Prosper High Yield Loans

Will Prosper High Yield Loans work?

Reviewer's product rating:

I don’t know if you’ve heard of Prosper .com or not, but they’re actually a pretty cool little site.

I’ve heard them referred to as “the eBay of loans”, because they let members apply for loans that are then funded by other members.

They then make a single payment each month to Prosper High Yield Loans, and Prosper divides that payment up among all of those who invested in their loan (so that the borrower doesn’t have to worry about making separate payments when multiple people combine their assets to meet the requested loan amount.)

I thought it was a neat idea, but didn’t really give it much thought… until I started hearing some people talking about how it could be a good business opportunity. I decided to delve a little deeper, and found out that you actually can make some decent money if you’re careful with your investments.

A loan that’s taken out through Prosper works like most loans… the borrower has to repay the amount that’s borrowed, plus interest. The interest rate can vary from one lender to the next, and as with most things of this nature is largely determined by the person’s credit rating and how much interest they’re willing to pay.

As usual, the worse their credit is then the more interest they’ll pay (though there is a minimum credit rating that’s required to sign up, so you don’t have to worry as much that you’ll be lending to people who never repay their debts.) If you make enough investments through Prosper with higher interest rates, you can wind up making a good return on your initial investment over the course of the loan’s repayment (often several months to a year or more.)

Of course, just because there’s a minimum credit score required to sign up doesn’t mean that some people don’t default on their loan payments or make late payments at the very least. This is where the standard risk of investment comes into play… the loans aren’t insured, so if you invest in someone’s loan and they don’t repay it then you’re going to lose the money that you put in.

This means that you need to be careful in choosing who you invest in, as people with mid-grade to high credit ratings will most likely not default (but will also offer lower interest rates) while those closer to the cut-off may be more likely to not repay the money (but will give much higher interest.) Choose your investments very carefully, and remember that you don’t have to fund the entire loan (only the portion that you’re comfortable with putting money towards.)

And that’s really all that there is to it. If you want to keep money coming in then you’re going to have to keep putting your money into loans, so decide how much you want to invest and keep that initial investment going in to new loans as old ones are repaid. The interest is yours to keep, and you can always add more to your investments or stop reinvesting at any time.

Review by Mike Church

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