[aquaswim47]

I used it, but I put it at the same risk level as speculating in stock options. I wouldn't put any more than 1% of your capital in Prosper whereby for options, I tend to like to use a 0.5% to 1.5% rule.

Currently, I lent money to a D borrower. My money is sure for about a year (till about October, I think) then after he might default. When a person claims bankruptcy, they cannot claim bankruptcy for another 7 years; he claimed as a result of divorce. He currently pays me an 18% interest rate. He only had $700 in credit out of an $800 limit so I thought I'd take a chance on this guy. I only placed a $50 bet on it. In my opinion, it would cost him more to default than my $50 so I thought it was worth the bet. Also, his living expenses and debt were minimal to income. I think you have to understand manual underwriting to have even a slight advantage on Prosper.

There are so many corporate bonds and preferred stocks that are paying massive coupons. For example, Wells Fargo Preferred 7% coupon is selling at a 20% discount. JCPenney is paying 7.65% and it has a solid balance sheet despite a BBB rating. In other words, it's extremely easy to get 8.5% to 10% on your money. Corporate bond funds and municipal bonds are also attractive. Revenue bonds are quite risky, though.

Even as an expert, it's very easy to lose a lot of money with Prosper. In some cases, you could have a D or E borrower that you would have that's less risky than an AA or A borrower. I realize that on average an AA borrower should be the lowest risk, but why should an AA borrower go on Prosper if they can borrow at 4% with Iberia Bank via a credit card. It's equal to prime - 1% as a rate, which is a really good deal. To get to the level of Prosper, prime would have to increase to 9.25%; in other words, one quote in the Wall St. Journal out of an entire month would have to be 9.25% or higher for Prosper to have been cheaper.