Peer to Peer Lending - Prosper.com

Hello all,

"Peer to Peer Lending"

This is a topic I have been searching on google today. How can you invest by giving out loans to individuals who need it.

I believe stock market is one way of investing, ofcourse in a way, Stock Market is like loaning money to the companies, whose stock you are buying. But in recent past after 2008 debacle, I have realized that it has big risk too. The risk is not only dependent on all known factors, meaning it does not really matter if the company you have invested in is doing well or not. There are so many other unknown factors.

So why not try out "Peer to Peer lending". There is risk of course. Thats what i m looking for how much risk.

Apparently "Peer to Peer Lending" market is in a very nascent stage in United States. Apparently there are very few websites, where you can do this. This is pretty old school in India. In old days in India, there would be lenders and borrowers in one community itself. The lenders(Sahukar)would lend money by keeping some kind of zamanat(surety). I believe the Sahukar took the shape of modern day banks. I do not think there is the element of surety(Zamanat) here on prosper.com. May be its not legal for institutions to have zamanat. There is not FDIC insurance either on Prosper. This all definetly increases the risk.

Coming back to my topic of Prosper.com, I wonder if its a good place to invest. I will be posting more information as I find.

http://blogs.wsj.com/wallet/2009/07/14/as-prosper-gets-the-green-light-a-comeback-for-peer-to-peer-lenders/tab/article/

This is the highlight on the losses, which is what I was interested. It does not look all that bad from outside

"In general, lenders’ losses have also been ticking higher amid the rise in unemployment. For example, the average lender on Prosper since the company’s inception in 2006 has lost 3.67% after charge-offs, though many of the earliest lenders lost much more. Since March 2007–when the company began providing more information about borrowers’ credit and employment histories–average lenders’ returns were negative 2.04%."

http://www.prosper.com/

Here is a typical portfolio

http://www.prosper.com/invest/portfolio_plans.aspx

Its a good business idea, especially in developing country like India where there is so much potential to grow and a lot of people cannot do certain things because they cannot afford the high interest loans.Point I am trying to make is that why can't you start something similar to this in India again, in a more structured way. It is more from helping each other and keeping benefits in the community rather than than giving it to the bank. I am sure this is still going on India but I am not sure how contractually and legally its done.