Prosper Review: Peer to Peer Lending

Not everyone can invest at Prosper. There is a list of requirements that all investors must meet before they can open an account:

Individual investors must be 18 years of age or older, have a valid Social Security number as well as a checking or savings account.

You must reside in an eligible state. As of this writing residents in the following states may invest: Alaska, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Maine, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New York, Oregon, Rhode Island, South Carolina, South Dakota, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

Some states, Alaska, Idaho, Missouri, Nevada, New Hampshire, Virginia and Washington, have financial eligibility requirements of a $70,000 annual gross income and a $70,000 net worth. Also, no residents of these states may invest more than 10% of their net worth in Prosper notes.

When investors consider Prosper as an investment they need to remember that there have really been two iterations of the company. Prosper 1.0 was from their beginning in 2006 to 2008 when underwriting standards were very lax (the minimum credit score was 520) and investor returns, on average, were negative. Prosper 2.0 is from 2009 to the present day when underwriting standards improved dramatically (minimum FICO score is now 640) and returns for investors have been much better.

Prosper anticipates that investors can expect to see a 4.99 percent return on AA investments, up to 13.48 percent on E grade investments. You only need to invest $25 to get started.

Prosper offers a wide range of loans from debt consolidation to home improvement, short-term and bridge loans, auto and vehicle loans, small business loans, baby and adoption loans, engagement ring financing, special occasion loans, green loans, and even military loans.

Prosper Marketplace, Inc. was the first ever peer-to-peer lending marketplace in the U.S. The platform has grown tremendously since its inception; it now has a member base of 810,000 people and has funded over $12 billion in loans.