Good news/bad news about Prosper

I got an email from Prosper yesterday telling me they are registering their promissory notes with the appropriate parties so that they can create a secondary market for their lenders. What this means if this passes is that lenders can sell their portions of a loan to get cash back prior to loan maturity. Say you have $200 stuck in loans and you really need it, but the loans don't mature for another two years. Sell that in the secondary market and get some of it back right away. That's pretty good news in that it creates some liquidity in the Prosper community. It turns out this was what Lending Club was doing when it was not accepting new lenders. So Lending Club, it seems, is ahead of Prosper.

Now the bad news is that Prosper has been making some pretty disturbing moves, including contradicting their own legal agreements with their own borrowers and lenders. According to some sources, their default rate is pretty high as well (35% for loans originated from June 2007 on). Personally, I'm not seeing this default rate. Either I picked my loans well or I'm just plain lucky. But I have $300 invested and I have $30+ in returns. I've been lending since October 2007, so you can quickly say I got 10% return. However, my loans did not all start in October, so it's probably closer to mid to high teens. I don't really feel like calculating it all out, but I'm definitely sure I'm getting a much better return than in the stock market (I'm getting negative return right now).

Now since Prosper is in a mandatory "quiet period", I cannot make new loans. This period will last until their whole registering their promissory notes thing is finished. I guess what I need to do now is decide whether I should stick with Prosper or just let the loans mature (or sell them in the supposedly upcoming secondary market) and switch to another peer-to-peer lending site like Lending Club. As I've said before, I have had not problems with Prosper, but a quick search definitely shows concerns regarding Prosper. I need to do some research and check up on Lending Club as well. Peer-to-peer lending has kinda been frowned on, but it's been such a great investment for me this past year. We'll see how it goes. Who knows? Maybe I'll find another area to invest my small Prosper funds in.