Loans

Prosper Review: Consider all the Pros and Cons of P2P Loans

Prosper Review: Consider all the Pros and Cons of P2P Loans 23.07.2019Leave a comment
Prosper.com

Prosper supports everyone who moves towards their dreams and their goals. Company specialists know how difficult it is to achieve results, how much effort the result is worth, and that the cost of success is not calculated in money.

It is important for us that every loan that is obtained thanks to the platform gives you the opportunity to move closer to the clients’ goals, move to a new frontier, become better than yesterday and do not stop there.

The platform is the pioneer in the p2p crediting, it was the first that implemented such a scheme of loaning in the USA in 2006 and since then Prosper tries its best to provide the customers with the best service and conditions ever imagined.

Prosper Stat

The Essence of P2P Lending

The p2p crediting means a simple phrase – “from person to person” or “Peer-to-peer”. Indeed, when a person takes a loan on a p2p service, he turns to the same person. When concluding a loan agreement, no intermediaries are involved such as banks or lenders.

The money is issued by the lenders themselves (investors) – they do not need the help of banks and credit organizations to search for customers. Everything happens directly, without involving any financial institution.

The indisputable advantages of p2p lending are:

  • The absence of intermediaries who charge extra fees for their services, both from investors and borrowers.
  • The process of proceeding a deal is easier and faster. Both sides save their effort and time.
  • In most cases, lending takes place on the Internet. These are modern online platforms – large sites, where you can borrow a loan from a specific lender, and choose the right one from the list/rating offered.
  • Interest rates may be lower than those offered by banks or other financial organizations.

To understand the essence of p2p lending, you need to delve deeper into the mechanism for concluding such a transaction.

How p2p lending works?
How p2p lending works?

Usually, consumers have to turn to intermediaries: banks, MFIs, various credit organizations, etc. All of them are intermediaries or they charge too much for their services.

The downside is high-interest rates, commissions, and insurance products imposed. But they can also be understood since such organizations need to pay money for the work of the staff, the rent of space, and also ensure the issuance of deposits.

Popular p2p crediting is carried out on more simplified and favorable terms:

  • The lender interacts directly with the client. As a rule, it is individuals who issue loans to ordinary consumers. Platforms for transactions are various high-tech websites where you can choose a lender, see their rating, reviews, and other important information. Users have a choice, and the lenders themselves do not have to pay for the rent of offices and the remuneration of their employees. Everything happens online, which saves time and money from both sides.
  • Since there are no intermediaries on such online sites, the interest rate does not include fees for their services and additional payments. On such p2p platforms, you can not make a deposit, but this is only their advantage. Lenders do not need to spend money on creating reserves. Therefore, they offer more favorable credit conditions: the absence of commissions, insurance, and an acceptable interest rate.
  • More simplified and faster design.
  • There are no banks or other organizations on such online loan issuing services. Lenders are only individuals who offer to arrange almost all types of loans. Therefore, on the online platform, you can take the necessary sum for a real estate, car -, as well as a consumer- or a personal loan, etc.

The owners of such sites (platforms) are also not intermediaries, so they do not charge extra fees for concluding each such transaction.

At the same time, scoring is constantly performed on such services:

  • Evaluation of the solvency of all customers until the conclusion of the contract. Therefore, the lenders themselves have little risk to conclude the contract directly.
  • Assessment of all possible risks, both for lenders and borrowers. Separate ratings of individuals who issue loans on such platforms can be compiled. Thanks to them, it is easier for users to decide on a bona fide lender.
  • Services can also additionally collect arrears, offer various payment methods.
  • Some risk, of course, is present, but it is minimal. Classic p2p lending is carried out only on online platforms that are notable for their impressive functionality and high technology, the most well-known of them in the USA is Prosper.​

These services also virtually do not risk, as they ensure the execution of transactions, but do not take part in them. Platform owners are not investors and do not issue loans to consumers. This is carried out by all individuals who are represented on the sites as lenders.​

How does Prosper Work?

On the website, a private person who wants to provide loans or investments is registered and gets his code name (nickname). He puts on the offer page the amount and the desired terms of the loan.

A potential borrower, registering on the site, chooses acceptable conditions. When registering, Prosper checks the borrower on FICO for credit history. Lenders see it and decide on a loan. After that, between the borrower and the lender, an agreement is drawn upon the amount, terms, and loan interest for using the loan.

Money is transferred to the bank accounts (credit cards) specified in the agreement. All registered customers of p2p services receive money if they have provided for their personal data and found lending partners.

The borrower’s benefit is the speed of obtaining a loan the absence of collateral obligations, and the need to carry out insurance operations that are mandatory for banking structures, and provide certificates of income confirmation. Prosper makes it easier for people in all parts of the USA to get loans.

Pros and Cons to Cooperate with Prosper

Pros Cons
The advantages of a peer-to-peer lending scheme for investors are in easy access to a large base of borrowers. The risks of losing the funds are compensated for by the diversification of loans issued by sums, interest rates, and regions.
There are certain risks of losing money for investors. Lack of collateral and insurance of loans issued, investors reimburse a higher interest rate and careful verification of borrowers.
The AIR on the loan is set by the investor. It is higher than rates on loans in banks.
The absence of strict commitments should not be misleading for fans of easy money at the expense of others. Prosper closely cooperates with collection organizations.
Taking into account the fact that p2p lending is made in small amounts and for short terms, the benefit for the investor becomes more noticeable than the deposit programs of banks.
In case of a five-day payment delay, information about the violator of the terms of the loan agreements is received by these firms.
The benefits to investors and borrowers in equal lending are in the absence of a large number of formalities required for banking lending institutions.
An investor places his funds among several borrowers: this reduces the risk of losing financial assets.
The borrower gets the opportunity to work simultaneously with several investors: this allows you to get money for startups or promising business projects. This type of lending from several sources is called craft funding.

It is beneficial for borrowers to contact Prosper because:

  • You can arrange both long-term (up to $40 thousand up to 5 years) and short-term (up to $2 thousand up to 30 days) loan;
  • The cost of the loan is much lower compared to online loan services and banks;
  • There is no need to even leave home – the application procedure, scoring and charging funds go online;
  • Only the applicant’s ID is required for registration;
  • There are no hidden fees, commissions, etc., which are usually offered by banks and what affects the loan amount;
  • Loan repayment is also made online through a personal account.

Investors’ working with Prosper is beneficial because:

  • This is a real modern and simple way to increase the income (yield up to 300% per annum);
  • The abundance of applications allows to diversify risks;
  • Investments from $2000;
  • Unscrupulous borrowers are eliminated at the stage of automatic scoring from Prosper;
  • All key data (socio-demographic parameters, income level, etc.) are available in loan applications, allowing you to build a balanced investment strategy.
  • Thanks to Prosper, Americans are able to fully appreciate the benefits of P2P lending. The effectiveness of this direction recognized the whole world.

Return Investition

FAQ

What is Prosper?

Prosper is one of the largest P2P lending platforms in the USA, thanks to which investors and lenders who provide loans to customers find each other.

Prosper.com
Prosper.com

This is a simple and transparent alternative to the traditional banking system. The organization allows private and institutional investors to invest in shares of loans. At the moment, there is offered the opportunity to invest in mortgage loans, unsecured loans to individuals, secured car loans, receivables, and loans to small businesses.

By joining the Prosper platform, borrowers instantly have the opportunity to find investors willing to buy their loans.

How to open an investor account?

It is very simple. One just needs to fill out the registration form of the investor, using his personal data and email. This can be done here.

Prosper for investors

How safe are investments?

When making any investments, there are various risks. The greatest risk is associated with a possible credit loss in investments. Prosper and lenders set up the following risk mitigation measures:

  • All loans are issued in accordance with the established policy of lenders, taking into account the possibility of the borrower to repay the loan;
  • for certain types of loans (for example, mortgage loans and secured auto loans), the collateral is taken from the client, which will be used in case the commitments are not fulfilled;
  • in this case, the losses of the issued loan are reduced, if such occur; For some types of loans (for example, business loans) as a pledge is a personal guarantee;
  • There are types of loans for which the lender offers a redemption guarantee, which means that the lender will redeem every loan from the investor for the face value of the principal amount and accrued interest before the redemption day if the payment is 60 days or more late.

To reduce risk and improve return on investment, an investor can do the following: diversify the investment portfolio by dividing investments across different borrowers and different types of loans, as well as choosing various borrowers, which diversifies credit risk.

What can be the purpose of borrowers’ loans?

Loans to borrowers can be issued for different purposes, for example, to start and/or develop their business, to purchase housing, to purchase a car or for large purchases, etc. The purpose of the loan is visible under each loan and depends on each borrower and lender.

Can I find out who is the borrower?

The investor has the opportunity to see certain information about the borrower, which is described on the platform, including the amount of the borrowed amount and the purpose. For security reasons and in accordance with the Data Protection Act, the borrower’s full name and address are never disclosed.

Conclusion

To sum up, everything that has been mentioned above, you should choose us because the company provides the following:

  1. Quickness. Managers process applications as quickly as possible, so as not to keep the clients waiting.
  2. Easy to get a loan online. Only the Internet connection and a bank card – nothing more are needed to get a loan.
  3. Fair interest on the loan. No hidden fees and interest rates.
  4. Clear loan terms. Accurate calculations of loan rates. One always knows exactly the conditions of the loan.
  5. Reliable credit

Prosper uses the latest technology in protecting the customers’ data. Prosper’s work is based on trust. The company sees its investors and partners as allies on the road to success because that transparency promotes trust.

Therefore, company’s specialists promote open communication between employees at all levels of the company, as well as with investors, partners, and other market participants.

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Andrei Shilkov

Blog author. I am well versed in Finance and Digital Marketing. I have two bachelors degrees, one in Computer Science and the other in Finance. Born in Russia, but later moved to the USA, to western Pennsylvania, the city of Pittsburgh.
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