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Prosper personal lending

I heard about Prosper yesterday on the radio so I went to the web site today to investigate. It seems like an interesting idea making small loans together with others to reduce risk. I figured the loans would be made by ACH transfer from your bank account to Prosper so I clicked on the frequently asked questions about funds transfer. Here is what I found.

Transfer request is on day 0. Day 0 can vary based on day of week, time of day and holidays.
Funds are withdrawn from your account on day 1
Funds are received and held by prosper on days 2-3
Funds are available to you on day 4

Although we refer to you and other individuals as “lenders”, the loans are being made by Prosper and then sold to you, making you a loan purchaser. The term “lender” is used through the site for the sake of simplicity.

Prosper holds the funds on days 2-3 (which also includes day 1) because all ACH transfers can be canceled or marked failed within a three day period. What do we think Prosper is doing with our funds during this magical three day window? Perhaps they are making interest and increasing their balances and cash flow? They indicate that this waiting period is standard practice and make us feel better by adding that it makes our external bank account more secure.

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