How Does Investing on Prosper Compare with Buying Bonds?
Investing in bonds—what you should know
Purchasing bonds can be a great, if unexciting way, to invest conservatively. The amount of interest you earn is usually fixed—it will never rise or fall. This allows you to accurately predict how well your invested money will fare from month to month.
Bonds also carry a maturity date which may be many years in the future, although bonds generally pay interest every six months, or even every month. This is entirely up to the bond issuer. You can purchase bonds issued by federal or state government, or bonds issued by participating corporations. Bonds are usually bought through a broker.
There's one caveat to bonds that many overlook, however: Aside from the federal government, there is a chance the issuer can default. This happens when the borrower (i.e., the entity that issued you the bond) cannot make the interest or principal payments. Despite this, bonds are often regarded as safe, even if they aren't 100% guaranteed.
So now that you have the gist of bonds, let's look at Prosper and our peer-to-peer community.
How Prosper differs (and remains the same)
Similar to bonds, when you purchase a Prosper Note on Prosper you will receive the principal and interest payments made by the borrower over a set time. Can the borrower default here? Yes, it's possible. Please be aware of this. If a borrower fails to make any payments on the corresponding loan related to your Prosper Note, you will not receive any payments on your Prosper Note.
But because of this risk, and although returns are not guaranteed, you may be able to earn better returns than bonds, CDs or money market accounts, depending on your investing decisions. We strive to provide you with all the tools you need to make an informed investing decision. Here's what we mean.
We offer many investing choices
Prosper offers you many ways to search and vet borrower' listings. You can filter the results by:
- Occupation of borrower
- Credit score range
- Individual credit attributes (i.e. home ownership)
- Loan type
- Keyword(s) and more
Again, although no credit score or Prosper Rating guarantees you'll be paid back in full, it can serve as a good indicator for what you can expect from borrowers. Usually, the higher the rating, the lower the return as it represents less risk and attracts more aggressive bidding from other lenders.
You can also feel free to bid as low as $25. This helps you diversify and further mitigate your risks by bidding across many loans. Our portfolio plans can help you do this. You choose your comfort level.
Unlike the conservative nature of bonds, Prosper may provide a way for you to earn fair returns—and have some fun, too! Many of our lenders enjoy investing money and helping real people.
Why not sign up now and see everything our financial community can offer you?
How Does Prosper Work?
Prosper lenders bid on listings and purchase Prosper Notes. Each Prosper Note corresponds to a listing which sets forth the relevant details about the loan, including loan amount, price, yield percentage, and borrower information. Any payment from a Prosper Note is dependent on payments Prosper receives on the corresponding loan.
The Notes that correspond to specific borrower listings are offered pursuant to the prospectus. Investors should read the complete description of the Notes and risks associated with making an investment in the Notes as well as other information about us and our platform in the prospectus.
Prosper Notes are risk bearing and speculative investments for suitable investors only. If a borrower fails to make payments on the corresponding borrower loan related to your Prosper Note, you will not receive payments on your Note. There is the potential that you will not receive any payments on a Prosper Note. You should review the Prospectus before bidding on loans. Not FDIC-insured. Notes may lose value. No Prosper or bank guarantee.
