Adventures in P2P lending

Asaf Buchner | February 16, 2006, 10:55 AM

It’s probably too early, but I can’t help making first observations on my experiences at Prosper.

Generally

Listings: Following a notable press coverage (@ The NYT, Businessweek, and CNBC), the number of open loan listings has grown from ~20 on Sunday night, to ~80 on Monday, ~110 on Tuesday and ~140 yesterday night (Wednesday). The percentage of listings from borrowers who do not belong to any group has grown to surpass 50%. However, it’s not surprising as these are probably borrowers who learned about the site through the press. The effect of group-initiated marketing [or lack thereof] is yet to be seen.

Money available for immediate funding: These funds are decreasing, indicating that in the American consumption-focused society it might be easier for Prosper to sign up borrowers than it is to recruit lenders. However, as it takes 4 business days [too long!] to transfer money Prosper might have more funds in the pipeline. Edit: It's really too early to tell, as now (Thursday night) the funding available is up.

Experiences as a Lender

Risking my own money: I ventured $1,000 and used the “standing order” feature as an autopilot to define how to lend the money. I limited the funds allocated to each loan to no more than $100. So far, $200 was lent, and the balance is already bidding for 8 different loans.

Reinvestment challenge: The loans are fully amortizing and are repaid over 36 months. If all of my funds are lent at once, I will receive around ~$30-35 every month for the next 3 years. I’m not sure how I will deal with this strange stream of cash flows. In addition, the money is not all lent at once which makes it even more awkward. I wonder why they didn’t limit the dates / times in which “auctions” close, at least now when there aren’t many loans.

Community: I received a message from one atlanta1129 asking me to bid on his loan listing [=to lend him money]. It did feel a bit strange. Anyway, I had to pass as I am out of funds right now. Nothing personal, mate!

P.S. – As Zopa did not launch in the US yet, I cannot try it out. However, I do enjoy reading Dave Nicholson’s blog.