I wrote about my lending experience with Prosper back in October. When I originally signed up I was very curious about how the process worked and what kind of returns I could expect. I figured the best way to learn was to dive right in and see for myself.

Generally speaking I am very satisfied with the product. The website works well and they have some nice tools for automating the lending process. I have been very pleased with the return on my investment - especially considering the beating my stock portfolio has taken this year.

In all, I invested a little over $2000 in Prosper. I was planning on making Prosper the “People Bonds” portion of my fixed income portfolio. The money I put into Prosper wasn’t money I needed; it was a portion of my “funny money” account. The investment was spread over 43 loans with an average interest rate of 13.1%. As of this writing, all my loans are current.

The biggest hang-up I have with Prosper is that my money is tied up for 3 years once invested. I know, I know, it’s a long-term investment and I don’t NEED the money at any point in the near-future but it still bothers me. I just like to know I can get to the funds if needed.

When I originally created my account in October there was talk of a secondary market for loans. The secondary market would have allowed me to liquidate my loans through a wholesale market to get my money back (minus a hefty penalty I’m sure). Unfortunately this never came to fruition and I’m stuck trying to decide whether or not to keep investing or start the long process of pulling out my funds.

I finally made the decision to pull my money out for two reasons.

1. I like to keep things as simple and organized as possible. I use Sharebuilder for my equity investing. With Prosper, it adds yet another account that I need to manage. Besides, I already have fixed-income investments with Sharebuilder.
2. The lack of a secondary market. The bottom line is that investing in equities gives me the freedom to sell at any time to get my money and that is a big deal to me.

Right now I’m pulling money out of Prosper every other month or so as it comes available. However, I am still checking the Prosper forums about once a month to see if anything has changed regarding a secondary market.

Be sure to check out WealthyReader’s Prosper experience for another point of view.