Prosper Investor Help

Individual investor members must be United States residents who are 18 years of age or older and have a valid Social Security number. Investors must also have a checking or savings bank account.

Individual investors must meet suitability requirements established by their state of residence. For the purpose of the net worth requirement, a husband and wife may be counted as a single individual.

Requirements for Idaho, Maine, New Hampshire, Oregon, Virginia and Washington residents:

To purchase Notes, investor members located in Idaho, Maine, New Hampshire, Oregon, Virginia, and Washington must satisfy minimum financial suitability standards and maximum investment limits. Specifically, investor members must either: (1) have an annual gross income of at least $70,000 and a net worth (exclusive of home, home furnishings, and automobile) of at least $70,000; or (2) have a net worth (determined with the same exclusions) of at least $250,000. In addition, no investor member located in these states may purchase Notes in an amount in excess of 10% of the investor member's net worth, determined exclusive of home, home furnishings, and automobile.

Requirements for California residents:

Investor members that are residents of California must meet certain suitability requirements. For individuals who purchased $2,500 or less in Notes in the past 12 months, your investment must not exceed 10% of your net worth. To purchase more than $2,500 of Notes, a California investor member's investment must not exceed 10% of his or her net worth, and either: (1) the investor member must have a minimum net worth of at least $85,000 and had a minimum gross income of $85,000 during the last tax year and will have (based on a good faith estimate) minimum gross income of $85,000 during the current tax year; or (2) the investor member must have a minimum net worth, exclusive of homes, home furnishings, and automobiles, of $200,000. Assets included in the computation of net worth shall be valued at not more than fair market value.

Institutional Investors also participate on Prosper's lending platform. There are no suitability requirements for institutions.

Please refer to the prospectus for additional information.

Prosper is currently available to lenders in the following states: Alaska, California, Colorado, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Maine, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New York, Oregon, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin and Wyoming. Also, Prosper is always working to make lending on Prosper available in more states, so please check back.

You do not need to be licensed to be an investor on Prosper. Although you are sometimes referred to on the Prosper website as a "lender," you are not actually lending your money directly to Prosper borrowers, but are, instead, acting as an investor purchasing Notes issued by Prosper that are dependent for payment on payments we receive on the corresponding loan. Prosper sometimes uses the term "lender" instead of "investor" on our website for the sake of brevity and simplicity, and for the convenience of Prosper users who appropriately view Prosper as a marketplace for connecting individuals who wish to borrow money with people who have money and the desire to fund loans to other individuals. Your rights and obligations as a purchaser or prospective purchaser of Notes are set forth in the Investor Registration Agreement.

A borrower loan is a loan originated through Prosper that is made to a borrower by WebBank, a Utah-chartered industrial bank ("WebBank"), and then subsequently sold and assigned by WebBank to Prosper. All borrower loans are unsecured, fully amortizing loans and may be for 1 year, 3 years, or 5 years. Not all borrowers are eligible for 1 and 5 year terms, eligibility is based on Prosper Rating and size of loan request. For each loan, interest accrues on the principal balance daily. Fees that are payable to the lender, accrued interest, and principal are deducted from the borrower's payment and paid into each investor's Prosper account every time the borrower makes a payment. Borrower payments are due once a month.

The interest rate calculation is:
Interest rate/ 365 = daily interest rate
Daily interest rate x principal balance = Daily interest amount

Prosper loan amounts range from $2,000 to $25,000. The maximum loan amount for any borrower is determined by the borrower's Prosper Rating, as shown in the table below:

Note: In limited instances, the maximum loan amount may differ due to constraints based on other variables in the model

Prosper offers fixed rate, "fully amortizing", unsecured loans from $2,000 to $25,000. Loan terms of one, three and five years are available, depending upon a borrower's Prosper Rating and loan amount. There are no penalties for paying off the loan early or for making partial prepayments.

Loan Terms

No, Prosper does not guarantee repayment of Notes. However, we do offer a 100% Identity Theft Guarantee. In the event of default because of identity theft, Prosper will cover the entire unpaid principal balance. Otherwise, the repayment of Prosper Notes is not guaranteed. Read the prospectus to learn more about the risks of investing in Notes.

There is no fee to sign up to be a Prosper investor.

Investors pay an annual loan servicing fee, currently 1% of the outstanding principal, subtracted from loan payments received. The fee is accrued daily, the same way that regular interest is accrued on the loan. It is calculated as: the annual servicing fee divided by 365 multiplied by # days since last payment, then multiplied by the outstanding principal of the loan.

In the event that a borrower loan becomes more than 30 days past due, Prosper will assign a professional collection agency to collect the overdue amount. Each collection agency has its own fee structure, but will only collect a fee for their services if funds are recovered. Learn more about collection agencies and their specific fees.

1. There is risk. Loans are not guaranteed—some will default. Understanding Prosper Ratings, credit scores and other credit data can help you measure and avoid unwanted risk.
2. A diversified loan portfolio may enable you to spread your risk among many borrowers. Consider spreading your investment out with smaller amounts across many listings. You can invest as little as $25 per loan.
3. You can view individual loans in order to choose loans one by one, or use Quick Invest to help you assign risk criteria and efficiently invest in a group of loans all at once.

To research the risk and returns for borrower loans, the marketplace performance page includes historical performance data from the Prosper marketplace.

You can transfer money to Prosper and it will be added to your Prosper account cash balance. When a payment comes in for one of your Notes, it's also added to your Prosper account cash balance.

You can manage the bank accounts available for transfers, including adding new ones, deleting old ones, and managing multiple accounts on file. Before you can transfer funds between your bank account and Prosper, you must verify that you are the account holder.

To verify your first bank account, Prosper will make one deposit and one withdrawal to your bank account (both less than $1.00). These two transfers should arrive in your bank account within 2-4 business days. After the verification transfers have completed (look for an email from Prosper), you need to find the exact amounts of the transfers from your bank's website or by calling your bank. Enter these amounts on Prosper to verify your bank account.

To verify subsequent bank accounts, you will need to supply Prosper with a copy of a voided check for that account.

Once a bank account is verified, you can transfer money between it and your Prosper account cash balance. Transfer money now.

Unless you are eligible for instant funds transfers, it takes four business days to complete a normal funds transfer from your bank account to Prosper. Transfers are only processed on banking business days. A transfer is processed on the same day if the request is received before 3:00 PM PST; otherwise it is processed on the following business day. A minimum of $25 is generally required for outbound transfers; however, once per month, you may transfer an amount less than $25.

Instant Transfers
When a transfer to Prosper meets certain requirements, funds are made available in a lender's Prosper account instantly, with no delay.

Requirements for instant transfer:

• Transfer amount must be between $25 and $50,000
• Sum of pending transfers cannot exceed $50,000.
• Your active loan value must be greater than $0.
• Your cash balance cannot be negative.

Bank transfers are done through an ACH (Automated Clearing House) transfer. ACH is a system of the U.S. Federal Reserve Bank that provides electronic funds transfer between banks. It is the same kind of fund transfer transaction that is used for direct deposit of paychecks, for example. Funds from ACH transfers may take two to four business days before they become available in the destination account.

You can only cancel a funds transfer which is not yet processing (that is, a status of "Scheduled"). Go to "My Account > Accounts", click on "View transfers", and then click "Cancel" next to the transfer that you want to cancel.

To add a new bank account, you will need to fax a copy of a check from your account to Prosper for verification. For security reasons, Prosper manually verifies and adds all additional bank accounts. Click "Add a bank account" to print a fax cover sheet for this purpose.

Prosper is not a bank, and does not take and hold deposits. Prosper does not pay interest on funds held in the Prosper account. All funds Prosper lenders place with Prosper to invest in borrower loans are maintained in a pooled account at Wells Fargo Bank, N.A. titled in our name "for the benefit of" our lender members.

Funds in the FBO account will always be maintained at an FDIC member financial institution. Lender members have no direct relationship with Wells Fargo Bank, N.A. by virtue of participating on our platform as a borrower or lender member. We maintain and administer the FBO account. No Prosper monies are ever commingled with the assets of lender members in the FBO account.

The FBO account is FDIC-insured on a "pass through" basis to the individual lender members, subject to applicable limits. This means that each individual lender member's balance is protected by FDIC insurance, up to the aggregate amounts established by the FDIC. Other funds the lender member has on deposit with Wells Fargo Bank, N.A., for example, may count against the FDIC insurance limits.

Some states require that Prosper Lenders respond to Financial Suitability Requirements. If your financial situation changes, you can revisit your response to the Financial Suitability Requirements at any time. Learn more about your state's suitability requirements.

A borrower listing is a request by a Prosper borrower for a loan for a specified amount, at an interest rate as shown on the listing. Investors are given specific credit information about the borrower and loan details to make an investing decision. A loan listing includes a Verification Stage icon to let investors know how far along the loan is in the verification process, during which Prosper verifies information and documents submitted by the borrower that are key to evaluating the loan. Learn more about the Verification Stage and Prosper's Verification Process.

The Verification Stage is a three-stage indicator of the progress on the Prosper loan, based on Prosper's verification of the borrower's identity, information and documents submitted that are key to evaluating the loan. The further along in verification, the higher the Verification Stage and the more likely the loan will originate.

The Verification Stage icons tell both prospective investors and the borrower how far along Prosper is in processing the loan application. The higher the stage, the more likely the loan will fund and originate. Borrowers improve the Verification Stage of their loans by submitting required documents promptly upon request to speed up completion of the loan application. Loan listings that reach the highest Verification Stage 3 are much more likely to fund and originate than loans in Stage 1.

The Verification Stage of a loan listing is represented as an icon within the loan listing.

The Prosper Rating is our proprietary system that allows us to maintain consistency when evaluating each loan. Prosper Ratings allow investors to consider a loan application's level of credit risk because the rating represents an estimated average annualized loss rate range. In contrast, Verification Stage is not a measure of potential credit risk. It is only an indication of the progress of a loan application based on verification of required information and documents. However, a loan listing in Verification Stage 3 indicates that the borrower's information is farther along in Prosper's verification process thereby increasing the likelihood that the listing will become a loan.

Reaching Verification Stage 3 only indicates that Prosper has verified most of the information and documents submitted, and does not guarantee that a loan will be funded.

Not necessarily; we may need more documentation.

A borrower can advance the Verification Stage by promptly providing information and documents upon request by Prosper. The Verification Stage, therefore, can serve as a signal that a borrower is serious about the loan application and is working to complete the verification process as quickly as possible.

Yes, if during our document review we discover that we need additional information. For example, if we can only verify partial income for the year, we may have to request additional documents for a full year's income from the borrower.

Historically, the following criteria have a high impact on default rates, and may deserve extra attention when considering a listing:

Debt-to-income ratio
Loan amount
Now delinquent
Inquiries in last 6m
Bankcard utilization

Learn more about the data in a listing.

Go to "Invest > Individual Listings" and you can search for listings by keyword, Prosper Rating, and a few other parameters. If you want to set more specific search criteria, you can do an advanced search. Learn more about searching listings. When you have an advanced search customized to your preferences, you can save the search to use again later using the "save this search" option. Once a search is saved, it will appear on your search and listing results pages.

Watch Lists

A watch list, or a list of your favorite listings, can help you keep track of listings without investing in them. To watch a listing, just go to any listing and click the watch link. You can also share your watch list with the public: just click "Settings > Edit Member Page > Share Your Watch List" on your member page.

Prosper has removed the Questions & Answers feature from borrower listings. We are evaluating how to improve the service for our members while continuing to meet all applicable legal requirements. We apologize for any inconvenience.

Prosper offers a trading platform on which investor members may offer their Notes for sale or bid on and purchase Notes offered for sale. Learn more.

Loan interest rates are set by Prosper and are based on factors including:

• Prosper Rating
• Expected loss rate
• Loan term
• Economic environment
• Competitive environment

Rates can change over time. The current interest rates and estimated returns are:

*Estimated Return is the difference between the Estimated Effective Yield and the Estimated Loss Rate. Estimated Effective Yield is equal to the borrower interest rate: (i) minus the servicing fee rate, (ii) minus estimated uncollected interest on charge-offs, (iii) plus estimated collected late fees. The Estimated Loss Rate is the estimated principal loss on charge-offs, and is based on the historical performance of Prosper loans. All estimates are based on the historical performance of Prosper loans for borrowers with similar characteristics. The calculations of Estimated Return, Estimated Effective Yield, and Estimated Loss Rate require significant assumptions about the repayment of loans, and lenders should make their own judgments with respect to the accuracy of these assumptions. Actual performance may differ from estimated performance.

There are three ways to invest. You can search for individual loans and manually invest by clicking "Invest Now" from any loan; you can use Quick Invest; or you can invest in Notes on our trading platform. Quick Invest allows you to efficiently invest in a group of loans. You specify the Prosper Rating and any other selection criteria and Quick Invest will find loans that meet your criteria, so you maintain control of your investments. A diversified loan portfolio may enable you to spread your risk among many borrowers, so consider investing in small amounts across many loans.

Try our investing tool, Quick Invest, which helps you to set basic or detailed criteria so that you can invest in many loans at once, rather than having to sort through multiple loans one by one.

Actually, the funds are never withdrawn from your Prosper account. However, they are set aside—put in a holding tank, of sorts—while the listing you are investing in is active. If the listing becomes 100% funded and the loan originates, then your funds will be invested.

There are a few occasions when your investment will be returned to your account and made available again for investing:

• If the listing ends with insufficient funding (i.e. not enough investors invested in the listing).
• If the borrower withdraws the listing, or Prosper cancels the listing.

No, you cannot cancel or withdraw investments once they are placed.

Each listing will be assigned a proprietary credit rating by Prosper, referred to as the Prosper Rating. The Prosper Rating indicates the listing's riskiness, and corresponds to an estimated average annualized loss rate range. This rating system allows Prosper to maintain consistency when assigning a rating to the borrower.

Learn more about Prosper Ratings.

Once a Prosper borrower listing is fully funded it must pass the loan review process before it is approved, During this time, the status of the listing is shown as “pending review.” Prosper's pre-loan review process can take as little as two and up to eight business days.

If the borrower does not pass loan review, the borrower listing is cancelled and funds committed to the listing are immediately returned to lenders to use in another investment.

Quick Invest allows you to efficiently invest in a group of loans using criteria you set, such as Prosper Rating, without having to select each loan individually. You simply specify the amount of money you would like to invest and the types of loans you want to invest in. Quick Invest helps you choose the loans that match your criteria. You can review the selected loans and make modifications before placing your order.

You can save your Quick Invest criteria so it's easy for you to use again.

Quick Invest is the fastest, easiest way to find a set of loans that meet your criteria so you can invest your money all at once. Quick Invest allows you to set basic or detailed investing criteria and to modify those criteria in order to fine-tune your investment order.

Diversification is often thought of as the key to smart investing. Quick Invest helps you spread your investment out across multiple loans without having to sort through loans one at a time. You can invest as little as $25 per loan, which reduces the impact if any one borrower goes into default, therefore lowering your risk in order to get better returns. Try Quick Invest now.

It's easy to diversify your portfolio and invest in a range of loans efficiently with Quick Invest. Here's how:

• Sign in to your Prosper account.
• Go to Invest tab, Quick Invest section.
• Enter an amount to invest and a maximum amount to invest per loan.
• Choose which Prosper Ratings you would like to invest in.
• Choose additional criteria (optional).
• Click on "find loans."
• Review your order results; make modifications as needed.
• Confirm your order.

After you submit your investment order, you will be given the option of saving your criteria so that you can use them again on your next investment. Shortly after your order is submitted, we will send an email confirmation of your Quick Invest order. Try Quick Invest now.

Once you set criteria, Quick Invest finds all the loans in our marketplace that meet your criteria. If the number of loans that meet the criteria exceed the investment amount, Quick Invest first selects the loans with the highest Verification Stage and then those that were created first and closest to closing.

If you select multiple Prosper Ratings, Quick Invest divides the investment amount equally among those Prosper Ratings and then selects the loans with the highest Verification Stage, followed by those that are closest to closing within each Rating. If the investment amount does not divide equally among the selected Prosper Ratings, a larger amount is allocated to the lowest risk Prosper Ratings first, based on the maximum investment amount per loan. If there are insufficient loans available within a particular Prosper Rating(s) to fulfill the investment amount, the remaining money is allocated equally among the remaining selected Prosper Ratings, with the priority going to the lowest risk Prosper Ratings, based on the maximum investment amount per loan, if there is not an equal distribution.

Investment amounts in some loans may be less than the maximum amount you specified. This will generally be due to some loans needing a smaller amount to become 100% funded; Quick Invest will invest the smaller amount. Additionally, each Prosper Rating you select might not be represented in equal proportion; it will depend on the number of loans available and funds needed in each Prosper Rating category at the time you invest.

Quick Invest will display all the loans selected for investment that meet your criteria. You can review the listings and make modifications to the order before you make the final funding decision.

Most of the time, you will get the loans you request. However, because Prosper is a dynamic marketplace, on certain occasions your final loan allocation may be different from the order you submitted. This is because although Quick Invest executes your order as soon as possible, there may be loans within the order that become unavailable during that time. This happens when loans expire, are withdrawn or become fully funded by other lenders. The investment amount per loan on some loans may also be less because the amount needed to fully fund the loan was less than your desired amount. In addition, once your order has been placed, loans may still expire, be withdrawn or cancelled. As a result, your total investment may be less than the amount in the order you submitted, which can affect the distribution of selected Prosper Ratings, investment amount per loan, and the estimated return. Note that you can track the status of all your orders in the My Quick Invest section.

Automated Quick Invest is Prosper's tool that places a standing order for loans that meet an investor's search criteria. You can automate your investment two ways:

1. completing a Quick Invest order: Simply click the "Automate" button at the end of placing your order, and Automated Quick Invest will place your order - just as you've instructed in Quick Invest - as new loans that meet your loan search criteria become available. No need to sign-in to invest in the loans you want.
2. From the Automated Quick Invest page: Any loan search criteria you've saved will appear on this page. To automate investment in any of your search criteria, simply check "Automate" and set a maximum investment amount per loan. You can also set an order limit -- or let your order run until your available cash runs out.

Investments are confirmed by email (based on your preferences). You can modify your Automated Quick Invest order at any time.

We phased out new Automated Plans on July 5, 2011. Any active plans on that date will remain active until they expire. Although Automated Plans offered the convenience of being able to invest in multiple loans at once, we recognized that investors also wanted more explicit control over their investments, including the ability to review loans individually.

We now have Quick Invest, which has many of the features of Automated Plans as well as some great new ones. With Quick Invest, you can efficiently invest in a group of loans at one time. You control your investment by setting your criteria for loan selection and then reviewing the loans before you invest. You can modify your order before you invest. This gives lenders exactly the level of control they want over their investments on Prosper. Learn more about Quick Invest.

NEW! If you loved Automated Plans, you'll love Automated Quick Invest which places a standing order that automatically invests in loans that meet your requirements. Learn more about Automated Quick Invest.

You can still see your automated plans in the My Account tab. Simply log in to your account, click on My Account > History > Archived Automated plans, and you will see your Automated Plan information.

Your Automated Plan criteria are not transferable to Quick Invest. However, your saved searches are transferable. You will see a link to saved searches when you go to the Quick Invest page.

It is easy to set up new Quick Invest criteria and once you place an order, you can save the criteria to use over and over again.

For all borrower loans, Prosper obtains each Prosper borrower's name, address, date of birth, social security number, and bank account information in an effort to verify the borrower's identity against data from credit reporting agencies and other identity and anti-fraud verification databases. In limited instances, we verify income and employment information. This verification is normally done after the loan is funded and therefore the results of our verification are not reflected in the borrower listings.

The borrower credit data that appears in borrower listings is taken directly from the borrower's credit report, without any review or verification by Prosper. The borrower's income, employment and occupation are self-reported. The borrower's debt-to-income ratio (DTI) is derived from the borrower's self-reported monthly income and the borrower's monthly non-housing debt burden from his or her credit report plus the monthly loan payment to Prosper. Prosper verifies the borrower's income or employment in some (but not all) instances. Prosper does not verify any statements by borrowers as to how loan proceeds are to be used and does not confirm after loan funding how loan proceeds were used. Although borrowers may provide proof of homeownership to establish homeownership status, in most instances homeownership status is derived from the borrower's credit report; if the report reflects an active mortgage loan, the borrower is presumed to be a homeowner. In connection with Prosper's identity and anti-fraud verification of borrowers, Prosper verifies the borrower's bank account to determine that the borrower is the holder of record of the account.

Prosper has the right to verify at any time the accuracy of all statements and information provided by borrowers, investors, and group leaders in connection with borrower listings and loans. If Prosper is unable to verify material information, Prosper may cancel a borrower listing or a borrower loan, even if the borrower listing is 100% funded.

In instances where Prosper undertakes to verify the income, employment, and occupation or other information provided by borrowers in borrower listings, the verification is normally done at the pre-funding stage, after the listing has already been created and investors have chosen the loan. In such cases, the results of Prosper's verification are not reflected in the listings themselves.

Prosper reserves the right to buy back Notes at any time. If Prosper buys back a Note, the outstanding principal balance will be returned to you and the Note will be marked as "repurchased."

Prosper typically repurchases Notes in accordance with Prosper's 100% Identity Theft Guarantee, under which Prosper has agreed to repurchase Notes from investors if the loan corresponding to that Note is found to involve verifiable theft of the named borrower's identity. Prosper may, at our discretion, require proof of the identity theft or fraud, such as a copy of the police report filed by the person whose identity was wrongfully used to obtain the corresponding borrower loan. Prosper is committed to providing a safe and secure marketplace, and works with law enforcement authorities to prosecute to the fullest extent of the law perpetrators of identity theft.

When a borrower makes a payment on a loan, after a short delay for processing, your portion of the payment will be added to your available cash balance in your Prosper account. You can use the funds to invest in more loans or transfer them to your bank account as you wish. Because different loans have different payment due dates, most investors with multiple notes see a continuous stream of small payments added to their account throughout the month.

Go to "My Account > Notes.” Click on the Note ID to view individual note details, including the payment history. Monthly payments are due each month on the same day of the month as the origination date.

Yes, using the Folio Trading Platform.

Borrowers have the option to pay all or part of the outstanding principal balance of a borrower loan in advance of the due date at any time. There is no penalty to borrowers for doing this. Partial prepayments will not change the monthly payment amount, but may shorten the loan term, resulting in the investor receiving less interest overall.

Borrower payments are requested from the borrower's bank account on the day they are due, and because Prosper, like most banks, electronically transfers money through a secure network called the Automated Clearing House (ACH) system, the entire process takes four business days.

On the note detail page for the borrower's loan, you will see the payment status as "Processing" during these 4 days. Once the payment has cleared, the payment status will change to "Paid."

When a borrower makes any payment on a borrower loan, the breakdown of that payment is available in the "Payment history" table on the "Note detail" page: "My Account > Notes >Note ID"

• Date: The date that the borrower's payment was withdrawn from their bank account.
• Payment number: An internal accounting number that can be used to identify each payment uniquely. If a payment is later disputed, the dispute line item will contain the same payment number.
• Total paid: Your pro-rated share of the gross payment made by the borrower. Non-Sufficient Funds (NSF) fees: If the borrower owes Prosper any fees for failed payments (typically due to NSF), these will be subtracted from the gross payment amount.
• Total received: The gross amount received by the lender, which excludes NSF fees.
• Late fees: If the borrower has any accrued, unpaid late charges, these are paid to the investor.
• Interest: If the borrower has any accrued interest since the last payment, this is paid to the investor.
• Principal: Any remaining funds received are allocated to principal.
• Service fees: If any investor servicing fees have accrued, these will be charged to the investor as an expense.
• Collection fees: If the loan has been assigned to a collection agency, collection agency fees will be charged to the investor as an expense.

Funds from incoming payments are applied in this order of priority:

1. Fees
   1. NSF (Failed payment) fees (to Prosper)
   2. Late fees (to lenders)
2. Interest
3. Principal

It is possible that a borrower who has made a loan payment in the past can have his or her bank cancel and request a refund on that payment. This is referred to as a chargeback, and will appear on your Note payment history table as "charged back." This is most common with borrowers who use the bank draft method of payment, where paper checks are printed and the check bouncing process is much longer. Prosper handles chargebacks according to our borrower chargeback policy.

If the borrower is more than 15 days late on a borrower loan, the borrower will be charged a late fee. The late fee is divided up pro-rata among the borrower's investors. If the borrower loan is more than 30 days past due, it is turned over to a collection agency to pursue collection from the borrower. If the collection agency cannot collect payment from the borrower after 121 days, the borrower loan will be charged-off. Charge-offs are eligible for sale to a debt buyer. The borrower will not be able to borrow ever again from Prosper, and since we report delinquencies to credit reporting agencies, the charge-off will adversely affect their credit report.

Under no circumstances should you attempt collection on a late payment yourself. You should not contact delinquent borrowers directly. Prosper has a detailed delinquency schedule for borrowers, and any additional contact you have with a borrower may expose you to civil or criminal penalties for unlicensed debt collection. The language and tone you use when collecting a debt matter are important in the eyes of the law, so what you might consider reasonable may in fact be illegal. If you were to accidently break the law you'd be putting yourself, your fellow investors, and Prosper at risk of litigation. Prosper suspends investors who engage in this sort of activity.

If the borrower loan underlying one of your Notes becomes delinquent, Prosper will use a collection agency to recover unpaid balances.

Because one collection agency will have responsibility for collection, all of the investors on a delinquent borrower loan will pay that agency's fees out of any amounts collected. If no amount is collected, investors do not pay collection fees. Collection agencies charge a percentage of any recovered funds as the service fee for their efforts. This percentage varies by collection agency, but is typically between 15% and 30% of the funds recovered.

View the collection agencies.

A borrower loan is charged-off when it reaches 121 days past due. This means the borrower has missed the last five monthly payments. When a borrower loan is charged-off:

• The borrower loan's entire balance is accelerated, meaning it is collectible in full as of the charge-off date.
• From the borrower's perspective, interest continues to accrue on the principal balance as before the charge-off. There are no changes to the interest rate or the way interest is accrued. Late fees are no longer charged.
• From the investor's perspective, the loan's principal balance is labeled the "charge-off balance."

Charge-offs will remain in collections until some action is taken to end the loan. Possible loan-ending activities include payment in full, discharged bankruptcy, and sale to a debt buyer. Prosper can also end a loan with "no value," meaning all efforts to collect on the loan, including debt sale, have been exhausted and the loan is deemed to have no value.

Payments made by the borrower post-charge-off are considered "recoveries," and pay down the loan's balance, but the loan stays charged-off. Depending on whether the loan is in collections with Prosper or an outside charge-off collection agency, recoveries may be subject to collection fees. Once charged-off, the borrower no longer has the opportunity to bring the loan current, only to pay it in full.

Prosper may, at our sole discretion, attempt to sell a delinquent borrower loan to a third-party debt buyer at any time. Prosper makes this decision based on what is best for investors' economic interests. Because debt buyers buy many past-due loans at once, loans might not be sold immediately after charge-off, or may not sell at all, due to market conditions. The loan will remain with a collection agency, which will continue collection efforts until the loan is actually sold to a debt buyer. If a loan is sold in a debt sale, the entire loan sale price will be allocated to investors. Each investor will receive their pro-rata share of the loan sale proceeds.

See the outcome of past debt sales.

Prosper does not provide tax advice. The following provides an overview of Prosper's tax reporting methodology for the benefit of investors. Each taxpayer's situation is unique; please consult your tax advisor for more information.

Income earned from loan interest is taxable income. Each tax year that you earn interest or other income, Prosper will send you a Consolidated Form 1099 summarizing your taxable interest income, and will report this 1099 information to the IRS. (In some cases, amounts less than $10 may be reported to state tax authorities based on individual state requirements.)

Regardless of whether or not the interest income or fees are greater than $10, these amounts are reportable on your annual tax return. Prosper reports interest income on a cash basis, not on an accrual basis. This is required by the Internal Revenue Service.

For purposes of interest income reporting, Prosper reports as an intermediary, known as a "nominee recipient" under Internal Revenue Code section 6049. Nominee recipients are responsible for reporting (via forms 1099) proceeds which are ultimately disbursed to recipients. This is the same method of reporting used by stock brokerages.

Although the matter is not free from doubt, we treat the Notes issued in 2009 or later as our debt instruments that have original issue discount ("OID") for U.S. federal income tax purposes. We will file information returns with the IRS in accordance with such treatment unless there is a change or clarification in the law. There are no statutory provisions, regulations, published rulings, or judicial decisions that directly address the characterization of the Notes or instruments similar to the Notes for U.S. federal income tax purposes.

You should be aware, however, that the U.S. Internal Revenue Service (IRS) is not bound by our characterization of the Notes, and the IRS or a court may take a different position with respect to the Notes' proper characterization.

(See Questions Related to OID Tax Reporting below.)

Prosper provides a year-end investor statement to all active investors, and may provide a Consolidated Form 1099 to investors and tax authorities, depending on the investor's activity during the calendar year. If you are subject to 1099 tax reporting, your tax forms will be available on the "My Account > History > Statements" page by January 31 of the year following the calendar year in question.

If you would like to receive a paper copy of your tax forms, please contact customer support.

1099-INT
You will receive a form 1099-INT in each tax year that you earn $10 or more in interest on Notes purchased prior to 2009, unless you live in a state for which there is an applicable reporting exception (see below).

1099-MISC
You will receive a form 1099-MISC in each tax year that you receive $600 or more in borrower late fees, referral awards, bonuses, incentives, and the like, unless you live in a state for which there is an applicable reporting exception (see below).

1099-OID
You will receive a form 1099-OID in each tax year that you have $10 or more in OID imputed interest on Notes originated in 2009 or later, unless you live in a state for which there is an applicable reporting exception (see below). This form details income reported on Notes that are subject to OID tax reporting. See Questions Related to OID Tax Reporting below.

1099-B
You will receive a form 1099-B if you have sold Notes, either on the trading platform or in a debt sale, or if you purchased a Note that was repurchased by Prosper. This form details each sale or repurchase transaction of this type.

When will my tax documents be available?

If you are subject to 1099 tax reporting, your tax forms will be available on the "My Account > History > Statements" page by January 31 of the year following the calendar year in question.

How is 1099 income reported to state tax authorities?

The following states have exceptions for reporting thresholds, as outlined in the following table:

Charge-offs and gross proceeds from any bad debt sale to a third party will be reported to investors in a year-end investor statement, and debt sales will be filed on tax form 1099-B. Using the loan principal balance before sale and the sale amount, investors can calculate their net amount of loss for the year. Investors are encouraged to consult their tax advisor to determine their tax basis on loans sold to debt buyers.

Delinquent (late) loans which have not yet been sold to a debt buyer will have no impact upon taxes until further action on these loans takes place.

If a borrower's loan is more than 30 days late, any Prosper member with a lender role and money in his or her Prosper account can make what is called a "community payment." A community payment is a simple act of goodwill, in which the payer can pay as little as $25 and as much as the full payment due toward the late payment due. The payer is not buying the loan, or diluting the ownership of the loan in any way: there is no possibility or expectation of repayment with a community payment.

Please be aware that if payments are made on a member's loan by another party and the member does not repay the other party, the loan payment may be deemed to be a gift for state and federal gift tax purposes and/or be deemed to be taxable income to the member for state and federal income and other tax purposes depending on the relationship of the parties (e.g., family, business, etc.) and the purpose or purposes of the loan payment. In those situations, the parties may be required to file notices or tax returns with tax agencies. Each of those situations may be unique and complex and, accordingly, Prosper cannot provide guidance or prepare any notices or tax returns for the parties. In those situations, we recommend that the parties consult with their professional tax advisors for guidance.

No. When you joined Prosper and agreed to the Prosper investor agreement, you agreed that your earnings and losses from your activity on Prosper would be assigned to your Social Security number (SSN). Prosper is required by the IRS to report in this manner.

You should consult your tax advisor to determine the methodology behind adjusting your 1099 to reflect a non-calendar tax reporting. Prosper is required by the IRS to report on a calendar year basis.

Prosper does not provide tax advice. Each taxpayer's situation is unique. Please consult your tax advisor for more information.

Contact customer support if you have a question on any of the values reported on the Prosper-generated tax forms or end-of-year statement.

You will generally be required to accrue OID in income as ordinary interest income for U.S. federal income tax purposes, regardless of your regular method of tax accounting. If you hold a Note that has a maturity date of more than one year, you will be required to accrue OID income as ordinary interest income under a "constant yield method." Under this treatment, if a payment on a Note is not made in accordance with the payment schedule for the corresponding loan (for example, because of a late payment on the corresponding loan), you will be required to include an amount of OID in taxable income as interest even if you have not received the actual payment from the corresponding loan.

The amount of income reported under OID income reporting will be equal to the amount of interest received by the Note holder.

In general, late payments and early payments on loans will result in OID income being greater than the interest paid to investors on the loan. However, depending on the timing of late or early payments, whether or not the borrowers makes payments to become current if they have been late, and whether partial pre-payments occurred between the last scheduled payment for the tax reporting period and the end of the tax reporting period, it is possible that interest received by investors could exceed reported OID income.

If an investor holds a Note to maturity, the amount of OID income reported for that Note will equal the interest received by the investor over the life of the Note. Because OID reports income assuming all payments are made as scheduled, interest received can be greater or less than the OID reported in any given tax period. However, if OID income is greater than interest received in a given tax period it will be lower than interest received in a subsequent period and vice versa. Typically, the difference between OID income and interest received will be equalized in the final tax reporting period that the Note is outstanding.

When a loan pays in full during the tax reporting year that it was acquired, OID income will equal the interest received by the Note holder. If the loan pays in full in a subsequent reporting year, either due to maturity or prepayment, OID income for that reporting year will be adjusted such that the OID income equals the interest received on the Note over the Note's life. If in prior periods OID was greater than interest paid, OID income will be less than interest received in the current period, and it is possible for OID income to be negative for the final period.

Negative OID values will be reported in Box 3 of Form 1099-OID, labeled "early withdrawal penalty." Prosper has not assessed any penalty, and this amount will be treated as a reduction in ordinary income.

The impact of a loan charging-off on the associated Note will be the same as if the Note was paid in full. OID income in the tax period in which the underlying loan charges off will be calculated such that the interest received and the OID income are equivalent over the life of the loan.

OID income is reported net of servicing fees.

It is possible for the OID income on a Note to be negative due to over reporting of OID in prior periods. Negative OID values are reported in Box 3 of Form 1099-OID, and must be labeled “early withdrawal penalty.” Prosper has not assessed any penalty and this amount should reduce ordinary income for tax purposes.

Notes acquired on the Trading Platform that were originally issued in 2009 or later are subject to OID tax reporting during the period they are held. Similar to Notes acquired directly from Prosper, OID income will be reported based on the projected interest payment schedule at the time of acquisition. Scheduled interest payments will be calculated using a “constant yield method,” where the yield is the yield to maturity calculated at the time the Note was acquired. Unless a Note is acquired for its book value (par), interest reported on a Note acquired on the Trading Platform will be greater than or less than the amount of interest paid by the borrower on the underlying loan.

Like Notes acquired directly from Prosper, OID income reported over the life of a Note acquired on the Trading Platform will equal interest received over the life of the Note. The interest received will be calculated using the “constant yield method” based on the actual cash flows on the Note. This yield may differ significantly from the stated yield at the time the Note was acquired (the impact of pre-payment in full or charge-off of the underlying loan can have a substantial impact on the final yield of Notes acquired on the Trading Platform at substantial premiums or discounts).

If a Note acquired on the Trading Platform is resold, OID income will be calculated based on the payments projected at the time the Note was acquired.

Proceeds from sales of Notes on the Trading Platform will be reported by Foliofn in a separate form 1099B, available through Prosper's website. Additional information that may be necessary to complete your taxes for Trading Platform transactions (such as the book value of the Note at the time of sale) is available on your end-of-year investor statement.

Note: Prosper does not provide tax advice. Each taxpayer's situation is unique. Please consult your tax advisor for more information.

Contact customer support if you have a question on any of the values that are reported on the Prosper-generated tax forms or end-of-year statement.