Groups, Groups, Groups… Exploring Groups on Prosper

January 20th, 2007 | Prosper.com

Disclaimer: I am not a member of any group, nor do I help or detract from any group…

The basic idea is that a lender starts a group and becomes a group leader. That group leader maintains to group and optionally takes a some percentage on top of the lender rate. The idea is that trust worthy groups have less defaults on average then non affiliated borrowers.

With the recent dismissal of FAN and affiliates (one of the larger groups, the group leader was involved in a settlement order with the FTC — they have been banned from Prosper — the existing loans are going to stay on the books.), I thought it was about time I addressed my concerns, misunderstandings, and general distrust of groups.

I expect this to be a multipart series. I have far more questions than answers at this point. I will try to be rigorous in answering my questions. If you have questions on groups please add a comment and I will address in a future post.

Here are my questions:

Why would a Prosper borrower want to join a group?

Why would a borrower want to join a group with leader rewards and therefore pay more interest?

Why would a Prosper lender join a group?

Why would a lender help a specific group over others?

What is vetting? Does that help?

Are groups having less defaults than non affiliated borrowers?

Does a groups star rating matter?

Does a group actually help get a loan funded?

What are the interest rates for groups compared to non affiliated loans?

There isn’t enough data to evaluate expected default rates for all loans, does the star rating tell us anything?

Why Would a Borrower Join a Group? (Prosper Group Analysis Part 1)