Prosper.com, a company which operates a peer to peer lending marketplace, has issued a report claiming that its loan loss rates have declined dramatically after registering with the U.S. Securities and Exchange Commission and strengthening its borrower requirements.
“Clearly the risk management guardrails that have been implemented are paying off for lenders and setting the table for peer-to-peer lending to become a mainstream asset class for both individual and institutional investors,” said the company in a statement
“Last month we noted that our focus on risk management this past year has led to dramatically improved lender performance,” said Chris Larsen, Chief Executive Officer and Co-founder of Prosper.
“With the release of today’s report, we’re shedding even more light on the marked contrast between pre- and post-quiet period loan performance by taking a deep dive into loan loss rates. As may be gleaned from the report, post-quiet period loan loss rates are approximately 65% lower compared to pre-quiet period loan vintages; and even when controlled for the higher minimum credit score requirement of 640 that was introduced in July 2009, loan loss rates are still 60% lower.”
Larsen continued, “Clearly the risk management guardrails that have been implemented are paying off for lenders and setting the table for peer-to-peer lending to become a mainstream asset class for both individual and institutional investors.”
Prosper Marketplace Inc. is the world’s largest peer-to-peer lending marketplace with more than 990,000 members and approximately $205,000,000 in funded loans. Prosper allows people to invest in each other in a way that is financially and socially rewarding. On Prosper, people list and bid on loans using an online auction platform. Borrowers list loan requests between $1,000 and $25,000 and set the maximum rate they are willing to pay. Individual and institutional investors bid in minimum increments of $25 on loan listings they select. In addition to credit scores, ratings and histories, investors can consider borrowers’ personal loan descriptions, endorsements from friends, and community affiliations. Once the auction ends, Prosper handles the funding and servicing of the loan on behalf of the matched borrowers and investors.