It's now been almost a quarter since I began using Prosper.com. Overall the Prosper experience has been lucrative. My portfolio currently has a risk-adjusted return of over 10%. That certainly beats what you can get currently with both money market accounts and CDs both of which currently will return you around 5%
First let me say that I now have over a hundred active loans. Most performances been good to give you a flavor of what I've experienced so far I've had four loans go late. Two of these loans have already been remedied and brought back to being current. The other loans are currently less than 15 days late. We'll have to wait and see how those go.
I've also experienced to early payoffs. While this is to be expected, it must be calculated in the amount of time needed to deal with Prosper as an investment.
I had originally planned to deploy a whole is my money into loans within the first month of using Prosper. It is still three months later and although I'm very close now, I still haven't deployed all of my capital. While there are many loans on Prosper loans that meet the quality and risk-adjusted return metrics that I'm looking for are just not available in large numbers.
There's great opportunity with a place like Prosper to use extra information to boost returns. Unfortunately there are some structural things that are currently preventing full utilization of the site. It is important to be able to match your criteria, whatever they are, to be desired rate of return. For example, if you thought that borrowers with spotless credit who are homeowners deserve loans at 7.9% you can go filtered through all of loans by hand and find these. You can even set up a standing order with limits on percent funded. The problem is that you end up tying up tremendous amounts of money in standing orders, only to find a good percentage of them losing at or near the end since many of these loans may reach 100% funding only a few days in to there posting.
As I and many others have previously argued Prosper needs to address the issue of money not participating in loans. For example, I mentioned above that my risk-adjusted return was over 10%. That's only true of the money is actually deployed in loans. If you look back over the past quarter at the overall amount of money sitting in my Prosper account the actual risk-adjusted return is significantly lower because not all of my capital has been deployed into loans.
I know this is been raised over and over and over again. But Prosper needs to provide interest on funds that are not yet invested. In addition Prosper should add a feature allowing you to specify the amount of time remaining on a loan as one of the criteria for standing orders. This will allow you to bid on many loans, while not having money tied up for eight days only to find out that it's not didn't quite meet competitive bid on the particular loan.
Prosper.com is still a promising place to a boost returns on your cash. Prosper has been very aggressive in making changes to their platform to improve customer satisfaction on both a lender and the borrower side. I do have to consider the amount of time and investment takes to achieve the return. Right now, that's my biggest issue with Prosper. I certainly hope they come around on this issue because it is a promising and innovative platform. In the meantime I'm looking out for the launch of soap in the United States. It seems they're likely to have far less information available to investors. At the same time, they seem to make it extraordinarily easily easy to deploy capital. Who knows maybe Zopa's entry into the US market will give Prosper the motivation it needs to make some of these changes.
Good luck!