Prosper Raises Risky Borrower Interest Rates

Against a troubled landscape, one online lender, Prosper Marketplace, is boosting rates that it charges to risky borrowers, a move The Wall Street Journal said was geared toward making its loans more attractive to investors.

As noted by WSJ, the news came via a company blog post by Brad Pennington, Prosper’s chief risk officer, who said in the posting that the rates on new loans would be ratcheted up by 0.29 percentage points. The move became, according to the executive, “necessary for us to continue providing a compelling fixed-income product relative to the many alternatives available to our investor community.”

This would be the second hike in rates in about three months. The firm, like many others in the space, tamped down lending activity, with volume down by 12 percent in the fourth quarter. Other significant measures came as the firm cut 28 percent of its staff and shuffled executives.

The rates will affect lower-credit customers, with no raised rates on more creditworthy customers. The lower tiers will see rates grow by anywhere from 0.25 percentage points to 1.42 percentage points. That comes in the wake of a March offering that saw a pool of Prosper loans come to market with yields at more than 500 basis points higher than previous deals. The latest boost on rates comes as a way to make loans somewhat more attractive relative to asset-backed securities.