Investing with Prosper

Investing with Prosper - Prosper LogoFor those unfamiliar with the peer-to-peer lending environment here in the United States, there are two primary peer-to-peer facilitators, Lending Club and Prosper. Of the two, Prosper is older, having opened their doors in 2006, but is the smaller in terms of loans issued and market share. In looking at Prosper’s history, it is really the tale of three different eras as they have evolved drastically since inception.

Prosper – A Brief History

The first era began when Prosper was founded and ended a few months after Prosper went through their registration with the SEC. Notes during this timeframe were up for bid in a marketplace with investors and borrowers setting interest rates for each loan. During this time frame Prosper began to pioneer the most social version of peer-to-peer lending.

After seeing the success of rival Lending Club, Prosper transitioned to a similar note offering model with fix interest rates and a proprietary rating. This second era in Prosper’s history saw drastic improvements in the number of loans offered and the underwriting models used to evaluate the prospective borrowers. Unfortunately for Prosper the good news began to wane in the first half of 2012 and continued until the beginning of 2013. During this time frame, Chris Larsen, founder of Prosper stepped down starting a complete change in management. Loan originations began declining and technical issues became regular occurrences as the company struggled and investors experienced a severe lack of notes in which to invest.

Lastly, the final and most recent era began with the finalization of the new management of Prosper in January and February of 2013. Armed with a 100-day plan, a fresh round of funding from venture capitalists, and the renewed backing of existing investors, Prosper’s new management team set about making significant changes to the loan platform, on-boarding process for new borrowers, and marketing of the platform.

All of these more recent changes culminated in Prosper experiencing recorded setting growth in 2013 as they regained their momentum. Having monitored Prosper for the last four years, I am happy to see how they have matured and grown as a company and absolutely think this was a good time to be diversifying into Prosper as they are now heading in the right direction.

Making My Investment in Prosper

So as a result, during the month of May, and after four years of investing with Lending Club, I decided to diversify my peer-to-peer lending portfolio and start investing with Prosper. I opened an account with an initial $1,000 investment into a taxable account and plan on adding to this account. My goal is to have approximately $18-20,000 in peer-to-peer investments by the end of 2014. As the end of May, I had over $12,000 invested in a Roth IRA and taxable accounts at Lending Club, and including my Prosper contribution, giving me over $13,000 of assets in peer-to-peer lending.

Have you invested with Prosper? If so, what have your experiences been? Check back soon as I will post my investment criteria and share how I am investing in Prosper.

I have created a Prosper page containing this and other information regarding my investment with Prosper.

Interested in investing (or borrowing for that matter) with Prosper? Feel free to check them out!

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Comments

  1. Congratulations for your new foray into Prosper :)

  2. It’s cool to see Prosper getting their mojo back! I really thought that they were going to go under for a while.

    I like their automated investing feature (what are you waiting for Lending Club), but even with that, loans are VERY hard to get these days. I’ve actually transferred money out lately because there are just no loans to buy.

    • That is definitely an unfortunate side effect to the growth in peer-to-peer lending. Institutional investors with API access snag the loans up pretty quickly, so it is a matter of luck for sure! Fortunately, I haven’t had too many issues staying invested in the few months since starting the account and have since almost double my original $1,000 contribution.

      As always, great to have you stop by Mr. 1500!

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