Peer to peer lending is fast catching up as an alternative source of affordable loans, and the prosper marketplace offers users an online platform where you request and purchase loans. You can set the maximum rate of interest you are prepared to pay, and on the other end, lenders will bid for loan requests of their choice by setting their desired interest rates.
To receive loans you must undergo an identity and personal information verification process conducted by Prosper, and they will be in charge of all repayments. One of the upsides is that there are no pre-payment penalties applicable to these peer to peer loans, and furthermore they are amortized over three years, for its part Prosper collects a once off fee on all funded loans, this concept draws inspiration from other lending mechanisms such as micro-lending.
Founded by Chris Larsen , the lending platform opened its doors to the public in February 2006, it handles transactions in US dollars and only accepts US users. As can be expected, Prosper determines borrowers’ credit worthiness prior to lending request acceptance based on your Experian Scorex Plus credit score as follows – AA, A, B, C, D, E and HR (High risk), lenders can use this information to make informed decisions.
As a borrower you can make use of endorsements by your Prosper group of friends and these are against your previous Prosper dealings, privacy is a priority on the platform – users only display screen names. Upon receiving loans borrowers can expect to pay an origination fee of between 1-3% and this is dependent on your credit rating while lenders part with 1% towards an annual servicing fee, the loans can be as high as $25,000.
Lenders receive their dues over a three year period, the payments made by the borrower accrue into a lenders account and are immediately accessible. Following a bruising securities violation lawsuit filed in November 2006, the prosper.com website relaunched on April 18, 2009 but only to shut down again in May following which an SEC registration statement for the venture was declared valid and actionable, this resulted in the resumption of full market place activities on the 13th of July, 2009.
The online marketplace’s troubles with the law were not limited to the above only as the loan platform once had to make a filing with a bankruptcy court defending its position regarding a claim that it originated a loan to a user who had declared bankruptcy in violation of its own legal agreements.