Prosper.com Experiment Update II

(For more detail, see these previous posts Prosper.com Experiment, Prosper.com Experiment Update)

Well so far the experiment is moving along smoothly. I have received my first $50 in payments yesterday which I used to bid on another loan (Credit Rating: AA @ 11.25%). All loans are now current and none are late which is great news since my one late payer doubled up on her January payment and is now up to date.

Since the $50 in payments I received is made up of prinicpal and interest, I have decided upon this strategy for adding the new loan every month:

• The first two loans, over the next 2 months, will be targeted at credit grade C or Higher, with a tendancy to choose AA, A or B.
• The third loan, in three months, will get a little riskier and take someone with a HR credit rating assuming their credit stats don’t have any glaring concerns.
• I will then repeat with 2 higher credit loans and then a third with a high risk borrower.

This three month cycle of adding two safe loans and one risky loan to my portfolio should help keep my risk low while slightly improving my average interest rate. Only time will tell how this will work out in the end, especially if we are approaching a recession. Remember, most of these P2P lending sites have not been through an economic slowdown. Hopefully things will work out for the best and I will keep updating you on my progress here.

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.

LendingClub Bonus Update

It looks like LendingClub has sweetend the pot on its bonus offer when you open a new account.

They are now offering 5% of anything you lend over $5000.  So, for example, if you lend $7,500 Lending Club will credit your account with $7,500 * 5% or $375. You need to subimt your loan bids by February 3rd, 2008 to receive the 5%. LendingClub will notify you of the amount of your bonus by the end of day, Friday, February 8th, 2008. Not a bad deal if you were going to loan out the money anyway.

If you are not willing to part with more than 5k, they are still offering the following signup bonuses when you lend less:

$25 bonus when you open a lender account with $1-$999

$50 bonus when you open a lender account with $1,000 or more

I have already dropped $500 into 20 various loans and have received my $25 Bonus. We’ll see how this works out.

LendingClub.com $25 Signup Bonus Paid Today

Wanted to give an update to my earlier post about the $25 Lending Club Bonus promo. After logging into my account I noticied that I received the $25 bonus today.

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(Click for larger image)

All I did was open a LendingClub account, add my bank, verify it, and transfer in $30. (you only need to transfer in $1 to get the bonus, but I put in more to test their site out with a small loan) Very Simple! And they even posted the bonus to my linked checking account (I blocked it out for privacy sake) instead of keeping it in my lending club account. Not sure why they did that since I thought they would want me to put that bonus back into LendingClub. I am gonna do it anyway! The loan process was very easy and I am currently waiting to see if my bid for the loan gets funded.

That was some of the easiest free money I have made in a while! And remember if you fund the account with $1000 you can get $50 instead of $25.

Prosper.com Experiment

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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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LendingClub.com $25 Signup Bonus

LendingClub, a P2P lending site similiar to Prosper.com, is offering a $25 bonus for new accounts after you deposit at least $1 into your account.

As you know I have quite a few loans out with Prosper.com. I like the idea of P2P lending and am looking at putting some more money out there. Now that LendingClub has come around, I am thinking of trying them out with the money I would have directed toward Prosper. I recently signed up with them to get in on this bonus and am waiting for my Bank to be verfied.

You can then increase your earnings from Lending Club by refering others to receive referral bonuses. Here are the details:

When you refer friends to Lending Club and they become borrowers or lenders, we will deposit a bonus into each of your Lending Club accounts. You will each earn:

• $25 when your friend successfully submits a loan application
• $25 when your friend opens a lender account with $1-$999
• $50 when your friend opens a lender account with $1,000 or more

There is no obligation here. At worst case you at least get a free $25 if you decide not to be come a lender or a borrower, just add that $1 to get your $25. And hey, that is FREE MONEY!

Sign Up Here!

EDIT: My $25 bonus was paid today.

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