The Wall Street journal just published a very large article in this week's personal finance section on many-to-one microloan syndication. You can read it here.
The article has a pretty good discussion of prosper and discussed the author's personal experience investing in 300 loans. I do wish she indicated the average level of risk when she stated that 8 of them are late in payments, though none have defaulted yet. Otherwise, it was a good solid article.
She also mentioned that there are other marketplaces, one called Zopa.com. Has anyone tried them out? If so, please post here about your experiences.
BTW, I was very impressed that the author succeeded in making 300 loans! I personally find that I am outbid (and often choose not to rebid) on about 1/2 of the loan auctions I participate in. A C grade risk isn't worth 13% interest in my book.
Have a wonderful weekend,
makingourway
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Zopa's current model is fairly different from Prosper, and appeals to a different niche.
Basically, they only take borrowers of B rating and above (or perhaps a C -- the UK scoring system doesn't convert perfectly to US FICO), and they forcibly bucket lenders into at least 30 or 50 loans, say.
Key differences, in my mind, between Zopa and Prosper:
1.Passive investing is much closer to maturity on/Zopa -- you automatically get bucketed into a large group of fairly decent credit grades.
2.You don't get much of a social lending space on Zopa, nor a high risk/return space.
3.You don't get the "fun" of vetting and investing after doing "fundamental" research on a given loan, or the fringe benefits (eg, I now employ a programmer I funded for my random little personal projects).
1 and 3 are diametrically opposed models, in my mind, and they appeal to different groups of people. Over time, passive investing is scaleable -- but in-depth research on individual borrowers may turn into the next online poker industry, or day trading industry -- except there, the house will take a cut, but doesn't always bag the players.
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