Prosper Lending Review - the year in review

Happy birthday to Prosper Lending Review! We have been blogging for over a year now. In June 2007 my brother Matt told me about Prosper, a P2P lending site, that he had been funding loans on for about a year. I was immediately intrigued. On June 15, 2006 we launched Prosper Lending Review – a blog about the P2P lending marketplace with a focus on Prosper lenders.

Since then we have watched Lending Club grow, GlobeFunder launch, Virgin Money purchase Circle Lending, Zopa move to the U.S. and Fynanz launch. We expect to see Loanio launch soon and keep watching Canada to see if CommunityLend or IOU Central will open their doors. It's an exciting time for P2P lending and we are happy to be part of it.

Here's a look back at the past year. These are the most popular articles on the site as measured by the number of unique visitors.

• A Prosper scam: The story of Jessica Wolcott
• Revolution Money Exchange offers $25 sign-up bonus
• How does Prosper compare to other investments?
• Prosper: A hands-on education in risk management
• Why does Revolution Money Exchange require my social security number?
• Borrowing money to lend on Prosper: Wise or Foolish?
• When to bid on Prosper loans
• Why would a borrower use Prosper instead of a bank?
• Fynanz to tackle peer to peer student loan niche
• P2P Lending Review: Best of 2007
  

These are the top 10 referring blogs and forums over the past year.

• Prosper's official forum - The official forum was a great source of traffic before it closed in November 2007. The archived forum can be found here. I do not receive significant traffic from the new forum.
• P2PNoBank - blog aggregate run by Rateladder
• Prospers.org - great unofficial forum and wiki
• Prosper Report
• Rateladder
• Personal Loan Portfolio
• Lazy Man and Money
• Ted's take
• Lending Club's official blog - I have written a few guest posts for Lending Club.
• Prosperousland

What are people looking for when they come to Prosper Lending Review from Google? Here are the top 10 search terms driving traffic from search engines:

• prosper lending
• revolution money exchange
• prosper review
• loanio
• prosper blog
• revolution money exchange scam
• fynanz
• jessica wolcott
• prosper scam
• prosper lending review

Again, it's an exciting time for P2P lending. Stay with us over the coming weeks and months as we continue to follow the P2P lending marketplace.

Prosper referral program ends

Since announcing their referral program one year ago, Prosper has grown from about 300,000 members to nearly 800,000. Under the bonus program, both the referring lender and the new lender received $25. Over the last year the program has been modified several times. In addition, the program has been extended past several deadlines. According to Brad Prescott, Prosper's Director of Marketing, existing referral links will not generate referral payments for referrals that occur after 11:59PM PST on June 30, 2008.

Those that signed up prior to June 30th will still receive the $25 bonus when they fund their first loan. Prosper is expected to announce a new referral program this month with the goal of working directly with a few dozen, quality referral partners as opposed to hundreds of partners operating under a "one size fits all" approach.

Referral programs have been used by most peer to peer lending companies to grow their user base.

• Lending Club started off with a $5 referral bonus which they eventually increased to $25. Their program was halted in April 2008 when they entered their quiet period to register with the SEC. In addition, Lending Club briefly offered a 5% bonus to large lenders. It is expected that Lending Club will restore their referral program, perhaps in a different form, when they open again.
  
• Fynanz just announced a $25 referral bonus program with a 3-5% bonus to large lenders.
• Although it is not a peer to peer lending company, Revolution Money Exchange also has a $25 referral bonus program which has been very popular with our readers.

Although Prosper has announced that their referral program ended on June 30th, I received an email confirmation for a new referral generated on July 1st. This is no different than email confirmations generated prior to the end of the program and confirms a bonus will be generated if the new user becomes an active participant in the marketplace within the next 90 days. The Prosper referral page is unchanged and still allows you to invite friends with the same wording indicating a bonus will be awarded. Despite the deadline, perhaps it is not too late to sign up for the bonus. Prosper would be unwise to terminate awards until they make clear changes on their website, stop sending bonus confirmation emails and stop serving $25 bonus advertisements.

Why should I turn to peer to peer lending?

There has been so much talk in the past two or three years about peer to peer lending and its advantages and disadvantages. We’ve talked to countless people on both ends of the equation and have found the advantages overwhelmingly outweigh the disadvantages. There has been chatter that this is going to be the next big movement in the world of finance and a great way to help someone out and make a bit of cash on your own. Here are a few reasons why you should consider this emerging financial resource:

1. The lenders have great flexibility. As a lender you’re not making the loan, rather you are purchasing a part of the loan. You can get into a loan for as low as $25-$50. Accordingly, you can limit your risk by creating diversity through the purchase of many different loans. Prosper will put the loan out for bid and when there are enough lenders the loan is granted.
2. It’s a win-win situation all around. Everyone makes out in the peer to peer loan experience. The lender can sometimes see a turnaround of up to 15% on their investment. The borrower is granted the loan they were seeking and usually pays smaller interest than on a loan from bank because there is less overhead involved. A company like Prosper makes money as it takes a small percentage of the loan cost. Doesn’t this sound refreshing compared to the sour taste left in people’s mouths when dealing with the banks?
3. Lending is making you the bank. As the lender you are the bank and you get paid for taking the risk of lending money to a borrower. As you begin to get paid back you can choose to spread your money to new loans or you can simply withdraw your money. There is more risk involved in peer to peer lending than a guaranteed investment like a CD, but you can diversify your loan across risk classes and have a better chance at seeing a greater return.
4. Peer to peer lending is here to stay. This emerging market has enticed investors from all different walks of life and financial backgrounds. As we’ve already discussed there is risk involved, slightly more than stable money markets but you can also see your small investment grow. Prosper has been advertising that the average return is between 8 and 12 %.
   

This guest post was contributed by Heather Johnson, who writes on the subject of amex canada.