Lenders on Prosper do not have the opportunity to meet you, as say a bank loan officer would, and cannot, therefore, make a judgment on the intangibles normally factored into a loan decision. Prosper lenders may only look at your credit score, debit to income ratio and the proposed interest rate offered to decide if they will place a bid on your loan.

The Experian chart below shows historical default rates lenders use as a guide in deciding whether or not to bid on your loan.

For example, a borrower with a D rating has an average default rate of 6.2% that means if a lender invests in 10 D borrowers 1 borrower will default about half way threw the loan and the lender will take a 50% loss on that borrower.

The significantly higher risk (and the higher possibility that they will not be repaid) requires “compensation” in the form of higher interest. Say a borrower expects to make at least an 8% return on all loans they make. That means the lender must add the 8% to the 6.2% default rate to get a 14.2% rate that they need to bid in order to make a 8% return on a D loan.

Lenders may use a formula to gage their risk vs reward when making a decsion on bidding on a loan. Here is an example of a lenders formula.

Prime Rate is currently 8.25%
A lender may want the following returns based on credit risk.

Lender calculation

Rating	Prime	Default Rate	Risk vs. Reward	Minimum Bid
AA Rating:	8.25%	+ 0.20%	+ 0.05%	= 8.5%
A rating:	8.25%	+ 0.90%	+ 0.25%	= 9.4%
B rating:	8.25%	+ 1.80%	+ 1.0%	= 11.05%
C rating:	8.25%	+ 3.30%	+ 2.75%	= 14.30%
D rating:	8.25%	+ 6.20%	+ 4.0%	= 18.45%
E rating:	8.25%	+ 11.10%	+ 5.0%	= 24.35%
HR rating:	8.25%	+ 19.10%	+ 6.0%	= 33.35%

Prosper has a max borrower rate of 30% so you will not see many HR loans be filled if the lender were to use this calculation.

Prosper Articles
	Loan Listings Tips & Tricks A must read for borrowers, here are several guidelines that will help your loan fund at the best rate the marketplace can offer.
	Apple User Group Information Page A in-depth look at what the Apple User Group offers borrowers and lenders in the Prosper marketplace.
	Understanding Your FICO Score See what is comprised of your FICO Score and how if affects what credit grade you are assigned, and the interest rate you will be-able to get a loan for.
	Improve Your FICO Score Some basic tips on how to improve your FICO score and get better interest rates.
	The Lenders Prospective Borrowers wanting to understand more about how lenders view you loan, some factors used by lenders to determine if, how much and at what rate they will bid on your loan.
-	Going Interest Rates On Prosper Before composing a loan listing see what the going interest rates are on Prosper for your credit score.