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

At this time, all lenders must be residents of the state of California. Individual lenders (a husband and wife may be counted as a single person) must meet suitability requirements established by the state:

There are no suitability requirements for individuals who purchase $2,500 or less of Notes in the past 12 months.

To purchase more than $2,500 of Notes, your investment must not exceed 10 percent of your net worth, and either:

(1) you must have a minimum net worth of at least $75,000 and had minimum gross income of $75,000 during the last tax year and will have (based on a good faith estimate) minimum gross income of $75,000 during the current tax year; or

(2) in the alternative, you 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. For the purpose of this net worth requirement, both a husband and wife may be counted as a single individual.

Institutional investors may also participate on Prosper’s lending platform. Institutional investors must have their primary place of business within the state of California. There are no suitability requirements for institutions.

Please refer to the prospectus for additional information.

You do not need to be licensed to be a lender on Prosper. Although you are 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 uses the term "lender" instead of "investor" on Prosper's 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 have loans funded to other individuals. Your rights and obligations as a purchaser or prospective purchaser of Notes are set forth in the Lender Registration Agreement.

A Prosper borrower loan is a loan originated through Prosper that is made to a borrower by WebBank, a Utah-chartered industrial bank ("WebBank") from its own funds and then subsequently sold and assigned by WebBank to Prosper. All Prosper borrower loans are 3-year, fully amortized loans. For each loan, interest is accrued on the principal balance every day. Fees, interest, and principal are paid into each lender's Prosper account when 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

An Open Market loan is an existing loan that is owned by the loan seller that posted the listing, and subsequently sold and assigned by the loan seller to Prosper. Open Market loans may include existing consumer loans or retail installment sale contracts as well as secured or unsecured loans, and small business loans, where the borrower is a business entity, not an individual.

If you are interested in becoming a Loan Seller, please click here.

Prosper guarantees the repayment of both Prosper borrower loans and Open Market loans only in instances of verifiable identity theft of the borrower's identity. 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 Notes.

For Prosper borrower loans, Prosper charges a 1% annual loan servicing fee. The annual servicing fee is accrued daily, and is based on the loan's outstanding principal balance.

In the event that a Prosper borrower loan becomes more than 1 month late, Prosper will assign a professional collection agency to attempt 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.

For Open Market loans, Prosper charges a 0.5% annual servicing fee. In addition, because Open Market loans are serviced by the loan seller that posted the Open Market loan listing, the loan seller charges its own servicing fee, which is shown in the Open Market listing. Both Prosper's servicing fee, and the loan seller's servicing fee will reduce the effective yield of the Open Market loan below the stated interest rate of the loan. This reduction will be automatically taken into account when Prosper calculates the yield percentage during bidding on an Open Market listing.

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 bidding on smaller loans across many listings.
3. You can bid on listings one-by-one, or by portfolio plan
   You can view individual listings and click "bid now" one at a time, or, you can automate your bidding using portfolio plans.
   Portfolio plans bid automatically according to your listing and risk criteria.

To research the risk and returns for Prosper borrower loans, the marketplace performance page includes historical performance data from the Prosper marketplace. For Open Market loans, all historical performance data displayed in an Open Market listing is provided by the loan seller, and Prosper does not verify such information. The estimated return numbers seen when bidding on Prosper borrower loans are based on this historical performance data from the Prosper marketplace. The estimated return numbers seen when bidding on Open Market loans is based on historical performance data provided by the loan seller.

To bid on listings you will need to verify your bank account and transfer funds into your Prosper account.

Before you can transfer funds from your bank account to Prosper, you must verify that you are the account holder. To verify your 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. After that, you're ready to transfer money. To transfer money into your Prosper account, go to "My Account > Accounts", and click on "Transfer money".

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 Pacific time; otherwise it is processed on the following business day.

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 $500 and $20,000
• Sum of pending transfers cannot exceed $20,000
• Your active loan value must be greater than $0

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 make bids on borrower listings 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.

A Direct P2P borrower listing is a request by a Prosper borrower for a Prosper borrower loan in a specified amount, at an interest rate equal to the maximum interest rate set forth in the listing. Lenders are given specific credit information about the borrower and loan details to make a bidding decision.

Open Market listings are posted by a loan seller and describe an existing loan owned by the loan seller that is offered for sale on the Prosper marketplace. Open Market listings display the sale price for the Open Market loan, the yield percentage that corresponds to the sales price, the remaining principal balance of the loan and the interest rate the borrower is obligated to pay on the loan. Lenders are given specific loan information to assist in the bidding process. Open Market loans have been underwritten by the credit standards of the originator of the loan and all borrower information set forth in the Open Market listing, including the expected loss rates, are supplied by the loan seller to Prosper. We do not verify the information provided by loan sellers in Open Market listings, including the identity of the borrower.

On Open Market listings, the Prosper Rating and credit details of the borrower will be determined and will represent the borrower's credit as of the time the Open Market loan was originated, not at the time the Open Market listing is posted on our platform. Accordingly, much of the borrower's credit information could be outdated.

Coming soon, there will be an internet-based trading platform on which lender members may offer their Notes for sale or bid on and purchase Notes offered for sale. Learn more.

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

Debt-to-income ratio
Automatic funding
Public records in last 10y
Loan amount
Now delinquent
Inquiries in last 6m

Learn more about the data in a listing.

From the "Invest" tab, you can search for listings by keyword, borrower credit grade, 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 bidding on them. To watch a listing, just go to any listing page and click the Watch link. You can also share your watch list with the public: just click "Share your watch list" on your member page.

There are two types of auctions on Prosper: Direct P2P auctions and Open Market auctions.

Bidding on Direct P2P Loans:

In a Prosper borrower Direct P2P auction, lender members bid the amount they are willing to commit and the minimum yield percentage they are willing to receive. Bidding is now based on the yield percentage instead of the borrower’s stated interest rate. The yield percentage on Direct P2P loans is equal to the Borrower’s interest rate, minus Prosper’s 1% servicing fee. Because servicing fees reduce the effective lender yield on Direct P2P loans below the interest rate the borrower pays, the yield percentage already factors in the effect that the servicing fees will have on the yield.

Each borrower listing will show the maximum interest rate the borrower will accept. Bidding on the listing starts at the yield percentage that provides the maximum interest rate set by the borrower. When the total amount of all bids placed in the auction equals or exceeds the initial loan amount, further bids have to be placed at least 0.05% below the current winning yield percentage, bidding down the borrower’s interest rate. In the event that two lenders bid the same yield percentage, the lender who bid earlier wins. The lenders that bid the lowest minimum yield percentage at the end of the auction are the winning bidders. The final yield percentage is the minimum yield percentage for which there is sufficient participation among bidders to accommodate the requested loan amount at the end of the auction period.

Bidding on Open Market Loans:
The bidding process for Open Market listings focuses on the projected "yield to maturity" of the remaining payments of the Open Market loan, rather than the borrower’s final interest rate. The loan seller offering the Open Market loan for sale sets an initial sale price and an initial yield. The yield is calculated as the internal rate of return of the anticipated cash flows assuming all loan payments are made as scheduled. The initial sale price may be different from outstanding balance of the loan, and the initial yield percentage may be different than the borrower’s interest rate. The yield percentage is based on the relationship between the original loan's outstanding principal balance and the sale price in the listing; as the sale price goes up, the yield percentage goes down, and vice-versa.

Depending on the relationship between the yield percentage and the outstanding principal balance, a loan will be sold at a premium or a discount. If the initial sale price is greater than the principal balance, the initial yield percentage will be lower than the borrower’s interest rate, and the loan will be offered at a premium. If the initial sale price is less than the principal balance, the initial yield percentage shown will be higher than the borrower’s interest rate (provided the lower price is low enough to offset the effect of the reduction in the effective yield resulting from servicing fees), and the loan will be offered at a discount.

Lenders bid by specifying an amount to invest and the minimum yield percentage the lender is willing to receive. If the total amount of all bids placed is less than the initial sale price, new bids can be placed at or below the initial yield. When the total amount of all bids placed in the auction equals or exceeds the initial sale price, further bids have to be placed at least 0.05% below the current winning yield percentage. In the event that two lenders bid the same yield percentage, the lender who bid earlier wins. If the listing receives sufficient bids to match the necessary sale price of a loan at the winning yield percentage prior to the end of the auction, once ended, Prosper will purchase that loan from the listing loan seller and issue corresponding Notes to the winning lender member bidders. The final yield percentage determined from the auction bidding process on an open market listing is the interest rate that will be set forth in the Open Market Note corresponding to the open market loan described in the listing.

If any listing does not receive bids totaling 100% of the loan amount at the time the listing ends, your money will be immediately transferred back to your Prosper account.

Bid yield is the rate that investors bid down as the auction progresses. Prior to October 15, 2008 Prosper listings showed a bid rate instead of a bid yield. For direct peer-to-peer loans, the difference between the two is that the bid rate is the interest rate paid by the borrower before lender servicing fees are taken into account. The bid yield is the rate after lender servicing fees have been subtracted. For open market loans, the yield also reflects any premium or discount. As of April 28, 2009, Prosper only allows bidding based on yield. The borrower rate is displayed but not used for bidding.

The bidding process for open market loans focuses on the projected "yield to maturity" of the loan, rather than the borrower's stated interest rate. The yield is calculated as the internal rate of return of the remaining payments of the loan, net of servicing fees, assuming all loan payments are made as scheduled. This yield is based on the relationship between the open market loan's outstanding principal balance and the sale price of the loan; as the sale price goes up, the yield percentage goes down, and vice-versa.

Open market listings display the sale price for the loan and the yield percentage that corresponds to that sale price. An open market loan sold at a premium, which means at a higher price than the outstanding balance, will result in a yield lower than the borrower's interest rate, net of servicing fees. An open market loan sold at a discount—at a lower price than the outstanding balance - will result in a yield higher than the borrower's interest rate (provided the lower price is low enough to offset the subtraction of servicing fees). Lenders bid by specifying an amount to invest and the lowest yield the lender is willing to receive.

If enough lender members bid at a yield resulting in a price acceptable to the loan seller, Prosper will buy the loan and issue corresponding Notes to the winning lender members. As long as the borrower makes all payments as scheduled, the cash received by the lender will provide the final yield-to-maturity that was bid in the auction.

There are two ways to place bids. You can search for listings and manually bid by clicking "Bid Now" from a listing page, or you can use portfolio plans to automate the process. Portfolio plans automatically bid on listings based on the loss rate or specific criteria you choose.

When bidding, you should bid the minimum yield percentage you are willing to accept for the Note. Prosper provides a projection of estimated return at the time you bid or create a portfolio plan based on the estimated loss of that listing. A diversified loan portfolio may enable you to spread your risk among many borrowers. Consider bidding on smaller loans across many listings.

Actually, the funds are never withdrawn from your Prosper account. However, they are set aside, or put in a holding tank of sorts, while the listings you are bidding on are active. If you won all of your bids, then all funds would need to be paid as soon as those listings closed.

There are a few occasions when your placed bid will be released and made available again for bidding:

• If you are outbid.
• If the listing ends with insufficient funding (i.e. not enough bids were placed).
• If the borrower or Prosper cancels the listing early.

If you were outbid, it means that other lenders bid at a lower yield percentage. Other lenders' interest rates and yield percentages are not displayed, so even though it might look like they are bidding at the same rate you bid, that is not necessarily the case. This hidden bid auction style guarantees the best rates for everyone involved.

Because there are cases where lenders with lower yield percentages are preventing other lenders from participating fully in a loan, we allow lenders to be "partial winners" in a listing. This means that only a portion of the lender's bid was used. Lenders with "partially winning" bids can place new bids on the same listing.

No, you cannot cancel or withdraw bids.

Automatic funding is an option for borrowers applying for a Prosper borrower loan who want their money quickly and would be satisfied by a specified interest rate, rather than a potentially lower interest rate that could result if the listing were subject to continued bidding.

In the case of automatic funding, as soon a borrower's requested loan amount is met by enough bidders, their listing will close and loan proceeds will be transferred into the borrower's bank account. Since the borrower didn't keep the listing posted long enough for bidders to bid the interest rate down further, the interest rate on immediate funding listings may be higher than other similar listings.

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 regardless of originator, type of credit score used, or asset type.

Learn more about Prosper Ratings.

Portfolio plans are automated bidding tools that allow you to place bids efficiently using criteria you set, without having to look through every listing or worry about listing end dates. You specify the amount of money and minimum yield percentage to bid on listings that meet your criteria, such as Prosper Rating, number of current delinquencies, or other listing features. Prosper offers three plans as models (labeled Balanced, Moderate, and Aggressive) with pre-filled criteria that will help get you started. You can modify the plan models, or create your own portfolio plan from scratch. Add a portfolio plan now.

You can change your portfolio plan settings at any time from the Portfolio Plans page in Investing. If you would like to temporarily stop your plans from bidding, click "Pause" next to the portfolio plan that you want to stop bidding. Keep in mind that previously placed bids will remain active until matched or the termination of the borrower's listing, whichever occurs first.

As soon as a Prosper borrower listing ends with bids totaling 100% of the requested loan amount, it goes to Prosper's Trust and Safety team for pre-funding review. During this time, the status of the listing is shown as "pending review". Prosper's pre-funding review can take up to (but not more than) seven business days. Then, the borrower has seven days to sign for the loan.

If the borrower declines to accept the Prosper borrower loan or does not pass pre-funding review, the Prosper borrower loan is cancelled and funds committed to the listing are immediately available to you for further bidding.

Yes, to have your plan reinvest your monthly payments, specify a total amount to bid that is larger than the total you currently have in your Prosper account. As funds accumulate in your Prosper account, the portfolio plan will use those funds to place more bids.

For all Prosper borrower loans, Prosper obtains each Prosper borrower's Social Security number, driver's license 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.

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. 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, lenders and group leaders in connection with borrower listings, bids and loans at any time. If Prosper is unable to verify material information, Prosper may cancel a borrower listing or a Prosper borrower loan, even if the borrower listing is 100% funded with bids.

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 bidding has ended. In such cases, the results of Prosper's verification are not reflected in the listings themselves.

In connection with Prosper's identity and anti-fraud verification of Prosper borrowers, Prosper verifies the deposit account from which the borrower will make payments, to determine that the borrower is the holder of record of the account.

The information in Open Market listings describing the Open Market loan for sale is provided by the loan seller and is not verified by Prosper.

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 lenders if the loan corresponding to that Note is found to involve verifiable identity theft of the named borrower's identity. Prosper may, in 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 Prosper borrower loan. Prosper is committed to providing a safe and secure marketplace, and works with law enforcement authorities to prosecute to the fullest extent 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 make more bids or transfer them to your bank account as you wish. Because different loans have different payment due dates, most lenders with multiple notes see a trickle of small payments added to their account throughout the month.

Go to "My Account > Lending > Notes" and enter a date range to display Notes purchased between those dates. Click on the note ID to view more details including the payment history. Monthly payments are due each month on the same day of the month as the origination date.

The Trading Platform is coming soon, pending regulatory approval.

Borrowers have the option to pay all or part of the outstanding principal balance of a Prosper borrower loan in advance of the due date at any time. There is no penalty to borrowers for doing this. Borrowers on Open Market loans may have the same option. Partial prepayments will not change the monthly payment amount, but may shorten the loan term, resulting in the lender 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".

Prosper Borrower Loans:
When a borrower makes any payment on a Prosper borrower loan, the breakdown of that payment is available in the "Payment history" table on the "Loan detail" page:

• 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.
• Amount paid: Your pro-rated share of the gross payment made by the borrower. NSF fees: If the borrower owes Prosper any fees for failed payments (typically due to NSF, or non-sufficient funds), these will be subtracted from the gross payment amount.
• Amount 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 lender.
• Interest: If the borrower has any accrued interest since the last payment, this is paid to the lender. See more on interest accrual below.
• Principal: Any remaining funds received are allocated to principal.
• Service fees: If any lender servicing fees have accrued, these will be charged to the lender as an expense.
• Collection fees: If the loan had been assigned to a collection agency, collection agency fees will be charged to the lender as an expense. Learn more about collection agencies.

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

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

Open Market Loans:
The application of borrower payments for Open Market loans may vary, depending on the practices of each loan seller. The general policies and procedures of each loan seller will be reflected in the Open Market listing.

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.

Prosper Borrower Loans:
If the borrower is more than 15 days late on a Prosper borrower loan, the borrower will be charged a late fee. The late fee is divided up pro-rata among the borrower's lenders. If the Prosper borrower loan is one month 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 3 months, the Prosper 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. Learn more about charge-offs and debt sales.

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 lenders, and Prosper at risk of litigation.

Open Market Loans:
Open Market loans will be serviced, both before and after default, by the loan seller. In servicing Open Market loans the loan seller will use commercially reasonable efforts to service and collect the Open Market loans in accordance with industry standards customary for loans of the same general type and character as the loans involved.

If the Prosper borrower loan underlying one of your Notes becomes delinquent, Prosper will use a collection agency to help attempt to recover unpaid balances. If one of the Open Market loans underlying one of your Notes becomes delinquent, the loan seller may refer the Open Market loan to a collection agency at any time, or elect to initiate legal action to collect the Open Market loan, repossess or foreclose upon any collateral securing the Open Market loan, or sell an Open Market loan to a third party debt buyer at any time.

Because one collection agency will have responsibility for collection, all of the lenders on a delinquent Prosper borrower loan or Open Market loan will pay that agency's fees out of any amounts collected. If no amount is collected, lenders 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.

Charge-off of Prosper Borrower Loans:
A Prosper borrower loan is charged-off when it reaches 121 days past due. This means the borrower has fallen four months behind in payment. When a Prosper borrower loan is charged-off:

• The Prosper 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 charge-off. There are no changes to the interest rate or the way interest is accrued. Late fees are no longer charged.
• From the lender'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.

Charge-off of Open Market Loans:
For Open Market loans, loan sellers may have different policies and procedures relating to the timing and effect of the charge-off status of each Open Market loan. The general policies and procedures of each loan seller will be reflected in the Open Market listing.

Debt Sales of Prosper Borrower Loans:
Prosper may, in our sole discretion attempt to sell a Prosper borrower loan to a third party debt buyer at any time. Because debt buyers buy many past-due loans at once, Prosper borrower loans might not be sold immediately after charge-off, or may not sell at all, due to market conditions. Regardless of when the Prosper borrower loan is actually sold, it will remain in the with a collection agency, which will continue collection efforts until the loan is actually sold to a debt buyer. If a Prosper borrower loan is sold in a debt sale, the entire Prosper borrower loan sale price will be allocated to lenders. Each lender will receive their pro-rata share of the Prosper borrower loan sale proceeds.

Debt Sales of Open Market Loans:
For Open Market loans, loan sellers may have different policies and procedures for debt sales. The policies and procedures of each loan seller will be reflected in the Open Market listing.

See the outcome of past debt sales.

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

Your income from loan interest is taxable income. Each tax year that you earn $10or more in interest or borrower fees, Prosper will send you a Consolidated Form 1099 summarizing your taxable interest income or taxable fees, 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 IRC sec. 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.

Prosper provides a year-end lender statement to all active lenders, and may provide a Consolidated Form 1099 to lenders and tax authorities, depending on the lender's activity during the calendar year. If you are subject to 1099 tax reporting, your tax forms will be available on the "My Account > 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, unless you live in a state for which there is a 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 or referral awards, unless you live in a state for which there is a reporting exception (see below).

1099-B
You will receive a form 1099-B which details each transaction in which you have sold notes, either on the trading platform, in a debt sale, or repurchased by Prosper. 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 lenders in a year-end lender statement, and debt sales will be filed on tax form 1099-B. Using the loan principal balance before sale and the sale amount, lenders can calculate their net amount of loss for the year. Lenders 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 1 month 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 towards 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 lender 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.

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

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