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| How are the final lender rates determined? |
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Here's how it works:
Lender rate = Borrower rate - Group reward (the group reward is the group leader's share of the rewards x payment reward rate)
Take a look at the chart below to see how the various reward-sharing levels translate into payment reward rates:
For example, if a C-grade borrower in a 25% shared rewards group
listed a loan for $5,000 with a 10% starting interest rate, the
starting lender rate would be 8.5%:
Lender rate = 10% – ((100% - 25%) x 2.00%)
Or, in more detail:
Lender rate = 10% [borrower rate] - Group reward ((100% - 25% [sharing rate]) x 2.00% [payment reward rate])
The equation was (100% - 25%) x 2% = 1.5%, so the Group reward is 1.5%.
Therefore the Lender rate is 10% - 1.5%, or 8.5%
You can play with the effect of group leader rewards on the borrower and lender rates using the loan calculator.
Note: The equations above don't take into consideration the
loan servicing fees charged by Prosper. For a lender's net return,
subtract the 0.5% annual servicing fee from the lender rate.
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