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Number of Loan Listings Plummet at Prosper.com

by Peter Renton on December 29, 2010

Last week I discussed the changes that happened at Prosper on December 19th. So, here we are 10 days later and I thought it was time to update everyone as to what has been happening. It has been a very interesting holiday season for everyone at Prosper I am sure.

If you look at the numbers below you can see the total loan origination numbers for the last couple of weeks. By the way, these numbers are all publicly available in the statistics section of Prosper’s site (you gotta love the transparency of p2p lending). As you can see things were going along just fine for the first week after the new lending model was introduced. They had a blip just after Christmas but it looks like things may be back on track now. The December 29th data is as of 4pm EST and it may actually increase.

I spoke with someone at Prosper this morning and while they acknowledged that loan listings are way down, they said part of the reason is the difference between the bidding system and the new fixed rate system. With the bidding system loans would stay on their site even after they were fully funded because they waited until the auction period ended. Even so, as of this afternoon there were only 17 loan listings available and all of them were rated D or E (as in high risk). Not much choice for p2p investors wanting to diversify their risk.

I have heard a number of negative comments about Prosper on this blog, on forums as well as on their Facebook page. This afternoon Prosper made this statement on Facebook:

We greatly apologize for the delay in answering posts. Rest assured that we are not in danger of going out of business, dying, or closing down. Quite the contrary — we’re confident that the recent changes we’ve made to our platform will greatly improve the lender experience on Prosper.com. At the risk of being repetitive, here’s why the number of listings has temporarily dropped off: 1) Listings are now pulled from the site as soon as they reach 100% funding, 2) We no longer list HR listings, 3) We now set interest rates that are commensurate with the level of risk and therefore, listings that previously were underpriced—and would not have been funded anyway—are no longer on the platform, and 4) The time of year. We believe, come January 3, you should see numbers rise dramatically.

Time will tell I guess. Let’s hope for everyone’s sake Prosper can dramatically increase the number of loan listings. I know one of my readers who wants to have a contest to predict how many loans will be available on Prosper at the end of day on December 31st (he thinks it will be 12). My guess is 21.

I am willing to give Prosper the benefit of the doubt for now. The holiday season is not a typical time of year for many businesses, but next week with the new year and the holiday season behind us I expect to see some improvements. I will be keeping an eye on their progress and will report back in a couple of weeks.

One final point worth noting, if you want a loan and have good credit now would be a great time to apply for a loan on Prosper. Loans with a good Prosper rating are getting funded in less than 48 hours because there is such little competition for investor dollars.

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Dan B December 29, 2010 at 9:18 pm

I don’t think the word appalling does justice to the quality of the current batch of borrowers on Prosper. At some point we really need to face up to facts & the facts here are that these people (23 out of the 25 listings) who are taking out loans at 28-31% for 3-5 years literally can’t get the money anywhere else.
What’s even more shocking is that these loans are getting funded pretty effortlessly, or so it seems. What are these investors smoking??

Lewis Zwick December 30, 2010 at 8:49 am

If the risk is so high to warrant an interest rate 25% points above prime, then these loans are truly not credit worthy. And thus, why bother. Would probably be cheaper to borrower from Guido.

peter December 30, 2010 at 10:48 am

@Dan – I agree it is a sad state of affairs on Prosper right now for investors. As you say these are very high risk borrowers and I think the only reason they are getting funded is that there is such little competition for investor dollars. Many investors have automated plans and never even look at the loans they are investing in.

@Lewis – I am guessing these borrowers cannot get a loan from a traditional bank or credit union. Check out this loan where the borrower didn’t state a loan purpose or answer any questions about their financial situation and he/she is currently 55% funded for this $7,500 loan.

jilliankay December 30, 2010 at 12:32 pm

I loved my last (almost finished) prosper loan…but it took a couple days to fund and was nerve wrecking!! It’s been the easiest, most hassle free loan ever. And I like that the interest is going to *people* who read my post and invested in me.

I spontaneously decided to list another loan last night (B credit, $15K @13.4%). I woke up this morning to find out that it was FULLY funded just 13 minutes after going live. One investor put up $10k alone. CRAZY. But then again, I was the only B, there were no A’s and only one AA at the time I submitted my listing. (Also, I have a perfect record with last loan.)

I just can’t believe the loans that are getting funded with E credit without even filling in all the information…it’s just weird! New bubble?

I think prosper has lost a little bit of the P2P feeling. As in, I know some of the investors were portfolio investments, and they didn’t actually look at my loan individually. Also, some of the investors I know are actually banks or groups. But overall, I’d still feel more comfortable with Prosper than banks and credit cards.

peter December 30, 2010 at 1:12 pm

Jilliankay – thanks for your comment. I knew they were funding fast but 13 minutes! Holy Cow. I am going to have to share that one around. Just before I received your comment I wrote this post today explaining what a great time it is to apply for a loan on Prosper. But I didn’t realize you could get approved in mere minutes. Thanks again for letting me know.

Kent December 31, 2010 at 9:52 pm

Either people are lending more quickly and jumping onto higher interest rates or things are completely drying up.

I’m often looking for specific criteria …. low DTI … 50K+ salary … and same job for 5 or more years and those loans are gone … maybe they are all enjoying vacation, but right now it just sucks.

Fred January 7, 2011 at 12:10 pm

Thanks for the article.I’ve been lending on Prosper for 3 years and came back from Christmas vacation to find the new model with no loans that meet my criteria. I haven’t had time to look into it but it was pretty concerning at first. My initial thought was that Prosper was toast… Time will tell if the new model works. Until then I am going to remain on the sidelines.. Thanks again

Peter Renton January 7, 2011 at 4:01 pm

@Kent/@Fred – Welcome to the new (and improved?) Prosper. It is slim pickings for investors. Most A and B graded loans get funded in minutes or hours so you have to be quick. But since the new year they have been averaging 20-25 loans which leaves very little choice for investors. Let’s hope things pick up for investors soon.

John B January 8, 2011 at 6:01 am

Yeah, this new business model is tough. The rates are higher on these A and B loans but they seem to fund immediately after listing in some cases. It makes it hard for the smaller/part time traders to invest. I think some people with auto plans automatically fund the new listings when they become available as well.

Peter Renton January 8, 2011 at 2:55 pm

John, I think you are dead right about the auto plans. My suspicion is that the majority of the loans are being funded right now with the auto plans (particularly the A and B rated loans).

Summit January 18, 2011 at 7:34 pm

I listed a small loan recently and received enough bids overnight. You guys are right i couldnt get a loan elsewhere. But its not me its the sad state of our banks. I have pulled several small loans from my bank over the years. I have never missed a payment and my credit score is good. But last week the bank wouldnt even give me the time of day. No loans unless you have huge amounts of collateral or money to tie up for a secured loan.

Peter Renton January 18, 2011 at 8:53 pm

Summit, The banks have gone from giving money away (relatively) freely to slamming the door shut completely. This is why peer to peer lending is such a great opportunity right now for borrowers as well as investors. With banks not lending borrowers have few options available – p2p lending is really the best option for many people. And as a borrower you are not giving your money to fat cats on Wall Street, but rather to individuals who are likely not that different from yourself. Thanks for sharing and good luck with your loan.

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