Do you really care about the borrower's stories

e90_m3 · Joined: 22 Feb 2008 Posts: 3

Hi,
I am a newbie and just trying to evaluate the whole p2p lending concept. Question I have is, do you really care about the stories of the borrowers say on Prosper?

Or as long as you have the credit ratings/debt2income, you are okay? THere are no telling that the stories are real anyway, so why bother, right?

Also if you could advise what other metrics you usually look at to judge a loan request, that will be helpful. Thanks in advance!

Wiseclerk · Site Admin Joined: 22 Nov 2007 Posts: 70

Hi

concerning the stories. What lenders have to know is that they are not validated by the service (e.g. Prosper, Lending Club).
Many lenders believe that while the story alone is no reason to bid, it can effectively keep you from bidding, e.g. when:

With most platforms you have the chance to ask borrowers a question.

One example of a recent listing that (for me) does make sense is this one:
http://www.prosper.com/lend/listing.aspx?listingID=256034
Borrowing at 21.47% to lend out at a higher rate.
While borrowing to lend is usually not a good idea, at this rate it seems ridiculous.
The borrower claims his past lending success but the average age of his portfolio at Prosper is only 45 days, meaning it is too young to be hit by defaults yet.

There are known lenders that care about the description because they only fund loans with a certain goal (like helping students, or reducing credit card debts).
There have also been past studies trying statistically to determine if certain words (e.g. "desperate") included in the listing resulted in an higher than average default risk.

My advice: Don't overvalue the descriptions but do not ignore them either.
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