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Putting the social in social capital

by Andrew Martinez-Fonts on 04/23/08

We’re all taught: when in polite company, don’t talk about money, sex, politics, or religion. I don’t know about the last three, but when it comes to money, people are decidedly tight-lipped. A cousin once confided in me (after a few drinks) that he’d racked up $50,000 in credit card debt. You could have knocked me over with a feather! Here’s a guy who went to college, has a good job, and seems to live a normal lifestyle. And he’s overspent enough to feed a quarter of a million children for a day.

How could I have not known this? I mean, he’s family, right? But people are very private with their money, and I would argue, without reason.

With the exception of having a mortgage, debt is looked down on in the United States. But according to CardRatings.com, 60% of Americans don’t pay off their credit card bill every month. So it’s not uncommon to carry a balance. What can set you apart from the crowd, though, is paying off your credit card balance in a smart way. That’s where Prosper comes in.                 

Okay, so you think Prosper is a cool idea, and you put up a listing. You’re really hoping that some of those lenders notice you with that picture of your cute dog and adorable kids. And maybe if you’ve got stellar credit, you will get some bids. But chances are you probably won’t.

There is something you can do about it. Tell someone. Seriously. Do it. It will help.

When you ask for a loan on Prosper, you’ll probably upload your picture, and you might write a long story about how much that kitchen remodel set you back. Or how you wrecked your car, but it was, like, totally not your fault.

And we Prosper lenders get that. We know you need a loan; otherwise you wouldn’t have jumped through Prosper’s hoops to ask for one. But we’re looking for a little commitment from you, too.

So tell someone, already. I did it, and I managed to get a great loan at an embarrassingly low interest rate.

Here are some other folks who are doing it right:

Blind DogBlind Dog

No, we haven’t started making loans to canines. But this borrower has a $200 bid from a neighbor and fellow church-goer. Missmanhattan says “Mike is a neighbor and personal friend of mine.”

Paying off my credit cardsPaying off my credit cards

This borrower was referred to Prosper by someone who was an existing lender, and has already placed $650 in bids on the loan. By referring the borrower, Zorg (the lender) will also enjoy $50 when the borrower’s loan gets funded.

Need $$ for Spring ProjectsNeed $$ for Spring Projects

He’s already got a $50 bid from a friend, and an endorsement from his kid (probably unverified because you have to be 18 or older to get verified). And with an estimated return of 24.61%…

So give it a try. I know it’s a little weird asking friends and family for money. But when you’re only asking them for $50, and their small bid can help you get your whole loan funded, it’s easier than you think. Heck, if you invite them to Prosper, you’ll each get $25.

So what’s stopping you? Leave a comment and let me know.

Andrew is a Product Manager at Prosper.

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6 Responses

Peer Lend | April 23rd, 2008 at 7:37 pm

Hi Andrew,

On “So what’s stopping you?”:

I suggested this maybe a year and ago in Petri Dish (I miss Petri Dish) but will bring it up again given your current focus on the matter.

Why not make this a more painless process? At least in the Friend to Friend referral cases.

As dynamics currently stand, borrower refers their friend and gets $25 when the referred friend bids (presumably) on their loan. The referred friend also gets $25 when the loan funds, for a total promotional outlay of $50.

Why not just tweak the referral program a little for borrowers who refer friends who bid on their particular listings? Instead of giving each one $25, in cases where the borrowers refer friends who bid on that borrower’s listing, give the $50 to the referred lender who bids at least $50 on the loan of their friend. This would totally relieve any sort of social or emotional burden on the part of the borrower asking their friend to sign up – in fact, it might even make it fun – almost like handing out $50 bills, in a way.

Not only that, but marketing would get to call it something like the “Free Bids for Friends” program – and, you know, turn borrowers into marketers, for their own loans + the platform. (Marketing loves this more than anything else.)

For that matter, the cash outlay would be immediately put back into a loan, which would offer some (very slight, but add up) benefits – as opposed to just handing out promo bonuses.

There are a number of implementations, here’s 2:

IF lender referred by x bids on loan listing of X, THEN deposit $50 into lender’s account on loan funding. (Borrower says to friend: “If you bid on my listing, you’ll get your $50 back after it funds.” Still sounds somewhat questionable, still requires a leap of faith.)

IF lender referred by x is attempting to bid on loan listing of x, THEN allow a $50 bid (EVEN IF lenderbal=$0).

The second one is more fun – and lets them get a feel for what bidding is like, and the option could be turned on as soon as lender’s banking details were verified, making it fast – and with no lender cash outlay – making it painless not only for lender, but painless for the borrower to ask them to do! Borrower to friend: “If I can get you to sign up as my friend, you get a free $50 bid on my loan (pause for borrower to explain Prosper), and it doesn’t cost you anything – in fact, when as I pay back the loan, you’ll get that $50, plus interest.”

There are some signal issues that you guys would need to consider ($50 VBE bids may have their signal value discounted, or at least baselined), but I think they’re marginal and outweighed considerably by the multiplier effects involved – which are nearly viral.

Of course, this should just be a friend to friend tweak to the existing referral prog – not a replacement of that referral program.


poppadollars | April 23rd, 2008 at 10:35 pm

Not sure that debt is looked down on, but excessive debt certainly is. Most young people seem to use credit cards these days as their safety net instead of savings.

As a lender on Prosper, I am more likely to lend to someone who has an endorsement even if it is a close relative or friend. It adds some credibility to their story and a personal touch.

Tricia | May 11th, 2008 at 8:25 pm

I was told about this site by my son who was reading a book, I forget the name, but I thought…it was 50/50, so why not.
It took me 4 trys, but is going to be worth it. after I pay off my new loan, I would love to learn how to become a lender. I am very happy to have found a new place, and it has lifted my spirits for the first time in a long time. I vow to not let anyone here down. thanks Tricia


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