Prosper.com Two Years In

Two years ago I threw a couple thousand dollars at Prosper.com as I thought the concept was cool. Over two months I loaned money to 16 different people. I didn’t have much of a strategy, but made micro-loans on gut-level intuition. After funding those loans, I felt like I was putting too much time into finding loans, and let the ones I funded ride without re-investing the proceeds.

Two years in, I have 75% of my money back, but half of my loans have defaulted or are in collections. I made a decent amount of interest before a few of these defaulted, as some had APRs of 25%. Judge me as lending at loan shark rates if you wish, but these people were doing things like getting out from under 100% APR “Payday Loans” schemes or trying to establish credit after an ex-spouse trashed their combined credit.

I estimate I’ll reach mid-2009 making about $100, which is better than losing money (which can still happen). But it has been a fun learning experience, and I’m just taking the proceeds out and not re-investing. It’s pretty risky, the lack of repayment makes me angry, and it takes too much time to do research.

I learned something interesting from one of the people at Prosper who I met along the way. Affinity credit cards, like a Stanford or Berkeley credit card (powered by Visa or Mastercard etc) tend to get paid promptly at a much higher percentage of people than a comparable “generic” card. The theory is that people feel like they’re disrespecting their alma mater when they miss a payment.