan for repaying the money extended to them.
Prosper Loan Servicing
“Prosper handles the funding and the servicing of each loan on behalf of each lender and borrower.”
Lenders and borrowers that choose to use the website find that much of the process has been automated and streamlined to make everything as easy as possible for them.
The information needed to apply for a loan is easy to obtain and once the information has been entered, the borrower does not need to do anything further until the loan is fully funded.
Once the loan has been fully funded, the funds are direct deposited into the bank account of the borrower that requested the loan.
The borrower does not have to worry about making their loan payments on time because the payments are automatically taken out of their bank account every month on the service date of the loan.
The borrower authorizes these transactions when they apply for the loan and provide their bank account information for verification.
The payments for each loan are taken by Prosper and divided among all of the lenders that contributed funding for that particular loan.
The lender can choose to take the money that they have earned out of their Prosper account or reinvest the funds into new loans. If the amount of money in the lender’s account drops below a certain level, they must withdraw it all or invest the entire amount into loans on the website.
The Social Rewards Of Prosper
Many investors like lending through Prosper because they believe they are fulfilling a social need and filling a massive hole in the private lending industry.
The lenders are providing needed loans to the general public and small businesses while earning a handsome return on their investment.
The yields obtained from investing with the Prosper Loans Marketplace are often much higher than what can be obtained through traditional investment vehicles.
A Guide To The Prosper Investor Marketplace
How Does Prosper Work for Investors?
Investors are the most important aspect of prosper from my perspective.