- Personal Finance
Which is better: Helping People or Making Money?
Does Everybody Prosper?
Make Money or Help People
Many people are altruistic by nature. They love to help people. The problem is it takes time and energy in order to make a difference in people’s lives.
The same can be said for making money. I can’t think of anyone who wouldn’t mind a little extra cash in their pocket. But it takes time and energy to make money…that’s the whole idea behind a job.
An interesting philosophical question that occurred to me when I was studying how to make money online with Prosper: why do people invest in micro loans to other people? To make sure we’re all on the same page: Prosper.com is a place where people with a little extra investment money can invest in loans to other people who need money. It shortens (but not completely cuts out) the middleman in personal loans. Now getting a loan from Prosper isn’t always the best option. Especially considering there’s 0% balance transfers from credit cards, reasonable rates from credit unions, and extended financing for large purchases. Frequently people turn to Prosper because they’re business has a cashflow problem or they can’t get better terms than their credit card’s APR. Now these aren’t necessarily huge risks, but they are far from a sure thing.
So then why would lenders turn to Prosper? The average return for lenders (according to the site) is around 7%. This is definitely better than most savings accounts which are currently around 1.7%, but there are better options considering the S&P averages 8% (over long periods of time). I’d also like to point out that the 7% from Prosper is an average return. Considering you have to invest a minimum of $25 per loan and to properly diversify you should have at least 20-30 loans, that starts to become a serious investment.
This brings me back to my original question: Why do you think that people invest in Prosper (or other lending sites): to help out people who are struggling with their finances and need a helping hand, to make money on non-traditional and somewhat less risky investments, or both? It could be a little bit of one and more of the other (i.e. 60/40 split).