Greetings from lender services! At Prosper I assist our lenders with everything from getting started on Prosper to full account reviews. Everyday we help a whole new group of lenders, each day is different. Some lenders are very methodical, looking at all the previous listings and using the Q&A extensively. Other lenders like to help people in need; social lending at its best. Hearing from all our lenders on what has worked for them, what hasn’t, I have no shortage of stories and experiences to share.

My lending strategy is focused on the social lending aspect, though I closely analyze the credit data for risk. I’m not a large lender, and that allows me to find loans that I have a certain connection with. This may be to help a recent UC Davis graduate to get on her feet, I can relate with the financial burdens students face during and after college. I’ve shared interests with my borrowers, some want a new boat, others want to start their own skateboard company. I enjoy helping people get a loan when we share a common interest, even though I will never meet the borrower. That’s what makes lending on Prosper fun for me, and why searching through pages of listings can be so rewarding.

Being a Pittsburgh Steelers fan, I recently helped fund a loan for a new fight song compact disk. Most of my borrowers have mid-prime credit with currently no delinquent accounts, and a low number of recent inquires. I like helping real people through Prosper, that’s the enjoyable part for me.

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Cameron Fleischer is a Lending Account Manager at Prosper

Individuals with good credit have a variety of alternatives when they need to borrow money.  Traditional banks have spent untold millions of dollars on brand advertising reinforcing the notion that borrowing from a bank somehow bestows prestige on quality borrowers.  But, does membership really have its privileges?  Smart borrowers know there are two things they should consider when borrowing money, the price and the terms.  Using these two criteria, Prosper’s marketplace is the best place for most borrowers with excellent credit to borrow. 

The better your credit rating the more you benefit from an underwriting process that takes into account your individual characteristics.  Traditional lenders segment borrowers into groups so they can centrally set pricing and terms.  This approach shortchanges the best borrowers in any segment because they are given an offer designed for the average customer.  On Prosper borrower rates are arrived at independently for every borrower.  Quality borrowers are rewarded for their individual credit characteristics and get the best price the market has to offer.  In many (if not most) cases these rates are lower than the rates quality borrowers pay to banks for a similar loan product.

Another way Prosper differs from traditional lenders is loan terms.  Because traditional lenders profit from borrowers paying higher rates, the terms of many traditional lending products are designed to attract borrowers with low rates, and increase rates over time to increase profits.  This is not a practice limited to lower quality borrowers.  Teaser rates, penalty pricing, no grace periods, and prepayment penalties are some of the tools traditional lenders use to increase portfolio profits for all their customers, including the ones with excellent credit.   Prosper has fair terms so borrowers know what they will be paying over the life of the loan.   Prosper loans have fixed rates that never change over the life of the loan.  Often banks label rates as fixed when they don’t float to market rates, but still reserve the right to change the rates based on their discretion at any time.  Prosper loans have a payment grace period before which a late fee is charged, and have no prepayment penalties.  Prosper believes that all borrowers should know for certain what they will be paying to borrow money, and should benefit from a low rate for the life the loan, not just at the beginning.

Maybe membership does have its privileges, if you join the right club.

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Kirk Inglis is the CFO of Prosper.

One of our primary objectives in making Prosper market data fully transparent and freely available via an API is to allow and encourage anyone to study the Prosper market and consumer credit markets in general.  We deeply appreciate the level of diligence and analysis so many have contributed using Prosper’s marketplace data.  We are also very encouraged that an increasing number of economists and professional credit analysts have taken the time to conduct deep studies of the market and share their conclusions publicly.

One such study was released yesterday by Economists Ginger Zhe Jin and Seth Freedman of the University of Maryland.  The study looks at Prosper’s market since inception to determine average returns and other interesting conclusions about the market. Among their findings:

1. The average Prosper returns since inception were estimated at 6.05% with a 5.72% standard deviation and were trending up as credit quality continues to improve (see table 9 and figure 8.3).
2. The highest returns were in Near Prime loans (grades B-D) at an average of 8.27%, followed by Prime loans (grades AA & A) at 6.78% and sub-prime loans at 1.73%.
3. The probability of default of a Prosper loan peaks at month ten and then edges down (see Figure 9). This is a major reason why Prosper’s performance tool shows more conservative returns. Prosper’s performance tool does not adjust for this later default moderation, which is significant given that the average age of the Prosper portfolio is currently 9.7 months (i.e. at the peak of the default curve).
4. The study showed that the highest returns occurred for loans priced up to 25%. Loans funded at more than 25% actually showed lower returns because defaults increased disproportionately. This implies that borrowers willing to pay very high rates show higher adverse selection, which is logical (see Figure 8.1).
5. The study found that lenders learn quickly - adjusting their bids and strategies as performance is revealed. New lenders also learn from their observations of earlier lenders in adjusting to marketplace dynamics.

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Chris Larsen is the CEO and Co-founder of Prosper.

My job normally requires me to write in funny sounding languages like C# (pronounced “see-sharp”), and SQL (like the word “sequel”). I use strange acronyms like ASP.Net (ay-es-pee dot net), and slay “bugs” with electronic weapons. After a feverish two years in the Prosper engineering department, I feel out of practice writing in my native English!

Taking a moment to breathe from what has been a truly wild ride thus far, let me share a personal insight: that is that people I work with at Prosper are easily the smartest and hardest working people I have ever worked with. We simply get things done. Fast. Very fast. And I’m not one easily daunted by hard work: having served in the Israeli Air Force, instructed in a foreign language, attended medical school, and having raised three children as a single dad for several years, Prosper is an experience that rivals the demands of all of them.

Decisions have been carefully weighed. So much thought has gone into building this marketplace! Hardly a step has been taken without the benefit of extreme consideration. From the day I started, working on a make shift desk made out of a folding table (many employee’s desks are still folding tables by the way!) till today, Prosper has been about extreme thinking matched with unrelenting quality execution. We are not perfect, and of course have made our share of mistakes, but I am oh-so-proud to be a part of where this is going.

Adam Edell is a Senior Software Engineer with Prosper.com

It doesn’t seem that long ago that our CEO Chris Larsen made the announcement at Prosper Days 2007 that Customer Support was coming in house to SF. It’s definitely been a challenging but fun 18 months for our department. We are a close knit team that strives hard to provide the best customer service to our community. As a result, we have built a solid foundation upon which we are continuously looking to improve. It’s no secret that with any start up company things can get pretty hectic. However, I feel management has been extremely supportive in dealing with any issues we’ve presented to them — which in turn only makes for a better user experience for all of you.

I’ve worked in support for several different companies in various industries and working here at Prosper has been one of my best experiences. In other companies I’ve worked at, the customer service departments were treated as outcasts which generated this feeling of irrelevance. Here at Prosper, other departments enjoy hearing our feedback. Seriously, why wouldn’t they? We talk first hand with you, the community. Confused about messaging you get or screens that perplex you? If you’ve emailed or called us about it, then we’ve brought it up to someone who’s listening.  (Contact Customer Support.)

Personally, I’m amazed at the improvements we made in such a short period of time. We could not have achieved this if no one was listening. For those of us that were here in Feb 2007, we now catch ourselves saying “Remember when we had to…” I expect a few months from now I’ll be saying that more and that’ll be music to my ears.

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Terence Dela Cruz is member of the Prosper Support Team and looks forward to helping Prosper Members on a daily basis.  He highly recommends the Prosper Tutorials.