Markets work! raises some rates

The timing of this is perfect.  It was just a few days ago that we posted on 3.25% “cash back bonus”.  We also opined that the reason for Prospers need to do this was a simple imbalance between loan demand and money supply.

Here is what we said on April 13th – “On a side note, I personally would prefer that Prosper increase the asking rates when these imbalances occur.  The entire point of a market is to balance risk with time with interest.  If there are too many borrowers and not enough lenders then the rate is simply too low. Just my $0.02.”

Well sure enough, Prosper has raised rates for AA, A and B borrowers.  It isn’t by much and that is good, but in this authors opinion, it does help balance the risk vs. reward equation.  In fact, I had stopped funding AA Prosper loans all together because the returns were just too low given the risks.  On top of that, with rates likely to rise over the next few years, I wasn’t very excited having my money locked up for 3-5 years for 4 to 5%.

If you are a borrower, I believe these new rates are still indeed reasonable and fair.  If you have great credit, getting a fixed rate loan for 3 to 5 years at 7% is not bad at all.  This move also brings more inline with its #1 competitor

Here is a snippet from Prosper’s news letter:

“…we have increased rates in our AA, A, and B Prosper Ratings.  Yields on one-year, three-year, and five-year loans for new borrowers are now 1.0% to 1.5% higher.”


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2 Responses to “Markets work! raises some rates”

  1. 4% Lender Promotion at Below Your Means: A money blog for the rest of us. (BETA)

    […] to believe these aren’t really a good thing in the long run.  We would prefer they raise rates or raise the bar for borrowers to qualify to fix imbalances between borrowers and […]

  2. raises rates again at Below Your Means: Living well by living within and growing your means

    […] seems like only last month that raised rates for borrowers.  At the time, I noted that Prosper appeared to be […]