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%
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