Prosper Lending Points to Ponder

I now have 8 active loans. Here's a few tips based on what I've learned to date.

(1) Check out Eric's Credit Community. This site gives a lot of good stats about Prosper lenders and borrowers. Recommend looking at his summary of delinquent loans. One limitation of this site is that some inaccuracies exist in the data that Eric presents. For example, his site lists me as having loaned out $500+ in loans. I've loaned out $377. It seems that he isn't capturing the cases where loans get bid to 100% but get pulled by the lender before Prosper transfers funds to the borrower's account. Absent of this example, much of his other data is invaluable.

If you look at the delinquent loan list, you'll find a common theme: In 79% of the late loan cases, the group leader did not participate in the bidding. If a cook doesn't eat his/her own cooking, are you confident in eating it too? I like to check for this whenever i'm bidding on loans. I typically use my own screen/filter to identify ideal loans; however, I quickly gain a little more confidence in my bid when I see that the group leader is bidding too. The group leader is typically involved in vetting loan applicants (directly or indirectly) and should have the best information to determine whether the risk vs. reward is more favorable for the lender or borrower. This approach has its limitations in that some groups state that they bid on all of their loans (watch out for this).

(2) The proper lending dead-zone occurs during the weekends. I call it a dead-zone b/c I believe that ACH transfers (money) do not occur during this time frame and there's fewer lenders able to lend when loan applications are expiring. My tip: make sure you have at least one increment of your typical bid in your account by Fridays. This way, you can participate in bidding on loan(s) when other people have less capability of bidding and competing against you.

(3) Seeing that the big money likes the same loans as me is reassuring. Right now, "L5" is the biggest lender on Prosper. After I find a loan that I like, I'm a bit more reassured when I see the big lenders, like "L5," bidding on the same loan. This third comment isn't empirically tested to determine validity. While pure conjecture, many people with wealth don't get wealthy by being dummies.

(4) It's my personal opinion that you should stay away from borrower's that are either asking for charity or have a tone similar to "help __ out," "need a break," etc.

(5) It's my personal opinion that you should not bid on business loans when the borrower's APR is greater than what you perceive is a reasoanble profit margin for them.

Feel free to scroll down to my other listings. Many of the recent ones are specific to Prosper lending.