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Kim Butler

Partners for Prosperity, Inc.

City:Mt. Enterprise

State: TX

I have 20+ years of handling alternative investments in cash, growth and income for clients nationwide.  I strive to help my clients with all things financial in every way possible over the phone and the web.  I own an alpaca farm which I enjoy working during my downtime.  I also enjoy gardening, writing and reading books.  I also train other advisors on Prosperity Economics.

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Prosper Sees Surge in Peer-to-Peer Loans

Prosper, an online peer-to-peer lending service, announces a 367 percent year-over-year increase in loans for Q3 2011.

| BY Adriana Reyneri

Prosper, an online peer-to-peer lending service, has announced 12 consecutive months of growth leading to a 367 percent year-over-year increase in loans funded in the third quarter of 2011. 

“As investors seek an alternative to the traditional banking model in this yield-starved environment, they are finding P2P lending to be a compelling asset class, and Prosper to be the reliable, trusted P2P lending company,” said Chris Larsen, Prosper’s chief executive officer and co-founder, in a prepared statement last week. 

Peer-to-peer lending provides an alternative source of financing for consumers seeking to consolidate debt, remodeling their homes, and pay for tuition, weddings and other expenses. Small businesses also rely on peer-to-peer lending networks, which can provide better interest rates for borrowers, while boosting yields for lenders, by doing away with banks and other high-overhead intermediaries. The internet services have blossomed in the tight credit market that has persisted through the recession and economic recovery. 

“The current economic downturn has caused financial institutions to become increasingly cautions about making loans,” said the North American Securities Administrators Association in an investor alert on peer-to-peer lending. “Through the online borrowing and lending practice of peer-to-peer lending, borrowers generally obtain loans ranging from $1,000 to $25,000 that would otherwise be difficult or costly to obtain from traditional banks, while lenders fund such loans based on the promise of capital return.” 

The association warns that the loans are unsecured and that borrowers who seek peer-to-peer loans may not have pristine credit histories. Investors considering lending through a peer-to-peer network needs to consider the risk, diversification and liquidity issues posed by peer-to-peer lending. The practice is currently regulated by the Securities and Exchange Commission and state securities regulators, as well as the Federal Deposit Insurance Corporation, said the GAO, and the newly formed Bureau of Consumer Financial Protection will also play a role in borrower protections. 

Prosper and LendingClub are the two major for-profit person-to-person lending platforms operating in the U.S., according to a Government Accountability Office study released in July. Kiva Microfunds is the major nonprofit platform, providing interest-free microloans to entrepreneurs around the world.

 As of March 2011, Prosper and LendingClub had made about 63,000 loans totaling about $475 million dollars, the GAO reported. The companies screen and rate the creditworthiness of borrowers. Then, individual lenders and a growing number of institutional investors browse the approved loan requests on the companies’ websites and purchase the corresponding notes issued by the companies.

 Some peer-to-peer lending sites focus on educational loans, reports, though federal education loans tend to be cheaper and more available and offer better repayment terms: “Peer-to-peer lending should only be considered as an alternative to private student loans, and also more expensive forms of credit such as credit cards.”