Prosper

earned-income_prosper

Prosper is a peer-peer lending marketplace.  Borrowers can request between $2,000 and $35,000 and lenders can invest in their loans for as little as $25.  Essentially, each loan is split up into individual share notes worth at least $25.00 (but which can be any amount from $25 to the loan amount).

In order to spread risk of default I invest no more than $25.00 in any single borrower (we have suffered no defaults yet, but have suffered a few loans repaid in full!).

Loans are classified according to their risk into seven categories: AA, A, B, C, D, E, and HR.  Within each category, loans are further scored between 1-11  depending on the individual risk factors (personal information is never given to lenders, just basic financial information).

Loans scored lower will carry a bigger yield to compensate the increased risk, but the risk of default is higher.

I'm a bit overweight AA loans, but I'll even it out through increased investment.

We’re a bit overweight AA loans, but I’ll even it out through increased investment.

We are risky, but not reckless, so we tend to invest in the middle categories, with safety investments on the less risky end, and upping my total returns with investments on the more risky end.  My investment scheme is a pyramid with most investments in the C category, and proportionally fewer at each step away from C, but with slightly more weight in the AA category than in HR.

Our ideal distribution is:  12% AA, 14% A, 16% B, 18% C, 16% D, 14% E, and 10% HR.  Currently I’m seeing yields of 13.01% annually.