Prosper is the eBay of peer-to-peer lending. Borrowers create listings for their loans, describing why they need the money and the maximum interest they're willing to pay. Loans range from $1,000 to $25,000 for a three-year term.
As a lender, you can put up as little as $50 and bid on loans individually or set parameters for a portfolio and invest automatically. The site charges 1% of the loan for good-credit borrowers and 1% of the annual loan balance for lenders.
The loans are unsecured, so there is risk. Double-A-rated borrowers typically pay lenders rates of about 8% and default less than 1% of the time. The lowest-rated borrowers often pay about 30% interest and have a default rate of more than 18%.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Prosper now helps lenders make informed decisions by making repayment histories of borrowers available. At the point of bidding, the site shows how well similar loans have performed.
The borrower's endorsements are another safeguard. Getting friends to vouch for borrowers creates a real sense of peer pressure for them to repay their loans, says Chris Larsen, Prosper's chief executive officer. A borrower with one endorsement is 35% more likely to pay up.
It's not wise to be the sole bidder on any loan. Try lending in increments of $50 to $100 on loans with medium to low risk. You should earn an attractive rate of return and be somewhat protected.
Online Lending Sites
1. Riskier Return: Prosper.com
2. Safety First: Zopa.com
3. Lend to a Friend: VirginMoneyUS.com
4. What's New? P2P Loans for College
Back to: Risks and Rewards
-
Stock Market Today: Have We Seen the Bottom for Stocks?Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
-
Is the GOP Secretly Planning to Raise Taxes on the Rich?Tax Reform As high-stakes tax reform talks resume on Capitol Hill, questions are swirling about what Republicans and President Trump will do.
-
Roth IRA Contribution Limits for 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
Four Tips for Renting Out Your Home on Airbnbreal estate Here's what you should know before listing your home on Airbnb.
-
Five Ways to a Cheap Last-Minute VacationTravel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
-
How to Figure Out How Much Life Insurance You Needinsurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life insurance needs.
-
Amazon Big Deal Days Is Coming! We’ve Got All the DetailsAmazon Prime To kick off the holiday season with a bang, Amazon Big Deal Days runs Tuesday, October 8 and Wednesday, October 9.
-
How to Shop for Life Insurance in 3 Easy Stepsinsurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
-
Five Ways to Shop for a Low Mortgage RateBecoming a Homeowner Mortgage rates are high this year, but you can still find an affordable loan with these tips.
-
Retirees, It's Not Too Late to Buy Life Insurancelife insurance Improvements in underwriting have made it easier to qualify for life insurance, which can be a useful estate-planning tool.
