Digging into the performance metrics on the Prosper.com website, I wanted to determine exactly how the borrower’s income and credit rating affected the potential for default. The result was more revealing than I had expected.
Simply put, a Prosper loan with a credit grade of AA and an income of over $100,000 has never defaulted. Beyond that, there have only ever been 2 instances of a loan ever being 1+ month late. Pretty secure, I’d say. These stats coupled with the fact that the average AA/$100k+ income loan averages an 2+% better ROI than a loan with AA/$0-99k and you have a significant difference and a decent search criteria.
Now, we are dealing with a relatively small segment of loans here, there have only ever been 225 such loans funded, but statistically, 225 is certainly enough to derive a conclusion from. And better than that, as of this article being posted, there are 15 loan requests currently actively available to bid on.
Think of it this way, how many other sets of criteria can you think of within Prosper’s advanced search that will mitigate your risks to this low a level? When you consider the average interest rate of AA/$100k+ income loan is 10.75% you have a stable loan category from which you are almost certain to get a solid return on investment.