Prosper Marketplace

Prosper is the first peer-to-peer lending platform in the United States, providing a way for individuals to invest in personal loans and earn passive income. The platform connects people looking to borrow money with individuals and institutions willing to invest in consumer credit. As an investor, you can purchase 'Notes,' which are securities corresponding to fractions of personal loans. When the borrower makes payments on their loan, you receive a portion of the principal and interest, generating a steady cash flow.

Prosper allows investors to build a custom portfolio by selecting individual Notes based on the borrower's 'Prosper Rating' (a measure of risk), credit history, and loan details. Alternatively, investors can use an automated investment tool to execute a predefined strategy. By diversifying across hundreds of loans with a minimum investment of just $25 per Note, you can mitigate the risk of any single borrower defaulting. Prosper handles all aspects of loan servicing, making it a streamlined way to access the alternative asset class of consumer credit.

Frequently Asked Questions

1. How does investing with Prosper work?

You open and fund an investment account, then browse available loans on the marketplace. You can buy Notes, which are fractions of these loans, starting at just $25 per Note. As borrowers repay their loans, you receive monthly payments of principal and interest.

2. Are there eligibility requirements for investors?

Yes, due to regulatory requirements, you must meet certain financial suitability standards which vary by state. These are in place to ensure that peer-to-peer lending is an appropriate investment for you. The specific requirements are detailed on Prosper's website.

3. What happens if a borrower defaults?

If a borrower is late on their payments, Prosper's servicing team will attempt to collect the owed amount. If a loan ultimately defaults, you will lose the remaining principal on your Note. This is the primary risk, which is why diversifying across many Notes is crucial.

4. What are the fees involved for an investor?

Prosper charges an annual loan servicing fee, which is a percentage of the outstanding principal balance of the loan. This fee is automatically deducted from the payments you receive. There are no other hidden fees for managing your investor account.

5. How can I manage my portfolio?

You can manage your portfolio manually by selecting each loan you want to invest in. For a more hands-off approach, you can use the Auto Invest tool, which automatically invests your available funds based on a target allocation strategy that you define.