Personal loans are losing popularity with investors at the moment, and some online lenders are feeling the blow. As most of us know, the marketplace for personal loans is dynamic, with ebbs and flows tied to the state of the economy, interest rates, the availability of capital and other factors. Prosper Marketplace, the second-largest provider of online personal loans, is responding to the current decline in loan volume by refocusing its business, closing some offices, reshuffling executives and eliminating 171 jobs. Even it's CEO will be forgoing his salary this year.

Prosper is headquartered in San Francisco, California. It plans to close down its unit, located in Utah, that specializes in personal loans for medical procedures. Job cuts of 14 percent will also take place at its headquarters and in its Phoenix office, according to Aaron Vermut, the company's CEO. Mr. Vermut sent an email announcing the moves, saying that Prosper would focus on its core business, consumer loans, due to tight capital markets.

Prosper had in recent years experienced rapid growth. In 2015, Prosper's staff tripled to 619. It also purchased two companies:

  • Billguard Inc., a personal-finance startup
  • American Healthcare Lending LLC, a provider of medical loans

Prosper makes money by earning interest on its loans, and by selling its loans to investors. This business model depends on investor sentiment, which lately has softened, precipitating the company's current retrenchment. Investors who in the past were eager to buy up personal loan notes have lost some of their enthusiasm in light of competing returns from corporate junk bonds and other forms of credit.

Last year, Prosper had a value of $1.9 billion, and raised $165 million in funds from several investment firms and banks, including J.P. Morgan Chase, Credit Suisse, USAA and SunTrust Banks.

Founded in 2006, the company has yet to turn a profit, even though it had $6.1 billion in loan originations in 2015, more than double the amount issued in its initial year. 2015 revenue was $204 million, but losses grew to $26 million from only $3 million in 2014.

The developments at Prosper followed a report on Monday that OnDeck Capital, an online business lender, experienced a decline in investor demand, causing it to cut loan growth projections for 2016 and sending its share prices tumbling by almost a third of their value.

This occurred despite the fact that OnDeck's lending grew by 37 percent, thanks to internally financed loans. The market leader, LendingClub, which saw its shares swoon by 10 percent, will announce its quarterly financial results next week.

Prosper's staff cuts will focus on human resources, business development, marketing and a handful of engineers. Instead of expanding some of its new office space, Prosper will instead sublease the property. Departing executives include the head of business development, Itzik Cohen, and chief risk officer Josh Tonderys. The Utah office will be shut only months after it was chosen to be the company's sales headquarters.

Prosper's future plans include making loans for surgery patients, but doing so through its core consumer loan product instead of lending directly to doctors. Its rollout of Prosper Daily, a mobile app to monitor its customers' finances, will continue as planned.

Do you need a personal loan? Use a personal loan site like GET.com to compare the best personal loan rates in the market. To learn more about persona loans, check out our simple guide to personal loans.

Sometimes it's a better idea to use a credit card for a small loan instead of getting a personal loan. To find out what will benefit your situation the most, take a look at the pros and cons of credit cards vs personal loans.