Comments on: Prosper.com Or Junk Bond Fund? http://thefinancebuff.com/2007/01/prospercom-or-junk-bond-fund.html like a friend telling you about money ... Thu, 19 Nov 2009 19:44:17 -0600 http://wordpress.org/?v=2.8 hourly 1 By: Adam http://thefinancebuff.com/2007/01/prospercom-or-junk-bond-fund.html/comment-page-1#comment-52 Adam Tue, 06 Feb 2007 06:36:00 +0000 http://blog.thefinancebuff.com/?p=66#comment-52 You are asking the right question, but there are many reasons why an individual will be willing to accept a lower interest rate on personal debt than an institution:<br /><br />1) Low overhead. Institutions pay for a large amount of fixed cost (buildings, equipment, legal). Individuals don't necessarily have that overhead.<br /><br />2) Profit margin. Corporations charge the fair amount of interest plus a high amount of profitability over their cost. If you look at the profit margins of most financial institutions, most individuals would be happy with a lower return compared to their alternatives.<br /><br />3) Individual attention. Companies to scale have to come up with systems to evaluate hundreds of thousands of applications per day. As a result, they are inflexible. Individuals can read an individual pitch and give it specific consideration, thus discovering credit-worthy applicants that might be missed by the system.<br /><br />I've made a few loans on Prosper, and no problems to date. On average, they are paying about 8% interest, and seem to be very high quality borrowers.<br /><br />It's worth looking at. You are asking the right question, but there are many reasons why an individual will be willing to accept a lower interest rate on personal debt than an institution:

1) Low overhead. Institutions pay for a large amount of fixed cost (buildings, equipment, legal). Individuals don't necessarily have that overhead.

2) Profit margin. Corporations charge the fair amount of interest plus a high amount of profitability over their cost. If you look at the profit margins of most financial institutions, most individuals would be happy with a lower return compared to their alternatives.

3) Individual attention. Companies to scale have to come up with systems to evaluate hundreds of thousands of applications per day. As a result, they are inflexible. Individuals can read an individual pitch and give it specific consideration, thus discovering credit-worthy applicants that might be missed by the system.

I've made a few loans on Prosper, and no problems to date. On average, they are paying about 8% interest, and seem to be very high quality borrowers.

It's worth looking at.

]]> By: RateLadder.com -- Prosper Lending, Loans, and Rate Strategy http://thefinancebuff.com/2007/01/prospercom-or-junk-bond-fund.html/comment-page-1#comment-50 RateLadder.com -- Prosper Lending, Loans, and Rate Strategy Mon, 05 Feb 2007 23:44:00 +0000 http://blog.thefinancebuff.com/?p=66#comment-50 I think the borrowers can't get a credit card loan. These are the people paying 29% to CC month after month. The best credit canidates are just trying it for the novelty. <br /><br />I write a blog from a Prosper Lender's perspective: http://rateladder.com<br /><br />RateLadder.com explores all aspects of lending on Prosper.com using personal experiences as examples while adding rigor to my own journey. Always looking to improve return on investment and reduce risk. I think the borrowers can't get a credit card loan. These are the people paying 29% to CC month after month. The best credit canidates are just trying it for the novelty.

I write a blog from a Prosper Lender's perspective: http://rateladder.com

RateLadder.com explores all aspects of lending on Prosper.com using personal experiences as examples while adding rigor to my own journey. Always looking to improve return on investment and reduce risk.

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