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Word Description
Account number The account number that appears on your personal checks (it's the second block of numbers, after the routing number).
ACH Automated Clearing House. ACH is a system of the U.S. Federal Reserve Bank that provides electronic funds transfer between banks. It is the same kind of fund transfer transaction that is used for direct deposit of paychecks.
Aggregate repayment history The total/sum of someone's loan repayment history.
Amortization The gradual elimination of a loan, with regular payments, over a set period of time. The payments are designed to cover both the principal and the interest.
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).
Annual income A figure that reflects the total amount of income an individual earns in a year's time.
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.
APY The Annual Percentage Yield (APY) is the true (or effective) rate of return on an investment over a one-year period.
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.
Balloon payment A balloon payment is a type of payment schedule when after a series of periodic payments, a large lump sum is scheduled and required at the end. Prosper loans do not involve a balloon payment. Prosper loans are fully-amortized loans.
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.
Bankruptcy A proceeding in a federal court that may relieve a debtor of the obligation to repay some or all of their creditors. A debtor's assets may be liquidated, and the obligations to the creditors can be altered or completely eliminated. Anyone who files bankruptcy has it denoted on their credit report for up to ten years.
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%.
Bid On Prosper, a lender makes a bid by offering an amount (in loan principal) and an interest rate (in an annual interest rate) against a borrower's loan listing. Depending on the rate and bid date of other bids on a listing, an individual bid can have three different statuses: winning, partially outbid, or outbid.
Bonds 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.
Borrower rate The borrower rate is the annual interest rate that the borrower secured after their loan listing closed, and will then pay on a monthly basis as they pay off their loan. Funds generated from the interest rate will be paid to the lender and to the borrower's group leader (in the form of group leader rewards, if applicable).
Breach A violation or infraction of a promise, legal obligation or contract.
Broker An agent who acts as a third party for others, negotiating contracts or arranging funding in return for a commission or a fee.
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.
Collection agency A firm that collects on delinquent accounts. Collection agencies change a percentage of any recovered funds as the service fee for their efforts. This percentage varies by collection agency, but is typically between 15-30% of the funds recovered. The percentage the collection agency keeps also goes down over time, so the collection agency has an incentive to collect delinquent amounts promptly.
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.
Credit bureau An agency that collects, updates, stores and sells credit history information about individuals. Credit bureaus sell credit reports to potential investors interested in knowing an individual's credit history, issuing a credit score to reflect their creditworthiness.
Credit grade A Prosper credit grade is a letter grade that Prosper assigns you based on your credit score, for use solely in the Prosper marketplace. A credit grade is what potential lenders on Prosper use to measure your likelihood of repaying money you have borrowed based on your past history. Everything from your first credit card to your home mortgage contributes to your credit history. Your credit grade can be affected by many factors, such as how much money you owe and your on-time payment history. Lenders will consider this credit grade (along with other factors, such as your group's borrowing history) to determine the interest rate they are willing to offer you, and how much to loan.
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 limit The maximum amount a bank or lender will let an individual borrow under a line of credit.
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.
Credit score A Prosper credit grade is a letter grade that Prosper assigns you based on your credit score, for use solely in the Prosper marketplace. Prosper obtains your Experian ScoreX (SM) credit score from your credit report, and assigns one of eight credit grades.
Creditor A person or organization that allows individuals to borrow money, and who they subsequently owe money to.
Creditworthiness A measurement of a borrower's ability to repay a debt.
Daily rate The interest rate expressed as a daily percentage rate, assuming a 365-day year.
Debt buyer A company that buys old debts that are considered “written off” or uncollectible. These defaulted loans are sold to debt collection companies through an auction, that then attempt to collect them. Because the debt is already fairly old by the time it reaches the debt buyer, a lender should not expect to receive much of their original investment in return for the outstanding debt.
Debt consolidation A single loan that groups together multiple debts, often resulting in lower monthly payment and longer repayment schedule.
Debt-to-income ratio Debt-to-income ratio (or DTI) is a measurement of a borrower's ability to take on additional debt. It is a part of anyone's credit profile on Prosper. This number takes into consideration how much debt the borrower had prior to their loan in addition to what their debt will be if the loan they are requesting is made. (Their debt history is part of their credit history, and is reported to Prosper in the initial credit check.) The DTI is calculated by dividing the borrower's annual income (before taxes) into their annual non-housing debt payments. So while it won't reflect your mortgage, it would reflect your car loan. It is expressed as a percentage. Generally a DTI of 20% is at the upper end of normal when excluding housing debt. If you are a beginning lender or unsure of how to factor in high-risk borrowers, we recommend that you stick with borrowers who have a DTI of 20% or less.
Default Failure to make the required debt payments on time or to comply with other conditions of a loan.
Default rate This rate is a calculation of how a borrower is expected to behave in regards to their loan, i.e. are they high risk to loan. The default data is observed over an industry-standard 24-month period, which is then converted to an annualized average rate. While not exact, it does offer a close approximation of how a borrower will behave. The default rate is important for lenders to consider, because it helps them to estimate their potential return on their loans.
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.
Delinquency Failure to make debt payments on time.
Delinquent loan A borrower who has missed a monthly loan payment. A loan can carry a delinquent status for up to four months, after which it is considered a defaulted loan.
Disclosures The release of relevant information to a consumer.
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."
DTI Debt-to-income ratio (or DTI) is a measurement of a borrower's ability to take on additional debt. It is a part of anyone's credit profile on Prosper. This number takes into consideration how much debt the borrower had prior to their loan in addition to what their debt will be if the loan they are requesting is made. (Their debt history is part of their credit history, and is reported to Prosper in the initial credit check.) The DTI is calculated by dividing the borrower's annual income (before taxes) into their annual non-housing debt payments. So while it won't reflect your mortgage, it would reflect your car loan. It is expressed as a percentage. Generally a DTI of 20% is at the upper end of normal when excluding housing debt. If you are a beginning lender or unsure of how to factor in high-risk borrowers, we recommend that you stick with borrowers who have a DTI of 20% or less.
ECOA Equal Credit Opportunity Act - A federal law that prohibits discrimination by any lenders or other creditors on any credit transaction based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.
Failed payment fee Failed payment fee (charged to borrowers). If your automatic monthly payment fails due to insufficient funds or because you closed your bank account and forgot to tell us, you'll be charged $5, which may vary depending on your state lending limits. This covers the fees our bank charges us. For example, if your monthly payment fails, your next payment would be $105.
FCRA Fair Credit Reporting Act - 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.
Finance charge The charge for consumer credit, which includes any interest charges for the loan, and potentially other additional costs.
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.
Fully amortized loans Amortized loans are loans with set monthly payments. The loan will be paid in full by the end of the specified payment schedule.
Fully-amortized repayment schedule The total timing needed for the repayment of a loan. The loan is paid back with set monthly payments.
Funding date The date when the funds of a loan are available to a borrower.
GL Group Leader
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 A sponsor or head of a group. The group leader typically creates the group, recruits members and monitors the borrowing and lending activities within his or her group.
Group profile The main page of a group, with basic information like the group name, a description about the group, the web address shortcut, the group's rewards settings (shared or not), and some privacy settings. Some group profile pages may include pictures as well.
HR High Risk - These borrowers have a very low credit score, so low that many traditional lenders consider them to be high-risk.
Inflation rate The percentage increase in the price of consumer goods, usually expressed annually.
Interest paid The total amount of the fee paid thus far to the lender for the loan.
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).
Lender rate The lender rate is the annual interest rate that the lender will receive from the borrower as they repay their loan.
Loan closing fee (charged to borrowers) - If you are a borrower and your loan is funded, you will be charged 1% of the amount borrowed or $25, whichever is greater.
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.
Manual bid A bid placed on a listing directly by a lender. An investor seeking out borrowers one at a time, using very specific search criteria would then place a manual bid to lend money to borrowers, instead of a standing order, which bids automatically using the search criteria you specify.
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.
NC No credit - These borrowers have no credit score because of limited information on their credit history. For example, a borrower with an NC grade could be a college student who has simply never had a need to borrow money before, or a recent immigrant who doesn't have any domestic credit history yet.
Net income This is the total income that remains after all the costs (interest, taxes, etc.) have been deducted from any revenue.
Origination date The date when a loan was final and closed.
Partially winning bid Because there are cases where lenders with lower minimum interest rates are preventing other lenders from participating fully in a loan, Prosper allows lenders to be "partial winners" in a listing. This means that only a portion of the lender's bid was used in funding the loan. Lenders with "partially winning" bids can place new bids to get more participation in the loan listing. A lender can use remaining available bid funds to make a new bid on any listing.
Payment reward This is a monthly reward that is accrued when a borrower's monthly payment is successfully paid on time. Payment rewards vary by the borrower's credit grade. So a high grade means a smaller payment reward (because they are lower-risk).
PM Private message
Primary account If you are a borrower, Prosper will need to know which bank account you want to make your monthly loan payments from (your primary bank account) because you can have more than one bank account set up on Prosper. If you only have one bank account, then that will be your primary account by default. All bank accounts must be verified before they can be designated as a primary account.
Refinance 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.
Routing number A routing number is a nine-digit number that identifies a financial institution. The routing number is printed on checks and is used to route all financial transactions (like transferring money into or out of Prosper) to the appropriate bank. This number appears on your personal checks in the lower left corner.
Service fees Prosper charges services for certain transactions. Some of these fees include closing fees, servicing fees and delinquency fees.
Shared rewards Each time a group member has a loan listing that gets funded, or a borrower pays their loan back on time, there is a reward. Shared rewards mean these rewards are shared among the group members, instead of going solely to the group leader. There is the option of a percentage of the rewards to be shared at the 25%, 50%, 75% and 100% levels. If they are 100% shared, the rewards will be reflected in lower interest rates for borrowers in the group. A group leader may change the rewards sharing level of the group at any time.
SSL Secure Sockets Layer (SSL) - This protocol allows files to be safely transferred on the internet through encryption.
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.
Supported groups This is a way for lenders to designate specific groups they have supported with loans on Prosper.
Underwriting A term for the process a lender goes through when determining what kind of loan to make to a potential borrower. Underwriting involves an assessment of the borrower's credit history, employment, and other conditions to determine the risk of lending to the borrower, what rate and amount to loan, and at what terms.
Verification Before you can borrow or lend on Prosper, Prosper must first verify your identity and other aspects of your background, such as home ownership or bank account. Verification varies depending on the role you select on Prosper and your initial registration.

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