Prosper Marketplace one of the two largest peer-to-peer lending companies operating in the world, has released new statistics showing that 53% of all loans on Prosper’s peer-to-peer lending marketplace were used to consolidate debt during the second-half of 2009.
Debt consolidation loans were by far the most popular reason that borrowers took out loans through the Prosper Marketplace. After debt consolidation, business loans were the second most popular reason for taking out a loan at 12%. Home improvement loans represented 9% of loans funded on Prosper Marketplace. Education loans and automobile loans each represented 4% of the loans that are funded on Prosper. 18% of loans were listed as “other use.”
In the press release, Prosper also said that during the second-half of 2009, the average credit score amongst its borrowers was 742 and the average loan amount was $4,369. These two numbers are especially important to Prosper. The company believes that its loans are less risky than its primary competitor’s (Lending Club) because Prosper’s average loan size is much smaller. Prosper is also hoping to minimize the perceived risks to investors by advertising the high average credit score of borrowers who get loans fudned.
It’s important to recognize that these statistics only represent loans that get fully funded by Prosper’s borrowers. There are many loan listings from borrowers that make their way onto Prosper’s listings but never get funded because lenders believe they represent too much of a credit risk. A calculation of the average credit score amongst all borrowers that apply for loans and have their loan listings on the marketplace would likely be much lower.
The company also released performance statistics about how well their loans have been performing. Prosper estimates that its lenders will make between 7.74% and 10.63% back on their money. Some have called Prosper’s methodology into question, arguing that the true rate of return that investors will earn should be solely based on loans that have completed their 3 year repayment cycle.
