Prosper Raises Borrower Fees

Prosper posted the following message on its blog on January 4, 2008 announcing that it has increased the fees borrowers will pay in order to close a loan on Prosper. Given the small loan amounts, Prosper had to make this move to remain financially viable, I believe. It's unfortunate that the cost of borrowing money is rising given the challenges that borrowers in the less than prime categories are facing (credit crunch, higher credit card fees, mortgage DQs, etc.), but I do understand that Prosper is running a business and needs to make these difficult decisions from time to time. It will be interesting to monitor Prosper's new loan volume going forward to determine if this change has an impact on the demand for loans in the affected borrower categories. Lendingstats is a good place to check on this data if you have an interest.

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Effective today, Prosper has increased the origination fee for borrowers. The rationale behind this increase is to enable us to better cover our administrative costs and bring our fees more in line with the market. We have endeavored to continue to keep the fees very straightforward for our borrowers.

The origination fee schedule for borrowers of first and second loans will be as follows:

AA 1.00% (no change)
A 2.00%
B 2.00%
C 3.00%
D 3.00%
E 3.00%
HR 3.00%

Therefore if you are a borrower and your loan is funded, you will be charged a percentage of the amount borrowed depending on your credit grade. This change will impact all listings created on or after January 4th, 2008.

Origination fees paid by existing borrowers and for listings that have already been created will not be impacted.