Wondering if you should invest with Prosper? In this Prosper review, we’ll be taking a detailed look at this P2P lending platform to help you determine if it’s right for you. Get all the information you need about its investment returns, features, loan diversity and more below. See if it’s right for you, and start investing today.
An overview of the Prosper P2P Lending Platform
Prosper is a US-based P2P lending platform. It’s available only in the United States, and investments can only be made in US dollars. It was first founded in 2005. This makes it one of the oldest and most well-known P2P lending companies in the United States. It has issued more than $15,000,000,000 in loans since it was first founded.
Overall, Prosper is a well-known and reputable option for US-based investors who are interested in P2P lending, and wish to invest in consumer loans in the United States. It’s only available in 31 US states and territories, though.
Investment returns with Prosper: Low, but steady
We won’t beat around the bush. The investment returns you can expect with Prosper are quite low. Interest rates for its loans usually hover around 3.4%-8.5%, with an average expected annual return of about 5%. This is lower than most of the competition.
Prosper has a huge number of loans to choose from, though. At any given time, there are dozens (if not hundreds) of loans available, with a wide variety of risk ratings ranging from AA (best) to HR (high risk). This means it’s pretty easy to build a balanced portfolio, and pick and choose your preferred rate of risk.
Loan diversification at Prosper: Choose from plenty of loans
When you invest in loans from Prosper, you’ll have a wide variety of loans to choose from. It only focuses on consumer loans. These loans can be used for any purpose. However, borrowers must state the purpose of the loan during the application process. Recently, it also started offering HELOC loans. The total borrowed amount varies from $2,000 to $35,000.
Most of the loans issued at Prosper usually vary in range from 36-60 months. It’s rare to find any loans that are shorter than this. Prosper is not a great option for short-term lending. You may want to turn to another P2P lending companies in the United States for short-term loans.
Prosper features: Auto-invest & more
Prosper has pretty good features for investors. You can benefit from a very streamlined auto-invest feature. All you have to do is set your preferred interest rate, investment amount, and some other criteria. Then, you can automatically invest in loans that meet your needs.
The minimum investment amount at Prosper is $25 USD, which is pretty good. It’s also easy to deposit money. All deposits must be made by a bank transfer (ACH deposit).
However, this service does not have any other special features. There is no buyback guarantee to protect your loan. You also can’t buy and sell loans on a secondary marketplace, so you can’t get rid of loans early.
Prosper user experience: Needs serious improvement
Just because Prosper has been around since 2005 doesn’t mean that its website should function like a “Web 1.0” website. It’s hard to even do basic things like navigate between loans, sign up, and deposit money.
The website was overhauled and redone in 2016, which made it a little bit better, but there are many confusing things about using Prosper. For example, it has two different auto invest features, called “Auto Invest” and “Automated Quick Invest.” You don’t need to use both, but the presence of two different – yet similar– features speaks volumes about Prosper’s poor UI design.
Should I use Prosper? Risks & recommendations
Overall, the risks of using the Prosper P2P lending platform are quite low. There is always the risk of an individual borrower failing to repay, just like all other P2P lending platform, and there is no buyback guarantee. However, you can view detailed credit information about borrowers to decrease this risk.
The other major risk is that Prosper may fail, but this seems highly unlikely. It’s one of the biggest P2P lending platforms in the United States, and has been around for nearly 15 years. It’s safe to assume it’s not going to shut down any time soon.