Comments on: A surprise calculation: Prosper.com vs. ING

By: gene

gene — Sun, 18 Feb 2007 21:34:23 +0000

I’ve been with prosper for some time. Payments are buying three more loans each month. STAY FULLY INVESTED! I did the math early. I WILL NOT lend $ at less than 12% due to costs and risk.

By: mbhunter

mbhunter — Tue, 11 Jul 2006 02:35:43 +0000

Tim MMF, yes I put in a small amount. So far, so good.

Wiseclerk, cool site!

By: Wiseclerk

Wiseclerk — Mon, 10 Jul 2006 15:07:11 +0000

As said before your comparison is off, because the money should be reinvested (e.g. in another prosper loan at 8%) as soon as it is available again.
8% is low. Average prosper loans are in the range around 14-15%. For details see:
http//www.wiseclerk.com

By: frugal

frugal — Wed, 28 Jun 2006 17:55:59 +0000

Your post shows mainly what are the disadvantages when you don’t re-invest your money. At any given time point, the interest rate from prosper.com is higher than ING. But you’re decreasing the prosper.com balance for compounding opportunity at 8% or 4.25% if re-invested at ING. That is obviously not what happens in reality. Even if you don’t do ACH, the returns will come out better at prosper.com. Just look at the last couple of months. You can easily make up the difference interests if you deposited your money into ING.
So I think the point should be what happens if you don’t re-invest.
8% is always better 4.25%. It’s not better only when you have part of the money earning at 8%, and part of the money earning at 0% without re-investing.

By: Tim MMF

Tim MMF — Fri, 23 Jun 2006 20:43:17 +0000

That is a surprising calculation. Have you actually decided to go through with your Prosper loaning? Considering the comments you received do you plan on adjusting your strategy? Great post!

By: Free Money Finance

Free Money Finance — Fri, 23 Jun 2006 10:31:22 +0000

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By: mbhunter

mbhunter — Thu, 22 Jun 2006 05:57:33 +0000

Good question differentWriter. It deserves a response. In a new post, perhaps, but thanks for asking!

Also thanks for the other suggestions — like the distinction between APR and APY, and the perils of leaving money out of play.

By: differentWriter

differentWriter — Thu, 22 Jun 2006 05:10:48 +0000

On a side note, does anyone have the math for this?

If I could add $500 every month to either ING savings @ 4.25% OR pay off my 2nd HELOC mortgage @ 7.25% fixed for 3 years, what should I choose?

It seems obvious to pay off the HELOC mortgage, but all this compounding has me confused …

By: Steve

Steve — Wed, 21 Jun 2006 19:13:28 +0000

Your math is off – you don’t just sit on the cash that you get paid back. At the very least, you put it into the ING account or you probably re-invest it into like-loans on Prosper, in which case the return profile is much better.

By: samerwriter

samerwriter — Wed, 21 Jun 2006 16:17:02 +0000

Right — the alternative is leaving that money “out of play”, which clearly is never the best solution. I’ve never used prosper, but I have to assume you can get your payments deposited directly into an interest bearing account.