Posts
Friday, November 17, 2006
Hello From The Middle East
I'm almost done w/ my traveling... I'm finally in a place that doesn't block out blogger.com.
Wednesday, November 08, 2006
On Travel
Heading overseas for a bit. Will be in the air and/or without internet for about 2 days minimum.
Tuesday, November 07, 2006
Updated Prosper Lending Strategy (A Collection of Tips)
You can read my latest posting on prosper lending here... You can always come back to the below posting.
Bottom line: I've been lending money on Prosper.com since Apr 2006. Over this time, I've developed a preferred lending style that is discussed below. Some of the tips have already been discussed piece-meal on this blog; however, I feel that it's important to now summarize them in one entry.
Bidding:
(a) Bid 0% on auto funded loans. Reason: Auto-fund loan requests still have the bid-down feature that allows the last bidder (person who first gets loan to 100%) to set a lower interest rate and bump off others who set their lending rates to the borrower's requested rate. If you set your lending rate at 0%, nobody will underbid you. Of course, if everybody bids 0%, then you'll make no money. I'm assuming that at least one person will always bid the borrower's requested rate and thereby prevent the loan from getting bid down to 0%.
(b) Don't unnecessarily tie up your money in bids at the 5-9 day mark on loan requests. The lender's rate will frequently get bid down anyways. It's typically best to bid within 48hrs or less of the loan's closing. There's one exception: Borrowers have the option to accept the current market rate whenever their loan is at 100% funding, regardless of whether it's the 9th or 2nd day of the listing. In these cases, the borrower is either desperate for the money or doesn't have the sense to let the loan get bid down further. Lenders beware! You can get some sweet returns but may be incurring additional risk.
(c) Always ensure you have enough money in your account for at least one bid on the weekend. Reason: Deposits don't get credited to lender's accounts on weekends. This is the lending/borrowing dead zone. You will get less bidding competition on the weekends. Thus, you can potentially lock in some sweeter risk-reward loans if only you have the money to lend.
(d) Don't be scared to bid on loan requests that do not have the bank account verified. Prosper cannot let a loan go to funding until the account is verified. You may tie up your money a few extra days; however, you typically get higher interest rates on these loans.
(e) Don't have your Prosper sixth sense yet? Don't know how to read people. Recommend you review various lender portfolios at Eric's Credit Community. Eric scrapes data from the Prosper website and creates useful borrower and lender stats.
- Lender Stats Table (Ranks lenders by ROI and $ invested to include their bids and holdings)
- Delinquent loans (sorted by group sponsored and non-group sponsored) If you review these, you'll start to develop your Prosper lending 6th sense. You'll also find a few lenders where you favor their lending style thereby allowing you to follow their bids.
(f) Group sponsored loans have a unique feature (sometimes). I prefer to bid on loans where the group leader bids prior to me. That shows me that he/she has confidence in the borrower and feels that the borrower presents a decent risk-reward. Warning: Some group leaders (GL's) autobid on loans for their group. This has less value to me. In these cases I still view the loans favorably. However, I bid w/ narrower % rate spreads b/c I'm somewhat suspicious of the quality of the vetting. Using narrow % rate spreads also allows the lender to more easily bail out of a loan when they see that the GL is no longer bidding. By doing this you have more control and can take action when you see that the GL no longer feels that the loan market rate provides a suitable risk-reward proposition.
(g) Use the "I buy ugly houses" lending strategy to get superior risk-reward loans. Here's my post on the strategy.
(h) In my humble opinion, the following credit grades are roughly equal: AA, A, B, C, D. If you look at Prosper loan performance data, the delinquency rates on these loans all fall within a range of 3-4%. These are very narrow delinquency rates. Thus, you must ask yourself why not bid on the "D" rated individual? You only have an additional 1% (est.) credit late/default risk but roughly an 8% greater interest rate.
(i) The key to identifying and bidding on any loan is looking for what I consider an inflection point. Has the person turned the corner from a credit disaster and is well on their way to financial bliss? Or, are they an "AA" rated individual with a $7600/month mortgage note in California and have depleted their savings?
(j) Consider the implications of the pictures or the absence thereof. Also consider whether or not their decision to autofund is based on desperation or some other reason. For further comments see my postings on the subject (posting one, posting two). Warning: Postings "one" and "two" are not necessarily ground truth. They’re merely observations with an element of conjecture thrown in.
Money Management:
(a) Don't make large lump sum deposits into your Prosper account. Doing so only precludes you from collecting interest on that money in your banking account. Instead it's best to make multiple transfers each week. Keep in mind that 3pm PST is the deadline for submitting transfer requests. Requests submitted after this time incur an extra day of processing.
(b) To get an idea of the best time for bank transfers, you may want to read my post on the subject.
(c) For Small Budget Lenders: If you have a small budget, you can make deposits of as little as $25 (recently reduced from $50). Recommend making $25 deposits when your cash balance and payments in transit add up to $25. This will allow you to have a full $50 to bid in about four or five days.
Groups:
(a) Don't join a group unless you have a need to borrow money. You cannot get any of the group rewards as a lender.
Advanced Search Filters:
(a) Recommend you set up loan search filters in roughly the same manner I outline in paragraph "3" of the following tips post. I still follow the filter strategy mentioned in this post with one main exception. I now bid on loans with DTI's as high as 60% if:
1) they rent
2) their spouse or life mate contributes significantly to household expenses
3) they own or owe on a mortgage but have significant equity (50% or better) that can be tapped in an emergency.
Bottom line: I've been lending money on Prosper.com since Apr 2006. Over this time, I've developed a preferred lending style that is discussed below. Some of the tips have already been discussed piece-meal on this blog; however, I feel that it's important to now summarize them in one entry.
Bidding:
(a) Bid 0% on auto funded loans. Reason: Auto-fund loan requests still have the bid-down feature that allows the last bidder (person who first gets loan to 100%) to set a lower interest rate and bump off others who set their lending rates to the borrower's requested rate. If you set your lending rate at 0%, nobody will underbid you. Of course, if everybody bids 0%, then you'll make no money. I'm assuming that at least one person will always bid the borrower's requested rate and thereby prevent the loan from getting bid down to 0%.
(b) Don't unnecessarily tie up your money in bids at the 5-9 day mark on loan requests. The lender's rate will frequently get bid down anyways. It's typically best to bid within 48hrs or less of the loan's closing. There's one exception: Borrowers have the option to accept the current market rate whenever their loan is at 100% funding, regardless of whether it's the 9th or 2nd day of the listing. In these cases, the borrower is either desperate for the money or doesn't have the sense to let the loan get bid down further. Lenders beware! You can get some sweet returns but may be incurring additional risk.
(c) Always ensure you have enough money in your account for at least one bid on the weekend. Reason: Deposits don't get credited to lender's accounts on weekends. This is the lending/borrowing dead zone. You will get less bidding competition on the weekends. Thus, you can potentially lock in some sweeter risk-reward loans if only you have the money to lend.
(d) Don't be scared to bid on loan requests that do not have the bank account verified. Prosper cannot let a loan go to funding until the account is verified. You may tie up your money a few extra days; however, you typically get higher interest rates on these loans.
(e) Don't have your Prosper sixth sense yet? Don't know how to read people. Recommend you review various lender portfolios at Eric's Credit Community. Eric scrapes data from the Prosper website and creates useful borrower and lender stats.
- Lender Stats Table (Ranks lenders by ROI and $ invested to include their bids and holdings)
- Delinquent loans (sorted by group sponsored and non-group sponsored) If you review these, you'll start to develop your Prosper lending 6th sense. You'll also find a few lenders where you favor their lending style thereby allowing you to follow their bids.
(f) Group sponsored loans have a unique feature (sometimes). I prefer to bid on loans where the group leader bids prior to me. That shows me that he/she has confidence in the borrower and feels that the borrower presents a decent risk-reward. Warning: Some group leaders (GL's) autobid on loans for their group. This has less value to me. In these cases I still view the loans favorably. However, I bid w/ narrower % rate spreads b/c I'm somewhat suspicious of the quality of the vetting. Using narrow % rate spreads also allows the lender to more easily bail out of a loan when they see that the GL is no longer bidding. By doing this you have more control and can take action when you see that the GL no longer feels that the loan market rate provides a suitable risk-reward proposition.
(g) Use the "I buy ugly houses" lending strategy to get superior risk-reward loans. Here's my post on the strategy.
(h) In my humble opinion, the following credit grades are roughly equal: AA, A, B, C, D. If you look at Prosper loan performance data, the delinquency rates on these loans all fall within a range of 3-4%. These are very narrow delinquency rates. Thus, you must ask yourself why not bid on the "D" rated individual? You only have an additional 1% (est.) credit late/default risk but roughly an 8% greater interest rate.
(i) The key to identifying and bidding on any loan is looking for what I consider an inflection point. Has the person turned the corner from a credit disaster and is well on their way to financial bliss? Or, are they an "AA" rated individual with a $7600/month mortgage note in California and have depleted their savings?
(j) Consider the implications of the pictures or the absence thereof. Also consider whether or not their decision to autofund is based on desperation or some other reason. For further comments see my postings on the subject (posting one, posting two). Warning: Postings "one" and "two" are not necessarily ground truth. They’re merely observations with an element of conjecture thrown in.
Money Management:
(a) Don't make large lump sum deposits into your Prosper account. Doing so only precludes you from collecting interest on that money in your banking account. Instead it's best to make multiple transfers each week. Keep in mind that 3pm PST is the deadline for submitting transfer requests. Requests submitted after this time incur an extra day of processing.
(b) To get an idea of the best time for bank transfers, you may want to read my post on the subject.
(c) For Small Budget Lenders: If you have a small budget, you can make deposits of as little as $25 (recently reduced from $50). Recommend making $25 deposits when your cash balance and payments in transit add up to $25. This will allow you to have a full $50 to bid in about four or five days.
Groups:
(a) Don't join a group unless you have a need to borrow money. You cannot get any of the group rewards as a lender.
Advanced Search Filters:
(a) Recommend you set up loan search filters in roughly the same manner I outline in paragraph "3" of the following tips post. I still follow the filter strategy mentioned in this post with one main exception. I now bid on loans with DTI's as high as 60% if:
1) they rent
2) their spouse or life mate contributes significantly to household expenses
3) they own or owe on a mortgage but have significant equity (50% or better) that can be tapped in an emergency.
Updated Prosper Lending Tips (A Summarized Collection of Topics)
You can read my latest posting about prosper here... You can always come to this 2006 posting later.
Bottom line: I've been lending money on Prosper.com since Apr 2006. Over this time, I've developed a preferred lending style that is discussed below. Some of the tips have already been discussed piece-meal on this blog; however, I feel that it's important to now summarize them in one entry.
Bidding:
(a) Bid 0% on auto funded loans. Reason: Auto-fund loan requests still have the bid-down feature that allows the last bidder (person who first gets loan to 100%) to set a lower interest rate and bump off others who set their lending rates to the borrower's requested rate. If you set your lending rate at 0%, nobody will underbid you. Of course, if everybody bids 0%, then you'll make no money. I'm assuming that at least one person will always bid the borrower's requested rate and thereby prevent the loan from getting bid down to 0%.
(b) Don't unnecessarily tie up your money in bids at the 5-9 day mark on loan requests. The lender's rate will frequently get bid down anyways. It's typically best to bid within 48hrs or less of the loan's closing. There's one exception: Borrowers have the option to accept the current market rate whenever their loan is at 100% funding, regardless of whether it's the 9th or 2nd day of the listing. In these cases, the borrower is either desperate for the money or doesn't have the sense to let the loan get bid down further. Lenders beware! You can get some sweet returns but may be incurring additional risk.
(c) Always ensure you have enough money in your account for at least one bid on the weekend. Reason: Deposits don't get credited to lender's accounts on weekends. This is the lending/borrowing dead zone. You will get less bidding competition on the weekends. Thus, you can potentially lock in some sweeter risk-reward loans if only you have the money to lend.
(d) Don't be scared to bid on loan requests that do not have the bank account verified. Prosper cannot let a loan go to funding until the account is verified. You may tie up your money a few extra days; however, you typically get higher interest rates on these loans.
(e) Don't have your Prosper sixth sense yet? Don't know how to read people. Recommend you review various lender portfolios at Eric's Credit Community. Eric scrapes data from the Prosper website and creates useful borrower and lender stats.
- Lender Stats Table (Ranks lenders by ROI and $ invested to include their bids and holdings)
- Delinquent loans (sorted by group sponsored and non-group sponsored)
If you review these, you'll start to develop your Prosper lending 6th sense. You'll also find a few lenders where you favor their lending style thereby allowing you to follow their bids.
(f) Group sponsored loans have a unique feature (sometimes). I prefer to bid on loans where the group leader bids prior to me. That shows me that he/she has confidence in the borrower and feels that the borrower presents a decent risk-reward. Warning: Some group leaders (GL's) autobid on loans for their group. This has less value to me. In these cases I still view the loans favorably. However, I bid w/ narrower % rate spreads b/c I'm somewhat suspicious of the quality of the vetting. Using narrow % rate spreads also allows the lender to more easily bail out of a loan when they see that the GL is no longer bidding. By doing this you have more control and can take action when you see that the GL no longer feels that the loan market rate is no longer a suitable risk-reward proposition.
(g) Use the "I buy ugly houses" lending strategy to get superior risk-reward loans. Here's my post on the strategy.
(h) In my humble opinion, the following credit grades are roughly equal: AA, A, B, C, D. If you look at each Prosper loan performance data. The delinquency rates on these loans all fall within a range of 3-4%. These are very narrow delinquency rates. Thus, you must ask yourself why not bid on the "D" rated individual. You only have a 1% (est.) credit default risk but a roughly an 8% greater interest rate.
(i) The key to identifying and bidding on any loan is looking for what I consider an inflection point. Has the person turned the corner from a credit disaster and is well on their way to financial bliss. Or, are they an "AA" rated individual with a $7600/month mortgage note in California and have depleted their savings?
(j) Consider the implications of the pictures or the absence thereof. Also consider whether or not their decision to autofund is based on desperation or some other reason. For further comments see my postings on the subject (posting one, posting two). Warning: Postings "one" and "two" are not necessarily ground truth. They’re merely observations with an element of conjecture thrown in.
Money Management:
(a) Don't make large lump sum deposits into your Prosper account. Doing so only precludes you from collecting interest on that money in your banking account. Instead it's best to making multiple transfers each week. Keep in mind that 3pm PST is the deadline for submitting transfer requests. Requests submitted after this time incurs an extra day of processing.
(b) To get an idea of the best time for bank transfers, you may want to read my post on the subject.
(c) For Small Budget Lenders: If you have a small budget, you can make deposits of as little as $25 (recently reduced from $50). Recommend making $25 deposits when your cash balance and payments in transit add up to $25. This will allow you to have a full $50 to bid in about four or five days.
Groups:
(a) Don't join a group unless you have a need to borrow money. You can get any of the group rewards as a lender.
Advanced Search Filters:
(a) Recommend you set up loan search filters in roughly the same manner I outline in paragraph "3" of the following tips post. I still follow the filter strategy mentioned in this post with one main exception. I now bid on loans with DTI's as high as 60% if:
1) they rent
2) their spouse or life mate contributes significantly to household expenses
3) they own or owe on a mortgage but have significant equity (50% or better) that can be tapped in an emergency.
Bottom line: I've been lending money on Prosper.com since Apr 2006. Over this time, I've developed a preferred lending style that is discussed below. Some of the tips have already been discussed piece-meal on this blog; however, I feel that it's important to now summarize them in one entry.
Bidding:
(a) Bid 0% on auto funded loans. Reason: Auto-fund loan requests still have the bid-down feature that allows the last bidder (person who first gets loan to 100%) to set a lower interest rate and bump off others who set their lending rates to the borrower's requested rate. If you set your lending rate at 0%, nobody will underbid you. Of course, if everybody bids 0%, then you'll make no money. I'm assuming that at least one person will always bid the borrower's requested rate and thereby prevent the loan from getting bid down to 0%.
(b) Don't unnecessarily tie up your money in bids at the 5-9 day mark on loan requests. The lender's rate will frequently get bid down anyways. It's typically best to bid within 48hrs or less of the loan's closing. There's one exception: Borrowers have the option to accept the current market rate whenever their loan is at 100% funding, regardless of whether it's the 9th or 2nd day of the listing. In these cases, the borrower is either desperate for the money or doesn't have the sense to let the loan get bid down further. Lenders beware! You can get some sweet returns but may be incurring additional risk.
(c) Always ensure you have enough money in your account for at least one bid on the weekend. Reason: Deposits don't get credited to lender's accounts on weekends. This is the lending/borrowing dead zone. You will get less bidding competition on the weekends. Thus, you can potentially lock in some sweeter risk-reward loans if only you have the money to lend.
(d) Don't be scared to bid on loan requests that do not have the bank account verified. Prosper cannot let a loan go to funding until the account is verified. You may tie up your money a few extra days; however, you typically get higher interest rates on these loans.
(e) Don't have your Prosper sixth sense yet? Don't know how to read people. Recommend you review various lender portfolios at Eric's Credit Community. Eric scrapes data from the Prosper website and creates useful borrower and lender stats.
- Lender Stats Table (Ranks lenders by ROI and $ invested to include their bids and holdings)
- Delinquent loans (sorted by group sponsored and non-group sponsored)
If you review these, you'll start to develop your Prosper lending 6th sense. You'll also find a few lenders where you favor their lending style thereby allowing you to follow their bids.
(f) Group sponsored loans have a unique feature (sometimes). I prefer to bid on loans where the group leader bids prior to me. That shows me that he/she has confidence in the borrower and feels that the borrower presents a decent risk-reward. Warning: Some group leaders (GL's) autobid on loans for their group. This has less value to me. In these cases I still view the loans favorably. However, I bid w/ narrower % rate spreads b/c I'm somewhat suspicious of the quality of the vetting. Using narrow % rate spreads also allows the lender to more easily bail out of a loan when they see that the GL is no longer bidding. By doing this you have more control and can take action when you see that the GL no longer feels that the loan market rate is no longer a suitable risk-reward proposition.
(g) Use the "I buy ugly houses" lending strategy to get superior risk-reward loans. Here's my post on the strategy.
(h) In my humble opinion, the following credit grades are roughly equal: AA, A, B, C, D. If you look at each Prosper loan performance data. The delinquency rates on these loans all fall within a range of 3-4%. These are very narrow delinquency rates. Thus, you must ask yourself why not bid on the "D" rated individual. You only have a 1% (est.) credit default risk but a roughly an 8% greater interest rate.
(i) The key to identifying and bidding on any loan is looking for what I consider an inflection point. Has the person turned the corner from a credit disaster and is well on their way to financial bliss. Or, are they an "AA" rated individual with a $7600/month mortgage note in California and have depleted their savings?
(j) Consider the implications of the pictures or the absence thereof. Also consider whether or not their decision to autofund is based on desperation or some other reason. For further comments see my postings on the subject (posting one, posting two). Warning: Postings "one" and "two" are not necessarily ground truth. They’re merely observations with an element of conjecture thrown in.
Money Management:
(a) Don't make large lump sum deposits into your Prosper account. Doing so only precludes you from collecting interest on that money in your banking account. Instead it's best to making multiple transfers each week. Keep in mind that 3pm PST is the deadline for submitting transfer requests. Requests submitted after this time incurs an extra day of processing.
(b) To get an idea of the best time for bank transfers, you may want to read my post on the subject.
(c) For Small Budget Lenders: If you have a small budget, you can make deposits of as little as $25 (recently reduced from $50). Recommend making $25 deposits when your cash balance and payments in transit add up to $25. This will allow you to have a full $50 to bid in about four or five days.
Groups:
(a) Don't join a group unless you have a need to borrow money. You can get any of the group rewards as a lender.
Advanced Search Filters:
(a) Recommend you set up loan search filters in roughly the same manner I outline in paragraph "3" of the following tips post. I still follow the filter strategy mentioned in this post with one main exception. I now bid on loans with DTI's as high as 60% if:
1) they rent
2) their spouse or life mate contributes significantly to household expenses
3) they own or owe on a mortgage but have significant equity (50% or better) that can be tapped in an emergency.
Monday, November 06, 2006
A Prosper Lesson Learned: I'm Kicking Myself For Lending Money To One Person
Read my latest post on prosper here... You can always come back to this 2006 post later.
Bottom Line: I recommend against lending money to people who need to buy a car w/ a Prosper loan.
A car is a "hard asset" that can be repossessed if somebody goes delinquent on payment(s). No matter where you go, you can almost always find somebody willing to sell you a car and finance it too!
To frequently I see people w/o money buying or leasing cars they have no business with (vettes, escalades, lexus's, bmw's, etc). I know there's dealers out there that will finance a car, albeit at a high rate, for most anybody.
So, when somebody with bad credit or no credit wants to borrow money for a car, they've probably been turned down already by dealers. I suspect, their credit and/or income reliability may be much worse than what's represented (or not represented) in their Prosper loan request. Of course, there may be the case where the person may have found a good deal on a private sale, with limited financing opportunities. This is up to you... I've been burned once, and i'm staying away from them.
Ok, why am I saying this. Well, my only delinquency is a person borrowing money for a van. He's also the only "no credit" (NC) rated person that I lent to. He's retired Air Force. I guess I have a soft spot for prior military since i'm active military.
Here's my one delinquent: (Link was listed but removed on recommendation of others).
Summary of my loan portfolio:
a) 89 active loans w/ six more in review for funding
b) 20.32% return since starting in Apr 2006 (% per Prosper Performance Table)
c) One delinquent (six weeks delinquent)
Now, I'm getting to where I prefer "credit card consolidation" loans over all others. I prefer these when the tone of their application is remorseful for the situation they got themselves into, and THEY SPECIFICALLY STATE THEY'RE USING THE LOAN TO PAY OFF OLD DEBT. Of course, they could always lie to you and simply pay off the cards to continue shopping at Nordstroms.... It's one of the risks I choose to take.
Good luck!
Bottom Line: I recommend against lending money to people who need to buy a car w/ a Prosper loan.
A car is a "hard asset" that can be repossessed if somebody goes delinquent on payment(s). No matter where you go, you can almost always find somebody willing to sell you a car and finance it too!
To frequently I see people w/o money buying or leasing cars they have no business with (vettes, escalades, lexus's, bmw's, etc). I know there's dealers out there that will finance a car, albeit at a high rate, for most anybody.
So, when somebody with bad credit or no credit wants to borrow money for a car, they've probably been turned down already by dealers. I suspect, their credit and/or income reliability may be much worse than what's represented (or not represented) in their Prosper loan request. Of course, there may be the case where the person may have found a good deal on a private sale, with limited financing opportunities. This is up to you... I've been burned once, and i'm staying away from them.
Ok, why am I saying this. Well, my only delinquency is a person borrowing money for a van. He's also the only "no credit" (NC) rated person that I lent to. He's retired Air Force. I guess I have a soft spot for prior military since i'm active military.
Here's my one delinquent: (Link was listed but removed on recommendation of others).
Summary of my loan portfolio:
a) 89 active loans w/ six more in review for funding
b) 20.32% return since starting in Apr 2006 (% per Prosper Performance Table)
c) One delinquent (six weeks delinquent)
Now, I'm getting to where I prefer "credit card consolidation" loans over all others. I prefer these when the tone of their application is remorseful for the situation they got themselves into, and THEY SPECIFICALLY STATE THEY'RE USING THE LOAN TO PAY OFF OLD DEBT. Of course, they could always lie to you and simply pay off the cards to continue shopping at Nordstroms.... It's one of the risks I choose to take.
Good luck!
Friday, November 03, 2006
My Annual Trip to the Movie Theater. The Movie That Gets Me Off the Netflix and Into the Theater
Joel Siegel, movie critic of Good Morning America, says this movie is the funniest thing he's seen since the Marx Brothers in Laurel and Hardy. Now this guy has seen a lot of movies. I'll go w/ his recommendation.
Joel's review.
My Biggest Pet Peeve w/ Prosper.com (Peer-to-Peer Lending)
Pet Peeve: My biggest pet peeve is not the fact that Prosper doesn't offer interest on unobligated funds. It's not the lengthy period of ACH transfers...
My biggest pet peeve are inconsiderate borrowers. Why don't borrowers who are late tell lenders why? They could change their profile to tell people up front what's going on and their own forecasted prognosis? It's the only considerate thing to do. BAD NEWS DOESN'T GET ANY BETTER WITH TIME.
Prosper member "i" hits the nail on the head with his statement:
"To Those Whom I Choose to Fund:
You have given to me your word. I am demonstrating my trust in you by allocating to you temporary control of money that I worked hard to earn. You now have an opportunity to show the strength of your character to me and to others. Please do not fail me. While I can live with some losses here, your character cannot!"
While, the borrowers may not necessarily understand that they gave their word, per se, they do a promissory note. This is virtually the same thing.
My biggest pet peeve are inconsiderate borrowers. Why don't borrowers who are late tell lenders why? They could change their profile to tell people up front what's going on and their own forecasted prognosis? It's the only considerate thing to do. BAD NEWS DOESN'T GET ANY BETTER WITH TIME.
Prosper member "i" hits the nail on the head with his statement:
"To Those Whom I Choose to Fund:
You have given to me your word. I am demonstrating my trust in you by allocating to you temporary control of money that I worked hard to earn. You now have an opportunity to show the strength of your character to me and to others. Please do not fail me. While I can live with some losses here, your character cannot!"
While, the borrowers may not necessarily understand that they gave their word, per se, they do a promissory note. This is virtually the same thing.
Here's a Good Policy Shift by Prosper.com
In the words of Secretary of Defense Rumsfeld, the worst things are those that you "don't know you don't know." Sounds like a Bushism to me but anyways, here's a previous unknown that I learned today while perusing the Prosper help section (I'm now wonder why Prosper didn't highlight this in a "News" email to me).
Prosper has lowered the minimum dollar amount for incoming transfers. In the past, the minimum was $50. Now, the minimum is $25. Prosper's outgoing minimum has always been $25 (at least since I joined). Perhaps this can be interpretted as a small concession to those that are fed up with Prosper not paying interest on unobligated funds.
Now a decent strategy for small timers would be to transfer $25 into their accounts as soon as their "cash balance" and "payments in transit" add up to $25. Previously, i've been pumping in increments of $50+ in order to have at least $100 (2 bids) in my account at all time.
This policy shift helps me and others who are in that end of the year crunch for maxing their 401k.
Prosper has lowered the minimum dollar amount for incoming transfers. In the past, the minimum was $50. Now, the minimum is $25. Prosper's outgoing minimum has always been $25 (at least since I joined). Perhaps this can be interpretted as a small concession to those that are fed up with Prosper not paying interest on unobligated funds.
Now a decent strategy for small timers would be to transfer $25 into their accounts as soon as their "cash balance" and "payments in transit" add up to $25. Previously, i've been pumping in increments of $50+ in order to have at least $100 (2 bids) in my account at all time.
This policy shift helps me and others who are in that end of the year crunch for maxing their 401k.
Putting Lipstick On The Pig: Prosper May Spruce Up Your Underperforming Loan Summary Section Without Your Knowledge
Whether you know it or not, your delinquent loans MA Y completely disappear from your loan summary section. Here's the details from Prosper's website:
Loans delinquent for 4 months will be sold on the open market to a debt buyer...
Many people probably don't realize this b/c there are so few loans that are in a delinquency status of 3+ months (81 loans, 2.35% of all funded loans).
This policy may be good for lenders and Prosper. I wonder whether or not this will be highlighted under the loan summary section. Or, will Prosper simply allow these delinquent loans to disappear from the loan summary section? Chances are that the delinquent account may just disappear and the lender may have to figure it out for themselves. If the lender is not astute, they may think that the delinquent account is now current. LENDER BEWARE!
Plea to Lenders: Don't let Prosper allow to mask these loan sales. If it's not specifically addressed in your loan summary, complain to Prosper. Have them highlight this in the loan summary section. They should include a section stating: "# Loans Sold."
Loans delinquent for 4 months will be sold on the open market to a debt buyer...
- After four months of delinquency for any single payment, your loan will be sold to a debt buyer and any proceeds will be distributed to lenders.
- Your delinquency will be reported to Experian, Prosper's credit reporting agency partner, and will appear in your credit history. Your 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."
Many people probably don't realize this b/c there are so few loans that are in a delinquency status of 3+ months (81 loans, 2.35% of all funded loans).
This policy may be good for lenders and Prosper. I wonder whether or not this will be highlighted under the loan summary section. Or, will Prosper simply allow these delinquent loans to disappear from the loan summary section? Chances are that the delinquent account may just disappear and the lender may have to figure it out for themselves. If the lender is not astute, they may think that the delinquent account is now current. LENDER BEWARE!
Plea to Lenders: Don't let Prosper allow to mask these loan sales. If it's not specifically addressed in your loan summary, complain to Prosper. Have them highlight this in the loan summary section. They should include a section stating: "# Loans Sold."
Thursday, November 02, 2006
I Just Learned Something New About Prosper.com "Group Rewards"
Please disregard some of my prior comments about Prosper "group rewards." Prior to yesterday's post, I previously took the liberty of interpreting prosper loan payment tables literally for what is listed in my Prosper account. On each loan payment, I'd see that each borrower would make a payment but Prosper would make deductions periodically for non sufficient funds (NSF) and "group rewards." Seeing this, I was psst off that I was paying "group rewards."
I spoke w/ a Prosper rep yesterday and he assured me that "group rewards" are paid strictly by borrowers and are included as a supplemental amount in payments borrowers make to Prosper.
That stated, I am continually unable to "check-book" balance the differences between my loan portfolio "historical performance" and "net interest and fees paid on loans to date" sections of Prosper screen displays.
- The "historical performance" is found by going to "your account," "lending," "loan summary," and finally "historical performance."
- The "net interest ..." is found at the bottom of the "loan summary" section.
The Prosper rep told me that the differences between these two reside in the fact that "historical performance" forecasts the net gains you SHOULD have in your account if all payments are current."
Even with this new knowledge, i'm still puzzled and am crunching the numbers. I'm trying to mathematically account for every penny in the difference between the two. If others out there can account for the differences in their accounts please comment below or email me. I'm exceptionally curious and annoyed w/ this.
I spoke w/ a Prosper rep yesterday and he assured me that "group rewards" are paid strictly by borrowers and are included as a supplemental amount in payments borrowers make to Prosper.
That stated, I am continually unable to "check-book" balance the differences between my loan portfolio "historical performance" and "net interest and fees paid on loans to date" sections of Prosper screen displays.
- The "historical performance" is found by going to "your account," "lending," "loan summary," and finally "historical performance."
- The "net interest ..." is found at the bottom of the "loan summary" section.
The Prosper rep told me that the differences between these two reside in the fact that "historical performance" forecasts the net gains you SHOULD have in your account if all payments are current."
Even with this new knowledge, i'm still puzzled and am crunching the numbers. I'm trying to mathematically account for every penny in the difference between the two. If others out there can account for the differences in their accounts please comment below or email me. I'm exceptionally curious and annoyed w/ this.
Wednesday, November 01, 2006
Prosper.com "Group Rewards" Apply Only to Borrowers (Not Lenders)
I recently blogged about joining a peer-to-peer lending group on Prosper. I like PsychDoc's group and respect it; however, I had an incorrect underlying assumption.
I frequently noticed that some groups at Prosper.com have 100% shared rewards. So, I thought, i'm a lender, I bid on PsychDoc's loans anyways... Why not juice up my returns by joining his group?
I was sooo wrong. Group rewards ARE NOT 100% SHARED (no matter the group, no matter what's advertised)!! They are only shared amongst those people that have ACTIVE LOANS. If you're a borrower, you'd say NO DUH! For those w/ training in Economics, you might say NO DUH. I too know the free-rider principle from Economics. However, I took Prosper.com at their word (100% shared rewards).
Note: PsychDoc did nothing wrong in advertising 100% shared rewards, many other groups do this. It's more so a matter of understanding Prosper.com policy.
Group rewards are shared by buying down the interest rate of borrowers. Next time you look at a group sponsored loan application, pay attention to the interest rate spread between lender and borrower rates. When a loan is funded, a borrower receives NO shared rewards until after 3 months. Prosper states that this is policy to ensure that the listing is a valid. After the 3rd month, the borrower will see that their interest expense is partially paid down by shared "group rewards" (provided their group shares rewards). I'm not sure how this is displayed. The amount of reward should remain level until their last payment. At that time, any additional rewards that may have piled up will be credited in lump sum.
So now, there's no point of me being in a group, unless I need to borrow money.
Disclaimer: The extent of my knowlege on the subject above is based exclusively on one phone call to Prosper. Some borrowers may be able to better detail how group rewards work. If I made any mistakes, please address them in my comments section below.
I frequently noticed that some groups at Prosper.com have 100% shared rewards. So, I thought, i'm a lender, I bid on PsychDoc's loans anyways... Why not juice up my returns by joining his group?
I was sooo wrong. Group rewards ARE NOT 100% SHARED (no matter the group, no matter what's advertised)!! They are only shared amongst those people that have ACTIVE LOANS. If you're a borrower, you'd say NO DUH! For those w/ training in Economics, you might say NO DUH. I too know the free-rider principle from Economics. However, I took Prosper.com at their word (100% shared rewards).
Note: PsychDoc did nothing wrong in advertising 100% shared rewards, many other groups do this. It's more so a matter of understanding Prosper.com policy.
Group rewards are shared by buying down the interest rate of borrowers. Next time you look at a group sponsored loan application, pay attention to the interest rate spread between lender and borrower rates. When a loan is funded, a borrower receives NO shared rewards until after 3 months. Prosper states that this is policy to ensure that the listing is a valid. After the 3rd month, the borrower will see that their interest expense is partially paid down by shared "group rewards" (provided their group shares rewards). I'm not sure how this is displayed. The amount of reward should remain level until their last payment. At that time, any additional rewards that may have piled up will be credited in lump sum.
So now, there's no point of me being in a group, unless I need to borrow money.
Disclaimer: The extent of my knowlege on the subject above is based exclusively on one phone call to Prosper. Some borrowers may be able to better detail how group rewards work. If I made any mistakes, please address them in my comments section below.
The Best Think I Told My Wife Since Getting Married (Per Her)
I'm on vacation till Monday, and this morning I had the liberty of lounging on the couch while my wife got ready for work. I noticed that she was steadily progressing with her hair, makeup, coffee, etc. but continued to cycle between different outfits.
I followed her into our walk-in closet to give her a hug / investigate. Perhaps I felt guilty lounging around while she works, but I said:
"Maybe we should go shopping so that (insert spouse's pet name) has new clothes"
Some guys might say, so what I do that all the time. Or they may highlight that I said MAYBE, and thus can back out of it!
I'm a frugal guy and I loathe shopping and it becomes even worse if the primary shopper is indecisive. LOL. I better stop there or I might start losing the points I scored w/ her this morning.
I followed her into our walk-in closet to give her a hug / investigate. Perhaps I felt guilty lounging around while she works, but I said:
"Maybe we should go shopping so that (insert spouse's pet name) has new clothes"
Some guys might say, so what I do that all the time. Or they may highlight that I said MAYBE, and thus can back out of it!
I'm a frugal guy and I loathe shopping and it becomes even worse if the primary shopper is indecisive. LOL. I better stop there or I might start losing the points I scored w/ her this morning.
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