So I've joined Prosper, I briefly talked about it earlier last month. I was excited and ready to go and become a lender to help people out. Mainly though I did it to make a buck. This is what its all about, making a buck. I must say that Prosper is not as easy as I thought it would be.
When I first learned about the site, I thought "Wow, this must be the easiest way to make a little bit of money on your *idle* money." Simply browse through the borrower's requests for money, read about them and then lend them some money at a really high interest rate. When I say high interest rate, I mean HIGH. Some of the loans right now are on the 20% or higher range. So if you have $100, and you lend it out at a rate of 22.5% over a period of three years, you can see what I mean by easy money. Well, it all sounds great until you actually get in and start lending money.
It is simply not easy to lend money. The marketplace in Prosper is as competitive as anywhere that offers a chance to make a profit. Geez, who was I kidding when I thought this would be simple? The problem I'm facing now is that my loans keep getting bumped off by other lenders.
This is how it works. For example, Joe Schlombo wants to borrow $15,000 to rebuild his kitchen, and he requests his loan at 25% interest rate. Happy and ready to lend I go into Joe's loan request, read the description and make sure I feel comfortable lending him money then I make a bid. Aha! thats where the catch is, this is just a bid! I would make a bid for $50.00 to $100.00 and offer it at 25% so will about other 200 lenders. Unfortunately this is not the end of it. The loan is essentially an item we (all the lenders) are bidding for. Another lender may come along tomorrow (before the auction closes) and say... "hmmm, this Joe guy seems pretty respectable, I'm going to lend him $100.00 at %24.5" And so one of us, the guys that bid $100 at %25 will get bumped off because of the %.5 difference.
You can see how this would be more difficult than I thought, it's a lot like eBay where you have to constantly watch the items you are bidding on and make sure you are ready to make a winning bid at the last second before the auction closes.
As it stands right now, I made over 30 bids since I first posted about prosper and they all have been bumped off by other lenders. I should probably go into the forums and ask other people how to get some of the winning bids and actually lend some money out, it is definitely not as easy as I thought.