Prosper.com Experiment Update

Just wanted to give an update on my Propser.com Experiment. My goal in this experiment is to get anough $50 loans as a lender where every month I receive at least $50 in principle and interest payments that I can put that back into another $50 loan. So this essentially will keep rolling over every month and start to grow as an investment. Yes that doesn’mt include what happens if there are late payments or defaults and that is why I am calling it an experiment.

I added 28 new $50 loans to my original 8 loans. Here is the breakdown:

36 loans at an average interest rate of 13.8%

Credit Rating for each loan: 2 HR, 5 D, 8 C, 4B, 11 A, 6 AA 

I calculated that I should bring in $52.26 / month in principle and interest on the 3rd of every month. I will reinvest that amount back into another loan immediately.

So I am set up to be a little more conserative with more loans in the higher credit ratings. Out of all these loans only 2 are late. One is a HR (High Risk) credit loan that is in collections, I have pretty much written this one off and have adjusted my experiement to account for that. The other late loan is only a month late. This one usually gets paid, but it is always a month behind, since I don’t think she has enough to make 2 payments to get caught back up. So I end up seeing a late fee payment every month which isn’t a bad thing as long as she keeps paying. All the rest of the loans (34) are in good standing now.

Prosper makes this whole process pretty easy. The only challege is picking the right loan to bid on. My criteria is to avoid anyone that has had a public record or bankrupcy on their record. Hey if they’ve done it once, they might do it again since they are familiar with the process. (I realize that is a blanket statement and probably not statistically true, but I am sticking to it!). I also look for people that have a DTI (Debt-To-Income) ratio of under 40%. At some point that number can get out of control and that person is borrowing to pay other borrowers and can never get out of that hole. Even though HR credit loans are the most attractive from an interest rate perspective I am now not bidding on anything lower than a C credit rating since I can still get a modest interest rate at a lower risk. And the final piece to my bidding strategy? Look for loans that are already 100% funded. I mean hey, if everyone else is bidding it must be a good loan right? Obviuosly I do this with caution. Always read the borrower description, review the credit info and any questions other lenders have asked of that borrower.

We’ll see how this goes. I would like to not have to add any more money to this and just watch it roll over every month, however if I get a high rate of defaults I may think twice on rolling this every month. Check back for updates.

Don’t forget that Prosper is currently offering a $25 bonus if you sign up as a lender.

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NOTE: For posts that contain bonuses, be sure to read the post for bonus expiration dates. Links may work but the bonus may have expired.

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