I am a borrower and a lender on Prosper. Peer-2-Peer lending is legit and is a excellent resource if you need unsecure funding, relatively quickly. As a small business owner, I found this service to be a perfect solution for people just starting and growing their businesses. I refer a lot of my clients to Prosper for that primary reason.
The way it works:
You join as a borrower or a lender (or both).
The loan amounts and interest rates are governed by each state to ensure that Usury laws are not broken.
The loan is based on a 3-yr term and can be prepayed without penalty.
The funds are automatically deducted from your bank account each month.
There are hundreds of groups that you can join to help increase your chances of having your loan funded.
For the Borrower:
- You provide Prosper with your SSN, employment info., banking info, etc and in connection with a rather odd ExperianPlus scoring method, Prosper assigns you a rating (AA-HR) and calculates your DTI. The assigned Rating and DTI is what lenders will see.
- When you are ready to apply for a loan, you create a profile, state your reason for the money, put in your loan amount and YOU indicate the interest rate that you are willing to pay.
- The duration that you want the funding request open: 3 days, 5 days, 7 days, 10 days
- Once you post your request, the private lenders can begin bidding on your loan and the fun starts...
From the Lending side: The lender can bid as little as $50 towards the fulfillment of a loan.
- The Lender will see your post, with your profile, your rating (AA-HR), your DTI and if you are a home-owner (if the borrower has elected to show this information) and bid on your loan.
- The lender CAN NOT go above the interest rate that the borrower has entered. A lot of times another lender will out bid you and you may need to re-bid with a lower interest rate. YES, I said lower interest rate which means that now the borrower will get their loan funded at a lower rate than they originally entered.
- The lender can e-mail the borrower (through Prosper, not directly) and ask specific questions. However, Prosper encourages people not to provide too much personal information and does take measures to protect the privacy of the borrower and lender.
- Once the lender bids on the loan, they will select a Collection Agency that will go after the borrower if they default on the loan.
- When the borrower makes the monthly loan payments, a percentage of that monthly payment + interest is automatically deposited into the lender's bank account.
When I borrowed money my rating was HR (high risk) with 0% DTI and my loan was funded in 7 days by 16 lenders. I joined a strong group, where the leader of the group funded almost the entire loan.
It goes without saying, people with better credit rates (AA-B) and low DTI have an easier chance getting their loans funded, but I have seen a lot of C, D, E ratings get funded as well.
Hope this information helps.
