In addition to all the intricacies of being a lending on Prosper, I also think it's helpful to understand how Prosper makes it's money. After all, Prosper requires cash to pay it's employees and stay in business, and it's in the lender's best interest for Prosper to keep it's doors open. And, to make things more fun, they give us all the statistics necessary to determine their corporate income.
Prosper lists their fees on the website. They classify them as borrower fees (closing costs) and lender fees (servicing fees). The borrower fees are very similar to the origination fee on a mortgage, where the borrower pays a percentage of the loan amount to the lending company to cover the cost of establishing the loan. Borrower fees are 1% for AA-D loans and 2% for E-HR loans. The servicing fees pay for the ongoing cost of collecting the loan payment every month, dividing up the payment to all the lenders, and actions (if any) Prosper takes to collect on late loans. It is collected as a percentage, 0.5% annually for AA-A and 1% annually for B-HR, of the outstanding loan balance and comes out of the lender's share of the earned interest.
It is possible to calculate Prosper's monthly income based on the readily available loan statistics. To get the borrower fees, sum up all the loans that originated during the month and multiply by the borrower fee rate. The lender fees are more complicated to get perfectly accurate, but a close approximation can be reached by looking at the outstanding loan balances at the beginning of a month and multiplying by the lender fee rate. The fees collected for August are shown below:
|Credit Grade||Loans Originated||Borrower Fee||Income|
|Credit Grade||Outstanding Loans||Lender Fee||Income|