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’t 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.

Another Free $50 From Sharebuilder

 

Sharebuilder has brought back its $50 new account promo.

Very simple to get: Open a new ShareBuilder Individual, Joint or Custodial Account by 1/15/2008, and we’ll contribute $50 to your investment after you place your first trade.  

I currently use sharebuilder for my ETF funds. They are purchased every week and I just let it go If you haven’t used sharebuilder, they are great in the fact that you can buy partial shares automatically over time. This is a great way to dollar cost average especially considering the volatility in the market recently. They will automatically take the money out of your account and invest in on a regular basis, it pretty much makes investing easy to do.

Sharebuilder $50 Promo Signup Link

I don’t recommend a sharebuilder account if you are going to be an active seller, take a look at Tradeking (see post) ot OptionsXpress (see post) as they have lower commissions. I consider Sharebuilder a buy and hold account.

TradeKing $100 New Account Bonus is Back!

Looks like TradeKing is again offering a $100 bonus when opening new accounts.

 Here is the skinny:

• New accounts must be opened and funded with $2,500
• A minimum balance of $1,000 is required in the account for the first six months
• Must Make 1 Trade in your account
• Bonus paid up to 180 days after executed trade

If this is like the last TradeKing Promo, you will see the $100 bonus paid in less than a week after your first trade, rather then the “up to 180 days” There is no expiration date on this so I imagine it could disappear at any time. So jump on this one before it is gone!

Offer Details and SignUp Link

Happy Trading and collecting that free money!

Prosper.com Experiment

Well after careful review of my Prosper account, I have decided to move a head with my experiment. I currently have 15 loans outstanding with 2 late more than 4 months. Those 2 account for only 4% of my portfolio. If they were to default, I would still be up 7%, so that is still a pretty good return considering.

I have decided to add 20 more loans all at $50 each. So each month, I would receive around $50 in payments to reinvest into another loan. ($50 is the mimimum amount you can loan with Prosper) So essentially this will be a self sustaining investment where I just need to direct the monthy payments into a new loan each month. It will be interesting to see how this will increase in value over time.

I am considering all of this throw-away money since this is obviously a higher risk than just putting this money into a savings account, but if it does well it might provide some revenue generation for me in the long term. Ideally if I could get the value of the account up to $10,000 I could see possibly $500 / month in payments (assuming no defaults). I will keep you posted as to how this plays out.

Prosper.com has a promotion that if you become a new lender you will receive $25 after you fund your first loan. Sign Up Here (you can sign up through that link if you want to be a borrower as well, unfortunetly there is no bonus for being a borrower at this time )

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Free $100 from optionsXpress With New Account

optionsXpress, an online stock and options brokerage, is offering a free $100 when opening a new account. You must deposit a minimum of $500 by 12/31 when the promo expires. You will receive the $100 bonus in your account on or before January 10, 2008.

Promo Details & Sign-up

I have never used these guys so I can’t comment on service. And although they don’t have the lowest commisions of places like Tradeking.com or Firstrade.com, earning 20% on that $500 in a few weeks isn’t too shabby!!

If I Hate Stocks, Where Else Can I Put My Money?

So you don’t want to touch the stock market with a 10 foot pole? Lately I don’t blame you! So what else can you do with your money rather thank stuffing it into your mattress? Well here are some ideas for you. Obviously the more risk you take, the greater reward….

P2P Lending Sites: (High Risk)
P2P (Person To Person) Lending Sites are becoming very popular for people to invest money. These sites give you the chance to act like a small bank and loan money out to indivuidals at a specified interest rate which is paid back over a certain period of time. I currently have money loaned out at Prosper.com. Prosper only does 3 year loans with a minimum of $50 per loan. You can get a great interest rate here, but that does not come without risk of the borrower defaulting or filing for bankrupcy. Prosper does give you credit information on the indivuidal which should help you narrow down your decision. I also suggest that you only loan the minimum of $50 for each loan that you do so you can spread the risk among many different borrowers.

High Yield Savings Accounts: (Low Risk)
If you are not a high risk investor, why not stuff all that money into a Federally Insured High Yield Savings Account? Many of them are still offering in the upwards of 5% APY. One of my favorites is UFBDirect.com. (See my Post) They are currently offering a 5.31% APY with a $1 minimum balance. This is definetly better than keeping it in the Free Checking account!!!

US Savings Bonds: (Low Risk)
Another possibility is investing in the good old US of A. US Savings Bonds are a pretty safe investment since they are backed by the full faith of the US Government. Treasury Direct is an online service offered by the U.S. Department of the Treasury Bureau of the Public Debt as an easy way to purchase and sell bonds online. Depending on the Savings Bond you can probably see interest rates in the 3-5% range. The great thing about savings bonds is that these are longer term savings tools, so if it is hard for you to put money into savings and not spend it, savings bonds can force you to save since most can’t be sold for one year after purchasing without some sort of penalty.

Collections: (Medium Risk)
Many people invest their hard earned money into collecting things. This can be tricky since you need to collect something that will increase in value over time. I used to collect baseball cards, but once people found out that old cards were worth a lot of money they started to collect current year cards which ultimately devauled them. Ebay.com is a great place to help you seek out items for your collection as well as give you a good idea of what you could start collecting. Some things that are poplular these days are old Coca-Cola memorbilia, Hello Kitty Items (don’t ask me why!) and Matchbox Cars.

Item Flipping: (Medium Risk)
Sites like Ebay.com and Craigslist are great ways to buy an item, then turn around and sell it for a profit. Many things that I see do well are cars and furniture. The reason is that the base prices for these items are high enough where you can buy an item, add $200 to the price and resell. But this can be done with anything from baby clothes to antique arcade games. Things you need to consider when item flipping are shipping costs, taxes, and payment methods as they tend to cut into your profits.

Real Estate: (Low Risk)
The reason that I marked this as low risk is that I am assuming that you are investing in your primary home and you are planning on living there for a while. If you are looking to buy and flip land or houses, than that would increase the risk. If you are currently renting, now is the time to buy a house. Prices have softened all over the country and mortgage rates are approaching their historic lows again. If you currently own a house and are looking to move, selling that house could be your biggest challenge. In Chicago, the average house is taking in the upwards of 9+ months to sell.

The above are just a few alternative ways to earn a little extra money on your cash. If you have a great way to invest your money why not comment at let us know! I am always looking for different ways to make some money.

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