Prosper Review - Peer To Peer Lending

Photo Credit: Jeff

Prosper Pros- Being a borrower if you are looking for unsecured loans at the best affordable rates, Prosper is the best you can get. Prosper also allows investors to earn some wise money with loans. Basically, Prosper brings together people who have money and people who want money together from different demographic regions.

Prosper Cons-. Not everybody can get benefits from Prosper. Prior to 2008, Prosper had a lot of cons associated with it. But, in 2008, the SEC declared peer lending as a form of securities and made it mandatory for companies to get themselves licensed.

Overall- I cannot advise you whether Prosper is a relatively stronger investment to be made, it completely depends upon you and your security advisor. I can say one thing if you are a borrower, peer-to-peer lending is definitely a great option for you as through it you can easily eliminate the middleman fees charged by the banks.

For both investors and borrowers, there are risks and benefits involved. Here is a glimpse of some of the risks and benefits-

Risks for Investors-

Each and every investment has some risks attached to it and being an investor you are always concerned with those high end risks, here is a list of risks which an investor might face while investing with Prosper-

1. Defaulted Borrowers- One of the major risks associated with peer to peer lending is default borrowers. This basically means that if your borrower defaults in paying the loan, you will be helpless. As all Prosper deals are unsecured, there is no collateral security attached to the loan which you can claim if in case the borrower doesn’t pay your money back.
2. Default Prosper- Another risk, which an investor might face, is Prosper default. It may so happen that Prosper suddenly goes out of business. Big dignitaries including Larry Page from Google and Steve Jobs from Apple are behind prosper, so I don’t think anything wrong can take place in Prosper.

Risks for Borrowers-

Risks always come with any kind of borrowing. Working with an unknown lender might result in poor lending practices, but thanks to the changes made by the SEC in 2008 which has made a strict disclosure of all lending laws. It is completely up to the borrower now who can choose the lending terms as per his convenience.

Like any other loans, the more your credit score is, the lower will be your interest rate and vice versa. For borrowers who always make timely payments, the risks are very low and for those who are not in time are charged a late payment fee of $15.

Prosper Benefits for Investors-

Here is a list of benefits an investor can avail by in investing in Prosper-

1. Ability to Choose Risk and Reward Levels- For every investor, the higher is the risk, the higher will be the reward attached to any investment. Prosper gives every investor an opportunity to choose the risk and reward levels associated with the loan.
2. Portfolio Diversification- For every investor, it is best to diversify their investment portfolio by opting different investment channels. Prosper gives you the opportunity to understand the risk and reward levels and then invest as per your choice.

Prosper Benefits for Borrowers-

Prosper offers a lot benefits for borrowers, here are some of the benefits-

1. Low Interest Rates- As there are no middle men associated with peer to peer lending programs, all profit excluding 1% fee goes directly into the lender's pocket. This makes the availability of low interest loans possible with Prosper.
2. Low Fees- Borrowing from Prosper doesn’t result in any type of maintenance or annual fees. You just need to pay the interest rate and that’s all.

My Last Piece of advice for Investors-

I would suggest there is no harm in trying something with only a few bucks and then check out whether you can go for bigger investments. In my opinion, Prosper offers great features of low risk investment with an ability to choose the risk and reward levels and diversify the investment portfolio.

My Last Piece of Advice for Borrowers-

If I were a borrower, I would definitely opt for Prosper peer loans which comes with minimal interest rates and fees. After having a conversation with my security advisor, I would personally recommend you to choose a good and the genuine lending company- Prosper.