Wow... This is probably the worst thing I can imagine someone doing. Let me step back a few yards and explain what this basically means. So here we are online in cyber space lending money to strangers who may or may not exist. We leave the fraud part to Prosper.com and we get to read a little about the borrower before we lend. Now we can just toss money in blindly and walk away and act like its some sort of retirement plan? Call me crazy but Id like to know where my money is going and to who.
At second look it gets a little better. This will give new lenders a learning curve and alow them to find a strategy that works for them before they pick the bad loans on their own. At least they will be able to blame the portfolio picker for some time.
There are 4 basic portfolio types that have been selected by prosper.com
Conservative: This type of portfolio bids primarily on very low risk loans ( AA or A) credit ratings and offers a 8% + ROI
Balanced : Has a mix of A and B credit grades offering 9% +
Moderate : Has a mix of A, B and C credit grades with a slightly higher risk your return will be only .86% higher
Aggressive : Now this is where it gets interesting. Here we are bidding on B, C, and D credit grades and which could have some current delinquency's. There is a much larger risk here and your ROI only goes up to a estimated 10.93% currently 10/31/07
Prosper also allows for fully customized portfolio planners for your specific risk tolerance. If you have a stomach for some serious risk prosper has the borrowers offering up to 36% depending on the state in which the borrower resides.
This is a all new plan for prosper. I see great upsides for new lenders but I suggest finding your own lending style. Formulas don't look at a listing and see a picture of someone with a Halloween costume on that is trying to fund the next widget start up company. It also doesn't ask the borrowers questions like we are currently able to do.
Happy Lending
Wednesday, October 31, 2007
Tuesday, October 30, 2007
Monthly Estimated Return on Investment
So its the end of the month and it looks like I had another great month with everyone making their payments on time. My Estimated Return on Investment or ROI has steadily climbed this month. My loans have aged to an average of 286 day old. This and everyone making their payments on time and no further lates or defaults gives my portfolio and instant boost of ROI.
My current ROI at the end of October is according to www.lendingstats.com is between 9.9% and 10.5% with a average loan credit rating of B. What does this all mean? Well simply put lending stats uses a advanced formula that was just recently updated to try and estimate given your loans performance how many will go late or default and then output a estimate on ROI. My performance here on prosper.com has been decent. I have only had one default to date with a total of 48 loans.
Using the lendingstats.com formula I am looking to out pace the Experian ROI which is rather weird but Ill take the optimistic look this time. My average lending rate is about 13% after accounting for future lates and defaults based on my personal lending history I should get a healthy double digit return.
Looking a bit deeper at my personal portfolio my oldest current loan is 553 days and counting and my current lender rank in the prosper.com community is 6748. I plan to be within the top 5000 by the end of the year using the lending habits mentioned earlier.
My current ROI at the end of October is according to www.lendingstats.com is between 9.9% and 10.5% with a average loan credit rating of B. What does this all mean? Well simply put lending stats uses a advanced formula that was just recently updated to try and estimate given your loans performance how many will go late or default and then output a estimate on ROI. My performance here on prosper.com has been decent. I have only had one default to date with a total of 48 loans.
Using the lendingstats.com formula I am looking to out pace the Experian ROI which is rather weird but Ill take the optimistic look this time. My average lending rate is about 13% after accounting for future lates and defaults based on my personal lending history I should get a healthy double digit return.
Looking a bit deeper at my personal portfolio my oldest current loan is 553 days and counting and my current lender rank in the prosper.com community is 6748. I plan to be within the top 5000 by the end of the year using the lending habits mentioned earlier.
Banks Say No? Prosper Lenders Says Yes!
So heres the scoop on Prosper.com borrowers. They have usually been refused by local and even some online banks for a number of reasons. The most common reason is bad credit in the past. Prosper.com lenders are able to look past that and into the borrowers story. I myself try not to read to much into the story but if they mention something that I prefer not to lend for I skip on to the next listing. The next most common case is a tough one its the borrowers with very little credit history. This causes them in some cases to have a low credit score and to pay much higher rates but as most banks wont lend to these people lenders on prosper may.
Now why would anyone want to lend to someone that the banks will not. Its all about the interest rate. In the loan range that I target current rates are anywhere from 7.98% to 24.67% for the best credit to the worst. There is one small problem with this rate.. its a complete gamble but its a cheap one. The minimum bid currently on prosper is $50 so its a $50 bet that could potentially work for a length of 3 years. each month collecting a little piece of that bet back plus interest.
To date *(Oct 31, 2007) $98 Million have been lent via Prosper.com with the person to person lending system that they have pioneered. From anything from a diamond ring to refinancing a mortgage.
Its called the eBay of money and there is good reason. A borrower will post a listing very similar to that of a eBay listing and tell a little about him or herself. They will post a requested rate and launch the listing for lenders to see. Each lender can bid anywhere from $50 to the entire amount of the loan. It gets very interesting torwards the end of the listing time as more bids come in teh rate for the borrower goes down and so do monthly payments for them.
Now why would anyone want to lend to someone that the banks will not. Its all about the interest rate. In the loan range that I target current rates are anywhere from 7.98% to 24.67% for the best credit to the worst. There is one small problem with this rate.. its a complete gamble but its a cheap one. The minimum bid currently on prosper is $50 so its a $50 bet that could potentially work for a length of 3 years. each month collecting a little piece of that bet back plus interest.
To date *(Oct 31, 2007) $98 Million have been lent via Prosper.com with the person to person lending system that they have pioneered. From anything from a diamond ring to refinancing a mortgage.
Its called the eBay of money and there is good reason. A borrower will post a listing very similar to that of a eBay listing and tell a little about him or herself. They will post a requested rate and launch the listing for lenders to see. Each lender can bid anywhere from $50 to the entire amount of the loan. It gets very interesting torwards the end of the listing time as more bids come in teh rate for the borrower goes down and so do monthly payments for them.
Sunday, October 28, 2007
$500 Winter Gamble
So the Winter season is upon us and I feel like picking some Prosper.com loans to fund. With the Holidays coming I have to tighten my standards for lending. Lending is a tricky thing to do. There are many life events that can affect peoples ability to pay me back. Christmas is the biggest. MOst middle income family's that with wander onto the Prosper site to borrow a few dollars this holiday season will likely already have a high percentage of their income already dedicated to credit cards and other bank loans as well as possibly requesting multiple lines of credit in other places than prosper at the same time. So the trick is to set yourself some basic standards and do not for any reason deviate from them.
The first set of my personal lending rules are a bit harsh but when you are dealing with money its always about business and their ability to pay back. If I have limited information to work with I have to start somewhere.
Diamond Rings - I will not for any reason ever fund a loan that is using the funds to purchase a diamond ring for engagement. I have nothing against marriage. In fact I think it should be at the top of everyones life goals to share a great life with the opposite sex. With the marriage failure rate at a massive 50% I cant take that chance for a unsecured loan.
Start ups - With the current business failure stats reading that only 1 in 10 businesses make it past 5 years again not a chance that I want to take. Although I did make 1 exception in the past for a Mexican Restaurant in Texas that of course let me down and filed for bankruptcy this past March. Lesson learned. On the upside I will lend to established businesses that are looking to make some improvements to increase cash flow. Do not think that just having a established business will get my money... They will have to display a very well laid plan as to how this will increase income and money for the loan will be paid back with proof to back it up.
Buying a new car - There are many reasons that this is not something that I like to fund most of which is the car decrease in value so rapidly and the high insurance costs that will put strain on the family that will be taking on both the loan and new insurance costs. If the car is to get in a accident then Ill most likely be the last person the borrower is thinking of when paying bills. Dont get me wrong most people will fulfill their obligations im just not in the business to figure out who will and who wont so I block them all.
Breast Implants - OK I'm a guy and I like them as much as the next guy but if you cant pay cash for them then you don't need them just yet.
Current Students - I believe that education is the future but this isn't the place for a education loan. Repayment starts in 30 days and I would prefer that students concentrate on college rather than how they are repaying their prosper.com loan. I just don't want to be part of that.
So the people that I will be lending to this holiday season will be homeowners that are looking to remodel or consolidate the credit cards. the borrower will have 0 current delinquent accounts, 0 public records and 40% or less debt to income. Also the rates will have to meet current market standards including servicing fees.
I have just initiated the transfer which will take about 4 days and hope to spread the $500 over 10 different loans diversifying the funds as much as I can to lower my risk and maximize potential return on investment. I plan to aim the funds at B and C credit ratings with a average interest rate of about 13.5%
The first set of my personal lending rules are a bit harsh but when you are dealing with money its always about business and their ability to pay back. If I have limited information to work with I have to start somewhere.
Diamond Rings - I will not for any reason ever fund a loan that is using the funds to purchase a diamond ring for engagement. I have nothing against marriage. In fact I think it should be at the top of everyones life goals to share a great life with the opposite sex. With the marriage failure rate at a massive 50% I cant take that chance for a unsecured loan.
Start ups - With the current business failure stats reading that only 1 in 10 businesses make it past 5 years again not a chance that I want to take. Although I did make 1 exception in the past for a Mexican Restaurant in Texas that of course let me down and filed for bankruptcy this past March. Lesson learned. On the upside I will lend to established businesses that are looking to make some improvements to increase cash flow. Do not think that just having a established business will get my money... They will have to display a very well laid plan as to how this will increase income and money for the loan will be paid back with proof to back it up.
Buying a new car - There are many reasons that this is not something that I like to fund most of which is the car decrease in value so rapidly and the high insurance costs that will put strain on the family that will be taking on both the loan and new insurance costs. If the car is to get in a accident then Ill most likely be the last person the borrower is thinking of when paying bills. Dont get me wrong most people will fulfill their obligations im just not in the business to figure out who will and who wont so I block them all.
Breast Implants - OK I'm a guy and I like them as much as the next guy but if you cant pay cash for them then you don't need them just yet.
Current Students - I believe that education is the future but this isn't the place for a education loan. Repayment starts in 30 days and I would prefer that students concentrate on college rather than how they are repaying their prosper.com loan. I just don't want to be part of that.
So the people that I will be lending to this holiday season will be homeowners that are looking to remodel or consolidate the credit cards. the borrower will have 0 current delinquent accounts, 0 public records and 40% or less debt to income. Also the rates will have to meet current market standards including servicing fees.
I have just initiated the transfer which will take about 4 days and hope to spread the $500 over 10 different loans diversifying the funds as much as I can to lower my risk and maximize potential return on investment. I plan to aim the funds at B and C credit ratings with a average interest rate of about 13.5%
Thursday, October 25, 2007
The Big Gamble
So heres how it all started back in 2002. One day while sitting at the office tired of making the same check every week for doing almost nothing it took me about six months of getting my work for the day completed within the first hour and helping other finish theirs before it hit me. I have always been a guy that absolutely loves money. I love it. It comes before everything with the exclusion of family and loved ones. So I started reading every article that I could find online that contained the words business, money, stocks, small business, entrepreneur and the list goes on. I did this for about another 6 months.
So here I am 1 year later and I have finally decided that I don't exactly have the funds to start my own business and I have even less knowledge of how to operate one. So I began reading everything once again and it goes on for months. I read every startup book I could find online or at local book stores again I realize that I do not have the funds to start up any type of company that I would actually love running. See I realized that for the company that I start I would have to love it like a person loves another. Sounds strange but I think if you can connect with your business on this level your going to be successful. I have read about a lot of people that simply look for the next big thing and buy into it not really caring what it is. Widget Magic... Then once the boom is over so are they. Great companies are able to beat these widget booms.
So I finally realize that my goal is to start my own Corporation one day. There are many reason to do this and I will go into that on another blog. So how am I going to find the time to do this.... I dont have the capital or the time to start something serious. I am only 25 year old so theres many years to set myself up for success. I realize that I need multiple streams of income. Sounds like a obvious plan. This isn't as easy as it sounds. Look back at my first paragraph. I have 7+ hours a day that I am being paid and have access to a computer. Wow all of the sudden the idea of somehow creating a small online site makes sense.
I start research. I find a site called www.CafePress.com I read the terms and conditions of the site as I do for everything involving my grand plan. I open my first Cafepress shop. The first months I spend creating multiple items and learning the system and reading how keywords work within search engines. I eventually buy some traffic from some small search engines and it pays off. I get a few items sold however my marketing costs were more than what I made from the shirts. Ok most people would maybe stop after this. Not me I see that people that were probably not looking to buy my t shirts ended up making a purchase. I read more about search results and how to improve them. I made a few adjustments and waited for the organic search results to kick in. About 3 months to the day I started getting sales every few days and have been every since then. Whohooo I have my first steady stream of income. Keep in mind its only about $50 a month but its a start.
Hmm now what to do next and where to put my newly found income stream to use. I stumble completely by accident to sharebuilder.com this seems like a nice place to put the money until I find something else to do with it. So I start making regular deposits into their money market account. Earning a modest rate I was happy but why not take advantage of their services while im there. I start researching some companies that I would like to invest in. I find 2. Keep in mind I have very little to work with here but sharebuilder is friendly to small investors. I start to put 50% of the cafepress profits into both Trinsic Communications and Calpine Energy Company. Both companies provided some quick cash influx over a few months and I sold them off. More money to play with... Yippee... Try to keep in mind that this started as nothing but a idea and now I have a steady income from cafepress and have now bought and sold stock.
Next idea...eBay seems to be a viable avenue to find a additional income stream. So I do some research and I find collectibles seem to be the thing that will hold value over time. So I decide to choose a item that takes up minimal space but can bring in great returns. I finally lose my mind and make a orders for marbles from some large dealers with the cash from the stock sale. Im ready to start my eBay business. I decide from the start that I am going to have a store. It seems the only way to keep fees down and offer many items and allow for growth. I open a store with 100 items and list 10 items a day auction style. Not much business the first month. I decide to take a short vacation from work and pump up my listing volume. More listings mean someone has to see them right... Well within the next few days I jack up my store listing to 500+ and I start to see results almost immediately. Today I usually have about 1000 marble lots listed and I can mange a store of this size with 300+ sales a month just a few hours a week. I now have my second income stream. My Ebay.com Marble Shop
What to do with the new found money once again. I start buying more stock. This time I choose something that will not be as speculative as Trinsic or Calpine. I do some research and find that Alcoa is the largest most sustainable company in the world and they pay quarterly dividends. This is a win win situation. A great company and a possible third income stream every few months. I start to buy my first blue chip company via sharebuilder on a weekly basis.
So I look for other investment opportunities. I find something in early in 2006 that really excites me. Prosper.com is the widget boom of the moment. Now I am not normally into widget booms but this has some real benefits to my goals and the US economy. Prosper.com is a place where people lend money to other people who are in need of a loan and are having issues getting a loan form a brick and mortar bank for whatever reason. Now you might be asking yourself why would you want to lend money to people that cant get a loan at a normal bank. First off they may be able to get a loan at a bank of simply put it on the old credit card but would rather give the interest to other hard working Americans rather than institutions. Wow now I want to try this out. Interest rates as high as 29%. I transfer the minimum amount ($50) in and make my first bid. I chose a borrower that is looking to finance his Xray tech schooling at a amazing 29% now what bank is going to give me that kind of rate. To date this guy has not let me down. Its a good feeling when you help fund someones loan and know that you helped a individual or family out of a hard spot. Hold on a minute this is no charity after all money is always business unless its a donation and then its just a tax write off. lenders get monthly payments from the borrower that are deducted directly from their bank accounts. To date I have funded 48 loans and plan to double that by the years end as I have become more confident in the borrowers on prosper.com
Prosper currently only offers 3 years notes. So everytime I lend money to someone that becomes a income stream for the next three years. Wow this is adding up quick. I now have income from my day job, ebay, prosper.com and cafepress. Things are looking good. I decide to take a new job that will allow me to bank more money for retirement.
I know what your thinking hey didn't this guy just say he wanted to own his own corporation...Yes I did but I also want to make sure I have enough saved up just in case. So I move jobs and start at a higher salary but sacrifice 2 weeks of vacation. So now instead of 5 weeks of paid vacation I have only 3 and work much harder. Thats fine with me because I want the money. I love it. I work for about 10 months before accepting a promotion that more than doubles my income.
Ok so heres the issue. We are now present day. Prosper.com has questionable abilities to run their collections department but hey that isnt a issue for me just yet. I'm lending for almost 2 years and I don't have any lates. Yeah I did just knock on wood. haha I have been a active member in the prosper community making suggestions for collections fixes since I know they will be coming in the future is just the law of averages that is working against me at the time. I at one point will get a late and I want collections to be quick and efficient when that day comes.
So here I am 1 year later and I have finally decided that I don't exactly have the funds to start my own business and I have even less knowledge of how to operate one. So I began reading everything once again and it goes on for months. I read every startup book I could find online or at local book stores again I realize that I do not have the funds to start up any type of company that I would actually love running. See I realized that for the company that I start I would have to love it like a person loves another. Sounds strange but I think if you can connect with your business on this level your going to be successful. I have read about a lot of people that simply look for the next big thing and buy into it not really caring what it is. Widget Magic... Then once the boom is over so are they. Great companies are able to beat these widget booms.
So I finally realize that my goal is to start my own Corporation one day. There are many reason to do this and I will go into that on another blog. So how am I going to find the time to do this.... I dont have the capital or the time to start something serious. I am only 25 year old so theres many years to set myself up for success. I realize that I need multiple streams of income. Sounds like a obvious plan. This isn't as easy as it sounds. Look back at my first paragraph. I have 7+ hours a day that I am being paid and have access to a computer. Wow all of the sudden the idea of somehow creating a small online site makes sense.
I start research. I find a site called www.CafePress.com I read the terms and conditions of the site as I do for everything involving my grand plan. I open my first Cafepress shop. The first months I spend creating multiple items and learning the system and reading how keywords work within search engines. I eventually buy some traffic from some small search engines and it pays off. I get a few items sold however my marketing costs were more than what I made from the shirts. Ok most people would maybe stop after this. Not me I see that people that were probably not looking to buy my t shirts ended up making a purchase. I read more about search results and how to improve them. I made a few adjustments and waited for the organic search results to kick in. About 3 months to the day I started getting sales every few days and have been every since then. Whohooo I have my first steady stream of income. Keep in mind its only about $50 a month but its a start.
Hmm now what to do next and where to put my newly found income stream to use. I stumble completely by accident to sharebuilder.com this seems like a nice place to put the money until I find something else to do with it. So I start making regular deposits into their money market account. Earning a modest rate I was happy but why not take advantage of their services while im there. I start researching some companies that I would like to invest in. I find 2. Keep in mind I have very little to work with here but sharebuilder is friendly to small investors. I start to put 50% of the cafepress profits into both Trinsic Communications and Calpine Energy Company. Both companies provided some quick cash influx over a few months and I sold them off. More money to play with... Yippee... Try to keep in mind that this started as nothing but a idea and now I have a steady income from cafepress and have now bought and sold stock.
Next idea...eBay seems to be a viable avenue to find a additional income stream. So I do some research and I find collectibles seem to be the thing that will hold value over time. So I decide to choose a item that takes up minimal space but can bring in great returns. I finally lose my mind and make a orders for marbles from some large dealers with the cash from the stock sale. Im ready to start my eBay business. I decide from the start that I am going to have a store. It seems the only way to keep fees down and offer many items and allow for growth. I open a store with 100 items and list 10 items a day auction style. Not much business the first month. I decide to take a short vacation from work and pump up my listing volume. More listings mean someone has to see them right... Well within the next few days I jack up my store listing to 500+ and I start to see results almost immediately. Today I usually have about 1000 marble lots listed and I can mange a store of this size with 300+ sales a month just a few hours a week. I now have my second income stream. My Ebay.com Marble Shop
What to do with the new found money once again. I start buying more stock. This time I choose something that will not be as speculative as Trinsic or Calpine. I do some research and find that Alcoa is the largest most sustainable company in the world and they pay quarterly dividends. This is a win win situation. A great company and a possible third income stream every few months. I start to buy my first blue chip company via sharebuilder on a weekly basis.
So I look for other investment opportunities. I find something in early in 2006 that really excites me. Prosper.com is the widget boom of the moment. Now I am not normally into widget booms but this has some real benefits to my goals and the US economy. Prosper.com is a place where people lend money to other people who are in need of a loan and are having issues getting a loan form a brick and mortar bank for whatever reason. Now you might be asking yourself why would you want to lend money to people that cant get a loan at a normal bank. First off they may be able to get a loan at a bank of simply put it on the old credit card but would rather give the interest to other hard working Americans rather than institutions. Wow now I want to try this out. Interest rates as high as 29%. I transfer the minimum amount ($50) in and make my first bid. I chose a borrower that is looking to finance his Xray tech schooling at a amazing 29% now what bank is going to give me that kind of rate. To date this guy has not let me down. Its a good feeling when you help fund someones loan and know that you helped a individual or family out of a hard spot. Hold on a minute this is no charity after all money is always business unless its a donation and then its just a tax write off. lenders get monthly payments from the borrower that are deducted directly from their bank accounts. To date I have funded 48 loans and plan to double that by the years end as I have become more confident in the borrowers on prosper.com
Prosper currently only offers 3 years notes. So everytime I lend money to someone that becomes a income stream for the next three years. Wow this is adding up quick. I now have income from my day job, ebay, prosper.com and cafepress. Things are looking good. I decide to take a new job that will allow me to bank more money for retirement.
I know what your thinking hey didn't this guy just say he wanted to own his own corporation...Yes I did but I also want to make sure I have enough saved up just in case. So I move jobs and start at a higher salary but sacrifice 2 weeks of vacation. So now instead of 5 weeks of paid vacation I have only 3 and work much harder. Thats fine with me because I want the money. I love it. I work for about 10 months before accepting a promotion that more than doubles my income.
Ok so heres the issue. We are now present day. Prosper.com has questionable abilities to run their collections department but hey that isnt a issue for me just yet. I'm lending for almost 2 years and I don't have any lates. Yeah I did just knock on wood. haha I have been a active member in the prosper community making suggestions for collections fixes since I know they will be coming in the future is just the law of averages that is working against me at the time. I at one point will get a late and I want collections to be quick and efficient when that day comes.
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