Account number The account number that appears on your personal checks (it's the second block of numbers, after the routing number).
Amortization term The period of time to pay off a loan. Amortization terms are measured in months. Every loan on Prosper has an amortization term of 36 months (3 years).
APR The Annual Percentage Rate (APR) is the effective interest rate that will be paid on a loan, i.e. the annual total cost to a borrower for the loan. The APR is different from the borrower rate (or "note rate") because it includes one-time fees in an attempt to calculate a total cost of borrowing money.
Automatic funding Automatic funding is an option for borrowers who want their money quickly and would be satisfied by a specified interest rate, rather than a potentially lower interest rate that could result if the listing were subject to continued bidding (over three to ten days). In the case of automatic funding, as soon as the requested loan amount is met by bidders, the listing closes and funds are transferred into the borrower's bank account.
Bank draft Borrowers who have monthly payments on their loan have the option of paying via a bank draft, which will result in an interest rate increase of 1.00%. Very few borrowers elect to pay via the bank draft process, thus rates shown on listing and bid pages assume that the borrower will choose to use the free electronic payment service instead. Due to the added complexity of bank draft payments, Prosper does not recommend choosing the bank draft method of payment.
Basis point An amount used for interest rates, equal to 1/100th of a percentage point. 100 basis points equal one percentage point. For example, an interest rate of 6.5% is 50 basis points lower than an interest rate of 7%.
Bonds (as investments) A bond is a debt issued by the U.S. Treasury, the state, or even corporations for a period of a year or more. An investor buys a bond, who is in essence lending money until a specified date (when the bond matures). On the maturity date, the investor receives the original principal, with interest. There are some bonds (interest-bearing bonds) that will pay interest during the term of the loan.
Breach A violation or infraction of a promise, legal obligation or contract.
Collateralized lending Other terms for this include secured lending or asset-based lending. It is when a borrower must offer proof of owning a particular kind of asset (property, inventory, etc.) in order for a loan to be granted. If the borrower defaults on the loan, the collateral can be seized in lieu of payment. Prosper does not offer collateralized lending.
Commission A fee or percentage charged by an agent for services rendered, like negotiating a contract or loan transaction.
Contract A formal agreement between parties, either written or oral. Prosper's loan contracts take the form of promissory notes between the borrower and Prosper. Once the loan is made, Prosper assigns the loan to winning bidders ("lenders") on the listing. Review Prosper legal agreements.
Credit bureau An agency that collects, updates, stores and sells credit history information about individuals. Credit bureaus sell credit reports to potential lenders interested in knowing an individual's credit history, issuing a credit score to reflect their creditworthiness.
Credit history The history of an individual's credit accounts, late payments, loans, bankruptcies, and any recent inquiries. This history is used by lenders to determine the creditworthiness of an individual.
Credit report A detailed report that outlines a person's credit history. It includes all history of their credit accounts, late payments, loans, bankruptcies, and any recent inquiries.
Creditor A person or organization that allows individuals to borrow money, and who they subsequently owe money to. On Prosper, creditors are known as "lenders".
Daily rate The interest rate expressed as a daily percentage rate, assuming a 365-day year.
Debt An amount of money owed to another entity for funds borrowed.
Debt consolidation A single loan that groups together multiple debts, often resulting in lower monthly payment and longer repayment schedule.
Default Failure to make the required debt payments on time or to comply with other conditions of a loan. On Prosper, when a borrower defaults, the loan is sold to a debt buyer. Learn more about default sales and debt buyers.
Defaulted loan If a collection agency was unsuccessful in collecting the past-due payments from a borrower (usually within three months), the loan is considered defaulted, which means the borrower no longer has any intention or is incapable of paying back the loan. Defaults are reported to Experian, Prosper's credit reporting agency partner, and will appear in a borrower's credit history. Their credit score will be negatively impacted. Borrowers who have defaulted on a loan at Prosper will not be allowed to borrow again on the Prosper marketplace. Learn more about default sales and debt buyers.
Delinquent loan A borrower who has missed a monthly loan payment. A loan can carry a delinquent status for up to four or more months, after which it is considered a defaulted loan.
Diversification This means as a lender you place many small bids among many borrowers. The risk that you will lose an amount of money that is loaned to one borrower is potentially greater than if you place many smaller bids on many borrowers. Prosper encourages lenders to diversify to diminish risk. Prosper makes diversification easy by allowing you to create "standing orders."
Equity In the real estate world, it's the difference between the fair market value of a property (what a property is worth) and what is still owed against that property (a mortgage balance, or other liens).
Fair Credit Reporting Act (FCRA) Enforced by the FTC (Federal Trade Commission), this act was passed by Congress to protect consumers when dealing with consumer reporting agencies (CRAs), like credit bureaus. The FCRA was designed to insure CRAs provide accurate credit histories, and to insure the privacy of that information.
FICO score A FICO score is a credit score. It stands for Fair Isaac Company, Inc., one of the companies that develops the formulas to calculate credit scores, and assess credit risk. Prosper uses a different scoring model than FICO.
Fraud alert A consumer can place this on their credit report if they suspect they have been a victim of identity fraud. A fraud alert forces a business to verify your identity before they can issue you credit. This often means you will need to be contacted directly by the business, so it's important to include a current phone number. There are both short- or long-term alerts you can place on your credit report.
Gross annual income A total income amount from all sources (including salary, dividends, etc.) that an individual receives per year before any deductions.
Group leader The leader of a Prosper group. The group leader typically creates the group, recruits members and monitors the borrowing and lending activities within his or her group. Learn more about becoming a group leader.
Home equity line of credit (HELOC) A means of borrowing for homeowners who borrow against the home equity of their residence in order to make home improvements, consolidate debts, or make other significant expenses and purchases. The homeowner can access these funds with a credit card or checkbook.
HR (High Risk) These borrowers have a very low credit score, so low that many traditional lenders consider them to be high-risk. Learn more about credit grades.
Inflation rate The percentage increase in the price of consumer goods, usually expressed annually.
Interest rate The cost to borrow money, expressed as a percentage rate, to be paid over a period of time. Fees associated with taking the loan are not included in an interest rate (see APR).
Late charge Late fee (charged to borrowers). If your monthly payment is 15 days late, you'll be charged $15 or 5% of that month's payment, depending on the borrower's state lending limits. For example, if your monthly payment is $100 and your payment was 15 days late, your payment amount would be $115. Late fees are passed on to lenders; Prosper does not profit from late fees.
Lender rate The lender rate is the annual interest rate that the lender will receive from the borrower as they repay their loan.
Listing review If a group requires listing review, borrower listings will be subject to review by the group's leader. The group leader will have 7 days to review and approve or decline the borrowers' listings.
Loan application A loan application is the format for a potential borrower requesting credit to disclose their financial information and other important information. On Prosper, borrower loan applications take the form of a listing. Learn more about creating a listing.
Loan servicing fee (charged to lenders) The lender servicing fee of 0.5% annually is accrued daily, and is based on the current outstanding loan principal. This fee is accrued the same way that regular interest is accrued on the loan. Learn more about Prosper fees.
Loan value This is the amount a lender is willing to lend to a borrower, plus the interest rate to borrow that amount.
Match reward This is a one-time reward that is accrued by a group leader when a group member's loan listing gets funded. Match rewards vary depending on the borrower's credit grade and whether rewards are shared. Only group leaders can earn match rewards. Learn more about group rewards.
Minimum payment The smallest amount that must be paid on a debt to avoid a penalty.
Monthly payment The amount to be paid each month against a loan (and its interest).
Net gain/loss This is the amount gained or lost after costs (taxes, interest, expenses, etc.) have been taken out of the gross sales or revenue.
Origination date The date when a loan was final and closed. On the origination date, the loan proceeds are made available to the borrower, and interest starts accruing on the loan.
Payment An amount of money due to a lender and is meant to reduce the remaining balance due on the loan on a set schedule.
Prepayment penalty Some lenders will assess a penalty if a loan is paid off early. Prosper loans do not have a prepayment penalty.
Principal balance The total amount of the debt, or loan, remaining that is to be reimbursed.
Promissory note A borrower's official agreement to pay their loan back in a specified time. Review Prosper legal agreements.
Refinance/refinancing Paying off an existing loan by using the proceeds from a new loan. The same property is usually used as collateral. This occurs when the new loan will allow the borrower to save money through lower monthly payments, lower interest rates, or financing costs.
Risk-free rate If an investment were completely free of risk, this is the theoretical interest rate for that investment.
Savings rate A yearly percentage rate that expresses the rate of return received on any investments.
Secured loans Also called collateralized lending. It is when a borrower must offer proof of owning a particular kind of asset (property, inventory, etc.) in order for a loan to be granted. If the borrower defaults on the loan, the collateral can be seized in lieu of payment. Prosper does not offer secured loans.
Standing order A standing order is an automatic bidding tool used by lenders, in which the lender authorizes Prosper to place bids on their behalf on loan listings that meet specific criteria. For example, if you wanted to take $5,000 of your money and invest up to $200 per listing at 7.50% interest in C-graded borrowers who are members of medical groups, you could spend your time individually seeking these borrowers out and then placing 25 manual bids, or you could create a standing order and have Prosper search them out and place the bids for you. Every time a borrower creates a new listing, your standing order will check to see if the listing meets the lender's criteria. If it does, the standing order will bid on that listing on your behalf. Standing orders are a great way to lower your risk as a lender because instead of one big loan to one borrower, you can create many small loans to many borrowers. Because your risk normally goes down as the number of borrowers you lend to goes up, it is wise to create as many bids as possible. A standing order is just an easier way to do this. Learn more about standing orders.
Supporting lender This is a designation for lenders who have supported specific groups with loans on Prosper.
Term The period of time for a loan to be repaid.
Types of loans There are many types of loans. Major types include mortgage loans, home equity loans, consolidation and refinancing loans, and personal property secured loans.
Unsecured lines of credit An unsecured line of credit means you don't have to offer any collateral, like a car or your house, to guarantee access to it. It is a revolving line of credit, accessed with a credit card or check.
Upfront costs Costs paid to apply for a loan, such as loan closing fees. Learn more about Prosper fees.
