Prosper is a peer-to-peer financial lending service that was founded in 2005. It was the first service of its kind where the funds were generated by the people for the people. Through its unique mechanism, prosper connected people from different parts of the United States who could lend one another money at a fixed-rate and fixed-term.
Is prosper the Uber of financial services?
Yes, Prosper is like the Uber of financial services where if you have money saved up for investment, you can put it to work and help someone at the same time. The lender gets a fixed percentage return on the fund, which is decided before signing the contract. Prosper has a very user-friendly interface that allows you to choose and invest in different loan requests from the borrowers.
Who are the terms of the loan?
Each loan has a credit rating and an annual yield with the total amount that is requested. The credit rating of the borrower is pulled from the national database of credit ratings. The ratings are pulled through a soft process that does not affect the current rating of the borrower. Moreover, the total amount of the fund is the amount that is requested by the borrower. It can be anything from $2000 to $40,000.
Now, the best part is that you don’t have to fund the entire loan. You can start investing from as little as $25 per loan. Additionally, you can invest in multiple loans with different yields at the same time. It will give you a very diversified portfolio allowing you to manage your risk as well.
Beware of very low credit ratings
Risk is a factor that is attached to these loans, however. The threat comes from borrowers not being able to pay back their loans or defaulting to some extent on its yield. Prosper invites loan offers from borrowers belonging to a broad financial group.
The credit rating of a borrower can be AA, A, B, and C. AA rating loans are the safest investment options but produce low yields for the investors. AA borrowers keep an outstanding financial record with their banks, so you can be sure that they will pay up.
‘C’ rating loans are the riskiest, but they offer the highest returns. You can expect annual returns averaging 8.2% on your initial investment on C category fund requests while you can go as high as 6.6% on A category loans.
Lower investment risk by diversifying your Portfolio at Prosper
The best option is to usually to diversify your investment portfolio by investing across credit ratings. Put a significant portion of your savings into low-risk low-return investments and spend the remaining in high-risk high-yield funds. Or maybe you can find the middle ground and invest in medium risk medium return loans; the choice is yours.
Each loan has a status bar showing the amount that has been funded and the amount left. There is a limited period in which the fund request can be completed. It depends on when the funds were requested and what’s the deadline. If the funds fail to be wholly funded before the deadline, the borrower has the option to accept or reject the offer, as is it. If the loan is taken, the fund usually proceeds but with a lower amount. If, however, the fund is rejected, each investor gets their money back.
Prosper also gives out Loans?
Prosper provides an attractive opportunity for people who are looking for financial relief. If you are looking for a quick bailout than Prosper can hook you up with the most extensive network of lenders in America. You can even track where your fund is coming from with the help of a very interactive map on the Prosper app.
Prosper gives you the unique opportunity of designing a loan for yourself that is not available anywhere else. You can decide what amount you want and how you are going to pay it back. You can choose a fixed-term of 3-years and 5-years. The interest would pile up for loans with longer terms, so they would be expensive to adopt. But monthly payments for the long-term loan is lower, so you can choose whatever suits your requirements.
How to register?
The sign up is easy and straightforward from their company website, and they process payments through all types of financial services. If you choose to pay your loan earlier than decided, there are no payment penalties at all. After you have accepted your loan offer, Prosper will transfer the funds to your bank account within five working days.
It is worth mentioning that there is a particular risk involved in working with peer-peer lending systems as there is always a risk of the borrower defaulting. Always read reviews on the internet and benefit from the experience of other consumers.
Learn more about Prosper
You can learn more about Prosper by contacting the San Francisco office at (866) 615-6319 or Phoenix office at (866) 615-6319. Their office is open from Monday – Friday 9 am – 8 pm (ET). They can also be reached through email to [email protected].