Setting Up a Prosper Peer to Peer Lending Account

In a recent article we stepped through the basics of Peer to Peer lending.  This new internet enabled is like a dating service for investors and borrowers.  Rather than borrowing from banks at 10+% while CDs pay a paltry 1.5%, borrowers can benefit from lower rates while investors can reap similar benefits on their end of the transaction.

During my research for that article I became intrigued with the opportunities and committed to setting up investment accounts and reporting on my experience.  Today this series begins with a look at the process for setting up an investment account with Prosper.  Below I’ll unpack the process step by step so you’ll know what you can expect if you elect to follow suit.

Here goes.  A step by step guide for setting up an investment account with Prosper.  I’ve included several images but the sign up process is very quick and intuitive.  It probably took me 10 minutes over 2 sessions (I’ll explain that below), and I was taking screen captures along the way.

 

Image 1 is simply getting started.  Depending upon where you start, you’ll see one of both of these.

 

 

Image 2 is a 3 page personal profile.   

Prosper Step 2

Prosper Step 3

Prosper Step 4

 

 

 

 

 

 

 

 

Page 1 Collects your basic contact and identification details – name, address, phone, social, DOB.

Page 2 Collects your bank information.  This is for the electronic tranfer of funds into your Prosper Account.

Page 3 Confirms your data entry and collects approvals for Legal Agreements and Disclosures.

   

Prosper Step 5

 

Image 3, at this stage you have technically set up your account, but there are some housekeeping items.  This page reconfirms your log on ID and assigns a temporary screen name.  It also explains the process for verifying your banking account.    This step is similar to other electronic or internet based accounts in that it makes a couple small transactions, each under $1 and asks for you to verify those amounts to confirm you own the account.  The actual verification process may require a couple days depending upon the pace of the transactions.

 

 

Image 4:  Meanwhile, you’ve recevied 3 emails from Prospser through the process thus far.

Prosper Step 6

 

 

 

Below are images of each of the 3 emails.  Presumably they could arrive in another sequence, but here they are as I recevied them:

 Image 5-8

Prosper Step 7

Prosper Step 8Prosper Step 10

 

 

Prosper Step 9

 

 

Email 1 is a simple greeting

Email 2 asks that you verify you email address – clicking on the orange button takes you to your Prosper homepage, image to the right.

Email 3 confirms that a bank has been added to your account.  This will happen even though the bank has not yet been verified.

 

At this stage you’re still waiting to verify your bank.  But when you close the home page achieved from the email and attempt to reaccess it you get to select a security image that will appear each time you log on.  Again, similar to other internet based banks.

 

Prosper Step 11

 

 Image 9 Select your log on image.  Lots of categories and options are offered so you can select something reflective of your personality.

 

 

 

 

Prosper Step 12

Image 10 Once back to you home page, you’re reminded to verify your bank account.

 

 

 

 A few days later it’s time to verify your account.  Prosper and Lending Club follow the same procedure.  A small deposit and withdrawal is name to your account and you validate the amount to demonstrate ownership over the account.

 

Prosper 13Image 11  Once you see the activity in your bank account log back into prosper and click the verify link.

 

 

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Image 12  Enter the Deposit and Withdrawal amounts from your bank account and click to verify.

 

 

 

 

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Image 13  Prosper will confirm your verification and you’re set to transfer money into the account.

 

 

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Image 14  Time to transfer money.  Prosper allows recurring deposits as well as the ability to schedule a future transfer.  I opted or a single transfer for the sake of this demo.

 

 

 

Prosper 16

 

Image 15  Here you confirm your intended transfer and your off.  It’ll take a couple days  for the transfer to take effect. 

 

 

 

 

 

 

 

Once the confirmation is complete, you’ll collect an email communicating the same information and you’re back on hold waiting for the tranfer.  I’m fine with this waiting period as it gives me time to read again about the investment options. 

Another email will arrive once the funds transfer is complete and its now time to start investing. 

 

 

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 Image 16 – Upon logging back into your account, you’ll notice that my $100 transfer is now availble for investing.  Click Invest Now.

 

 

 

 

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 Image 17 – Not all of the features within Prosper are great and this, to me, is a dud.  Immediately, I’m asked to automate my investments.  In this process, you set your investment criteria and the system will auto-invest your funds.  I’m sure there are folks who love this, but I’m not one, at least not with my very first experience.

 

 

 

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 Image 18 – so I back out and hit the Browse Listings button.

 

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Image 19 – Another dud feature that pops up.  Here they are promoting ‘featured’ loans.  I appreciate the attempt at help, but I’d rather search and make my own selections, so I hit the View All Listings to continue.

 

 

 

 

 

 

 

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Image 20 – Here’s what you’ll see when you select a loan.  Loan Type, amount, term, yield, and funding % are all present.  Then below you see the rating data for the borrower.

This is an example of one of the loans I selected.  The A rating with high credit score and income looked very good relative to the 10.53% return.

Also note, that this page demonstrates the borrower rate (11.53%) for comparison against my return (10.53%).  I knew the spread was small, but this is less than I had expected. 

After making the decision to invest in this loan, I entered my investment amount and clicked “Invest Now”.

 

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Image 21 – A pop-up screen will appear and ask that you confirm your investment.  After confirming you may return to shopping investment options.

 

 

 

 

 

 

 

 

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Image 22 – After making all your selections, you can view the Pending Investments from your account page.

My new selections are still considered Pending because the Loan process is still in process.  A loan must receive miminum level of funding, (typically 70%), before it will close and similar to an auction, there is a timeframe for this to occur.

I selected loans that were all above or near the required funding level but each are still several days away.

Above are my selections, here’s why I made these selections:

Debt Consolidation 1 – This is a teacher with a high credit score making nearly $100k with a low Debt/Income Ratio.  A near 15% return sounds worth this level of risk.

Debt Consolidation 2 – A near 800 credit score with over $100k income with very low Debt/Income.  This is an A rated note according to Prosper, all of which surprised me that this would return over 10%.

Debt Consolidation 3 – This one is similar to #2 but not quite as strong.  700+ credit score, etc.  In the notes section, not all borrowers complete this field, the borrower presents as a recent college grad (with a $50k income, nice), who reports no student loans.  The borrow claims that this loan is to clean up bad credit card habits from college.  That sounded familiar to me and with no student loans and solid income, I found this to be a compelling risk.

Home Improvement – This is by far my riskiest loan, with a scheduled return of over 25%.  What was I thinking?  Well, I may have rolled this dice but here’s my thinking.  This is also one of the smallest loans I bought into.  It’s a $4000 loan with a monthly payment of only $162.  The borrower also has a upper-mid 700 credit score and great employment record.  The borrower appears to be carrying no debt other than a mortgage and has a low debt/income ratio.  My bet is that this borrower will pay this loan off early, in which case I only earn the high rate for a brief period.  I guess we’ll see.

 

At this stage, I’m fully invested and waiting for my loans to originate, at which point they will be active and I’ll start receiving monthly payments.  I look forward to tracking these loans and sharing with you my results.

If you’re at all interested in setting up a Prosper account, then I ask that you consider using the link provided below.  This is my affiliate link, which means I’ll receive a small referral fee at no cost to you.  If my materials helped in your decision making process, then this is a perfect way for you to say “thanks”.


 

Thanks for following along, and good luck in your investment strategies.  If you do decide to invest with Prosper, I hope you’ll share your experiences and results in the comment field below.

 

Setting up a Lending Club Peer to Peer Lending Account

Over the last couple weeks we’ve looked into the basics of Peer to Peer lending, as well as, the process for opening an investment/savings account with Prosper.  Today we’ll look at the process for setting up an investment account with Lending Club. 

So let’s jump into the process.  Here’s the step by step process for setting up an investment account with Lending Tree.
Similar to before, I’ll include several images but the sign up process is quick and easy, probably easier than the process with Prosper.  It took under 10 minutes over 2 sessions (more on that later), and I was making screen captures along the way.

 

Image 1 is just getting started.  Depending upon exactly where you start, you’ll see one of these buttons.

 

 

 

 

Image 2 is an initial sign up page.  Selecting your account type and registering your email and password.

 

 

 

 

Image 3 is the personal information page.  Name, address, phone, DOB, SSN… the basics.

 

 

 

 

 

 

Image 4 allows you to fund your account.  I like that Lending Tree actually allows 4 options – Bank Transfer, Wire Transfer, Instant Transfer with Paypal or Credit Card (a 1 time option with a $250 minimum) or Check.

 

 

 

 Image 5  I selected Bank Transfer to replicate the process with Prosper. 

 

 

 

 

 

Image 6 is your home page.  Since I selected to fund via bank transfer I’m in a holding pattern and still need to verify my account.  This is the same process in that a small deposit will be made to my account and I’ll need to verify that amount.

Of note here is the check list with the red dot directing my next action.  Also is the option to establish a recurring contribution.  I imagine this small feature has contributed to Lending Club’s growth. 

 

 

 

Meanwhile Lending Club also issues a couple emails verifying your sign up and account registration.  Mundane and no action required (unlike the Proser set up process), so I’ll spare you the screen shots.

Fast Foward a couple days and it’s time to verify your bank account.  This is a couple step process, but pretty simple and intuitive.  We’ll pick up with Step 7.

  Lending Club 7

Image 7  Check your bank account and you’ll find a small deposit and withdrawal from Lending Club.

 

 Image 8 Log back into your Lending Club account and following the link to verify your account.  Here you’ll need to enter one of the amounts from your account.  Either the deposit or withdrawal. 

 

 

 

 

 Image 9  Once you’ve entered the correct amount, you’ll immediately receive a confirmation indicating that your account is now active.

 

Image 10 is to add funds to your account.  Lending Club promotes recurring contributions (both Prosper and Lending Club allow it).  Select either botton based on your intent.  I selected “Add Funds” for the sake of this demo. 

 

 

 

Image 11  Time tp Transfer money into your Lending Club Account.  I elected to transfer a $100 electronically from my bank account for this demo.  A wire option is available for immediate transfers.  I didn’t figure the cost of the wire (my bank charges) to be worth the speed.

 

 

 

 

Once the transfer is complete, you’ll receive another email confirmation.  Because I went with the bank transfer, I’m in another brief holding pattern.  Personally, I’m ok with these delays because 1) I won’t want to pay for a wire and 2) once my account and investing approach is established, I can set up recurring desposits to smooth over the waiting times.

You will receive an confirmation email once the transfer is complete.  At this time, you can log back into your account and begin the “investment” process.

A couple quick notes,  to start.  While you are technically loaning money to another individual, the legal structure in place is one of investing, similar to bonds.  You are investing your funds into a loan or bond-like product that represents the borrowing action of the opposite party.  I’m happy to address questions on this in the comments, but prehaps the remaining demo will help.

 

Image 12  Upon logging back into my account, I can observe my funds available for investment.  You’ll recall we started with $100.

 

Image 13 – The loans or investments you can make are called Notes.  Press Browse Notes to idenify the loans in which you wish to participate.

 

 

Image 14 –  Reviewing the available notes can be both fun and overwhelming.  Lots of information is provided so the first step is understanding how to process it.

At first, all the available investments are visible – many pages and several hundred options.  The key is sorting on those which respond to your investing objectives.

On the far left are search options.  Terms (36 or 60 months) and Risk/Return levels were the key metrics I used for sorting. 

 

I started looking at the lowest risk loans, 36 Month Grade A loans.  Most of these offer 6.5 – 9% returns, which is fantastic comparted to the 1.5% returned by most CDs.

I then broadened my searchs based on Credit Ratings and Loan Purposes.  I was further able to investigate each specific loan or note by looking at the borrower metrics – income, rent/own, monthly payments, ratios, etc.  I not showing those detail screen captures given the personal (but not private) nature of the data.  The data is there when you’re ready to invest.

 

 Image 15 – I settled on 4 notes at $25 each.  What surprised me was the interest rate I was able to achieve for what I deemed as reasonable loans.

My pre-default adjusted notes promise to return nearly 14%.  Lending Club inserts the default rates for level setting purposes, but these appear to be generic overlays which are representative of their full portfolio.  The reality is that my personal default rate could be 0% or even 100%.  Hopefully, my selection criteria will be minimize my risk.

So what did I select and why?

Again, I bought into 4 notes at $25 each, and I’ll summarize my interest in each.

Note 1 – “Never Late” – is a Home Improvement loan for an individual with a credit score in the 815-819 range who also reports a montly gross income over $21k.  This person had a low % utilization or their credit and a low debt to income ratio along with a strong employment history and no report delinquencies.  This all sounds like a safe loan situation which surprised me that it was returning over 11%.  Additionally, over 300 over lenders/investers were participating in this loan.

Note 2 – “Strong Income” – is a debt consolidation loan (most are).  The borrower credit score is in the 695-699 range who reports a monthly income over $7k/mo.  The ratios are higher for this person but the return over 13%.  What struck me for this one was the answer to some of the more specific questions.  The borrower has recently refinanced their home to 3.5% on a 15 term and plans to consolidate multiple debts into this single payment.  This one could bite back, but the language and actions seem to demonstrate someone who is both ‘aware’ and making sound decisions.  203 people appear to agree and are also investing in this note.

Note 3 – “Freedom” – 383 people are taking this risk with me.  A risk with promises of a near 18% return.  A near $200k income, and 700+ credit rating struck me about this note.  The title of “Freedom” made me wonder if this person is a Dave Ramsey fan and in the details the person explains that this consolidation effort will free up over $2k in monthly obligations.  If this person is a Ramsey fan and plows that new extra into fat principle payments, this note can payoff early, thereby reducing the risk further.

Note 4 – BOA Consolidation – Another 700+ rated borrower with a prime income and low ratio.  Only 91 other investors are participating, but that means some are making larger investments. 

 Notice that I’m participating in loans that are nearly fully invested.  That means my money will start working sooner, it also means that many others have already desided to participate in the loan.  Since I’m comfortable in admitting that I’m not a Lending Club expert in my very first outing, I don’t mind reading other queues.  Credit scores near or over 700 and large numbers of other investors.  That suggests that I’m not making this decision alone.

 

 

Image 16 –  Once my selections are made, I need to Place my Order.  I performed multiple searches and sorts and reviewed over a dozen notes before making my selections, so this summary page was helpful.

 

 

Image 17 – After Placing my Orders, I receive a confimation.  At this point it appears that Lending Club is erring on over communicating, but I’d always rather err in that direction.

 

 

 

 

 

Image 18 – Finally, I’m returned to my Account Summary.  This is a nice dashboard in which I can track my Notes as they complete their funding and shift into actual investments.  It then reports over the health of those investments.

 

 

 

 

 

At this stage, I’m complete.  Lending Club does issue another email comfirming my investments and further notices are promised as the notes fund.  I look forward to the monthly reporting as funds are collected and I actually start to receive payments. 

 

Investments I would not make

I talked about the loans I selected and why I made those decisions, but what are loans would not have taken?  Here are some examples of characteristics I’d avoid.

3 Examples of Loans I’ll Avoid: 

I think I’ll categorically stay away from car loans.  While this person has a high credit score, they are signing up to buy a 5 year old car at a really high interest rate.  Consider, if the note promises the investor 10.16%, then the borrower is payout 12-15%, or even higher.  This can’t be a smart decision by itself and especially not when the borrower is so obviously chasing an image with a BMW.

 

Small Business loans is probably another category I’ll avoid.  A debt consolidation or refi is one thing, a loan has been given (approved), and how the borrower wants to update the terms.  Ok, there’s a known quantity about it.  However, a business loan is another animal.  What is the business and the inherent risks of that business in the specific market?  This type of loan seems to ask more questions.

 

Of course a tax loan is along the same lines.  You probably noticed that I was looking for conditions that demonstrated a certain ‘awareness’ on the part of the borrower.  Needing a loan to pay your small business taxes starts to sound like evidence of a lack of awareness.  Something else I’d likely avoid.

 

Conclusion:

In conslusion, I found the process of investing with Lending Club to be very simple and intuitive.  The site was easy to navigate and left nothing to chance or question.  I give high marks to the over all process and so far would highly recommend Lending Club

* I am currently not an affliate for Lending Club, so I’m not saying that only to promote a link.  I actually do like the product and look forward to tracking my investments.

How about you?  What is your experience with Peer to Peer Lending and how would you rate Lending Club?

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