Monday, June 16, 2008
Prosper Peer-to-Peer Lending
(Navigating the Risks of Peer-to-Peer Lending) Here is one of the better articles that I have found about peer to peer lending that is not on one of the peer to peer lending sites. I like that she points out the risks of lending this way. I hate that she does not talk a bit about the innovation behind this type of system and how it is different from the traditional system. I love the idea of these sites and how they function. I just wish there was more that could be done to reduce defaults. The hardest part to me about these sites is that I don't have a real name or address of the person I'm lending to. The lending site is the person that has all the personal information to track down any one with a problem and I don't understand what their motivation would be to go after the people that default. Why would they hire a decent collection company. As soon as the loan is funded they get all the money they are going to get on the loan. They don't care what happens after that point. I wish they had some interest in what happened to the loans once they were funded being they are the people that would hire a collection company and possible push to collect something from people who default. I understand that the best collection company in the world can't fix the problem of people defaulting on loans, but I would feel better if the site would lose something if a loan defaulted.
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3 comments:
That is ridiculous! Of course they care what happens to the loan after it funds. Do you really think Prosper is making a profit with their 2-3% fees? They are losing money so that they can build a system that shows everyone that this model works. They could never do that if defaults were out of control.
How are they not making a profit? 3% of every loan is good money. They are also recieving advertising money on the site that makes money. Why would anyone set something up and lose money. They are making huge money for keeping a site up an running. This is truely a free market situation where things that don't make money or can't get funding to cover their expenses don't exist.
That is ridiculous! Of course they care what happens to the loan after it funds.They could never do that if defaults were out of control.
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