More Categories
Prosper has recently added 13 new categories to their loans. This is quite a large augmentation, and it might make sense for Prosper investors to spend time looking at these new categories. I feel some loans that had previously fallen under one category or another might have a new home in another category.
The loan categories in the API documentation are represented as an enumerated list, ranging from 0 – 20 for a total of 21. Blue indicate overlap with Lending Club and will be followed by the corresponding Lending Club equivalent.
Original Categories
- 0 :: Not available
- 1 :: Debt consolidation – Debt Consolidation / Credit Card
- 2 :: Home improvement – Home Improvement
- 3 :: Business – Small Business
- 4 :: Personal loan
- 5 :: Student use – Educational
- 6 :: Auto – Car
- 7 :: Other -Other
New Categories
- 8 :: Baby & Adoption Loans
- 9 :: Boat
- 10 :: Cosmetic Procedures
- 11 :: Engagement Ring Financing – Wedding?
- 12 :: Green Loans – Renewable Energy
- 13 :: Household Expenses – Home Improvement?
- 14 :: Large Purchases – Major Purchase
- 15 :: Medical/Dental – Medical
- 16 :: Motorcycle
- 17 :: RV
- 18 :: Taxes
- 19 :: Vacation – Vacation
- 20 :: Wedding Loans – Wedding
It’s clear Prosper is attempting to accomodate a larger pool of borrower needs. If someone applied in the past to obtain money for taxes, what would they do when they didn’t see this as a drop down? Likely select Debt Consolidation.
Why This Could be a Problem
If you happen to invest using the LendStats methodology then you will be exposed to a new breed of loans with little operational history. Investing in say, RV loans may very well produce a high rate of return, but who knows? We don’t have enough information. People may choose to not invest in these types of loans since there is no data. LendStats has a way of making loan categories P2P favorites, but for now these loans will all have very high ROIs until defaults start to occur. One way this is mitigated is Prosper promotes something called a seasoned ROI, in which a loan is does not count towards the advertised return until it’s 10 months old.
Overall I think it’s great Prosper is opening up their loans to a broader range of needs. In the past I am sure many people tried to group their loans into what was the closest fit. As Prosper’s loans mature we will gather a much more information on the performance of these new categories!
Breakdown of New Loans by Percentage
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