eBay for loans
 

http://www.prosper.com/

Saw this in Popular Science this month. It looks interesting... maybe a way to get funding for all these startups!

What do you guys think?

Re: eBay for loans
 

I have looked into this. The consensus among the lenders at their lending forums seems to be that the borrowers are getting better deals than the sellers.

Re: eBay for loans
 

I have been using this site for about 6 months now, mainly as a test. I put in 1k and started making loans. So far I am getting about a 16% return, but I haven't had any loans go more than 30 days past due yet. I expect that my actual return will be closer to 10% as statistically some of my loans should default.

The hard part is trying to pick out the ones who will default less than their credit rating suggests. This has gotten trickier in the past couple months though. Over time as more lenders come in you get lenders that don't know what they are doing and they then overbid for loans and price them below your minimum. Right now I have maximum diversification. ~22 loans at $50 each. 2 of them have been problematic, ie have gone 15 days late more than once, but so far that just improves the return if they don't default as you get penalties.

I keep track of everything in an excel sheet that I plugged in all the formulas to factor in the default rate, etc. If people want to check it out PM me. I might put it up on my forum project website so people could download it.

Pancho

Re: eBay for loans
 

I check out the site from time to time. It isn't worth my time to be a lender. The amount of work involved to diversify and hope to get a decent return isn't worth it.

The site has an ongoing problem with scams and borrower info that has not been properly verified. Maybe down the road it can be a better investment method. For now, I would avoid it as a lender.

As a borrower, it appears to be a good deal. There are lots of lenders giving money to some questionable offers. For example if the loan fills she will have a $903.81 monthly payment for 3 years. A $900 per month payment on top of other expenses would be difficult to maintain for most people.

Re: eBay for loans
 

When in the process do you have to submit your bank account number? Is that the only way to receive/pay for loans?

Re: eBay for loans
 

Does anyone else have any exp with this site?

Re: eBay for loans
 

The money is in being a group leader. In the example you gave the borrower will pay 18% interest. The lenders recieve 17% and the remaining 1% goes to the group leader.

The problem I have with Prosper is you can't sell the loans you bought. They say they are working on that. A business model I have been thinking about involves becoming a group leader. Help people get loans by vetting them. Bid a portion of thier loan if they seem to be a decent risk. Turn around and sell the loan once there 3 months of good payment history. Continue to collect the group rewards interest off the loan even though you no longer own any of it.

Stu

Re: eBay for loans
 

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Does anyone else have any exp with this site?

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I've noticed attractive women get funded much better and at lower rates than ugly ones.

Stu

Re: eBay for loans
 

A message board I recently joined has a propser forum
http://creditboards.com/forums/index.php?showforum=64

I joined the forum to learn about business credit - just happened to notice the prosper forum this morning. Looks like some people have experienced high frequencies of late payments.

Re: eBay for loans
 

Any interest in forming a 2+2 Prosper group?

I have started one. 2+2 Prosper Group

If you want to join, sweet. I set the rewards that I get to zero, so I'm not gonna make any money off of this. (IE don't flame me for spamming! [img]/images/graemlins/tongue.gif[/img])

As of right now it's not approved, but once it does I think it could help us get loans for businesses. Let me know if you're interested/think I should change anything with it. Or if you think it's retarded, tell me that too...

Re: eBay for loans
 

Is it possible to get a loan through Prosper (with good credit) at a low rate and then keep it in the system and borrow to higher risk loans or do they have some reason for not allowing this?

Re: eBay for loans
 

someone is doing that

Re: eBay for loans
 

[ QUOTE ]
someone is doing that

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This is interesting.

If anyone is interested in doing this, it would be great if you could sign up through the 2p2 group, so we can all lower our rates!

Re: eBay for loans
 

Couldn't pretty much anyone find a better offer from a credit card company than the offers here?

Stellar credit = 7%
Bad credit = 21%

I, sadly, would be in their "D" class which means the best rate I can get is 17.12%. I have 2 credit cards that are under 12% right now.

Re: eBay for loans
 

I imagine the people who are getting these loans aren't able to get better offers from credit card companies, which is why you should be careful if you are lending. I think lending to the highest rated people for the best rate you could find would be ideal. You could potentially beat your savings accounts rate. Lending to high risk people would be a bad idea in my opinion. Anyone willing to pay over 20% in interest should not be trusted to repay the loan.

Re: eBay for loans
 

I think my largest group of borrowers is the "I got shafted by the payday loan people and got stuck with a stupid loan at 50-300%" crowd. Also the 2500 on a 20% CC crowd. The work though is in finding the good ones. I only bid on the ones that sound like they have realized and are trying to correct the root problem that got them into trouble, ie bad spending habits, etc. Some people still haven't figured that out and are just buying time until they really hit bottom. I try to avoid those ones.

I also pretty much never bid on the business related ones. I might buy a % of their business, but I am not taking that kind of risk for the rewards offered. It takes time to find the loans and to make it worth it timewise you really need to bid more than $50 per loan, but I am still in the "its an experiment" phase. [img]/images/graemlins/smile.gif[/img]

A couple of people PM'd me about the spreadsheet I mentioned so I posted it on my Forum project website. You can find it at www.interestmadesimple.com It's on the front page. It is locked but if you have some good ideas for improvements or corrections and make an account and post them on my site I could probably be convinced to give you the unlock code. [img]/images/graemlins/smile.gif[/img]

Pancho

Re: eBay for loans
 

Aren't the default rates listed almost certainly wrong for this particular context?

The rates listed are from Experian, not from Prosper. I have to think that the loans on Prosper are likely to have MUCH higher default rates than a more traditional loan.

Re: eBay for loans
 

Also, this is subtly different, but those default rates are for people APPROVED for loans.

So it's not 10.40% of Es default. It's 10.40% of Es approved for loans by financial institutions default. It's my opinion that a very high percentage of people on Prosper wouldn't get funded by a traditional institution (why else would they be on Prosper, for one thing), and should therefore be expected to be even higher-risk.

Don't forget this is a different concept than the fact that people are, in my opinion, more likely to default on a Prosper loan than a traditional one. One idea is in regards to the person the loan is given to, the other is in regards to the type of loan. As such the two additional risks must both be added.

Would triple the default rates listed be going too far?

Re: eBay for loans
 

How much are you getting back on $50 loans - about $1.75 per month?

Re: eBay for loans
 

Those were the default loan rates provided by Prosper so I went with what I had. Eventually I will probably want to update those rates when Prosper or one of the number crunchers gets better data specifically on their loans. That's not likely to happen until there are a lot of loans that reach the 2+ year point. I think the oldest loans from Prosper would be around 9-10 months old now and none of mine are older than 7 months.

Besides the way to make a good return on Prosper is to pick the loans that are really a lot better than their rating suggests. Ie find the C's that just missed a B rating. So far my results since May are;
22 loans
2 payed off
17 have been on time every month
2 has been days late twice (15 days)
1 has been late twice (30 days)

I should have avoided one of my problematic loans, but it was before I knew to avoid the group the borrower was a member of. To date (7 months) my predicted return using those number should be 11.5%, my actual return is 15.5% so far. Most of the payments end up being $1-3. Some people like to pay extra and the rates of my loans range from 10.95 - 28%. I have a pretty balanced spread of loans. Using the weightings in my spreadsheet my loans are at 5.75 avg-risk so above average. One of each loan is 5.15 I think.

Pancho

Re: eBay for loans
 

Pancho, certainly the exorbitant rates the borrowers are paying mean there's some opportunity here.

I feel like someone who's spent a lot of time working in the loan dept for a financial institution could really kill in this field. Also, I would think someone with experience would be able to give us some good default estimates for 3 years out based on the numbers for these first 7-10 months.

Re: eBay for loans
 

I'm obsessed with this site, btw.

Also, my transunion credit score (to my knowledge) is 610. This would be a D, barely. But Prosper, who uses Experian, rates me a B. Go figure.

edit: Experian has me at 638, still a would-be D. I wonder what kind of formula prosper is using.

Re: eBay for loans
 

[ QUOTE ]
The problem I have with Prosper is you can't sell the loans you bought.

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I was really interested in this until I got to that part. This looks like a really good, and profitable, idea, but I don't want to impair my cashflow to that extent. It's a shame, because I have 50K+ I can put in this.

Re: eBay for loans
 

Interesting - hadn't seen this page before - https://www.prosper.com/public/legal..._licenses.aspx

Does that mean if you're in PA your loan can't be more than 6%??

Re: eBay for loans
 

The way I understand that, Prosper is the lender - you're just the loan repurchaser - so they police that themselves by not allowing higher loans to people in those states.

If I'm wrong, lots of people are getting fined though [img]/images/graemlins/confused.gif[/img]

Re: eBay for loans
 

[ QUOTE ]
Interesting - hadn't seen this page before - https://www.prosper.com/public/legal..._licenses.aspx

Does that mean if you're in PA your loan can't be more than 6%??

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Yea I tried setting up a loan but since I am in Ohio 8% is the cap. That makes it basically unfundable for anyone in my state that isn't an A (I am C).

Re: eBay for loans
 

[ QUOTE ]
I check out the site from time to time. It isn't worth my time to be a lender. The amount of work involved to diversify and hope to get a decent return isn't worth it.

The site has an ongoing problem with scams and borrower info that has not been properly verified. Maybe down the road it can be a better investment method. For now, I would avoid it as a lender.

As a borrower, it appears to be a good deal. There are lots of lenders giving money to some questionable offers. For example if the loan fills she will have a $903.81 monthly payment for 3 years. A $900 per month payment on top of other expenses would be difficult to maintain for most people.

[/ QUOTE ]

Also, if you follow your example listing to its group, the second listing in the group has the same picture posted as one of its pictures.

Re: eBay for loans
 

Also, people who are interested need to look at this.

I've tried prosper and have had a loan go bad. No payment ever. The link above shows what the agencies are able to collect and it isn't good. If someone decides to pay you should expect to eat the entire amount you loaned. They are able to collect about 10% and sell off another 6%.

Re: eBay for loans
 

[ QUOTE ]
There are lots of lenders giving money to some questionable offers. For example if the loan fills she will have a $903.81 monthly payment for 3 years. A $900 per month payment on top of other expenses would be difficult to maintain for most people.

[/ QUOTE ]

FYI, this loan didn't fill. It only got 44%. Does each loan only have 7 days to fill? I guess this lady just needs to shoot for like a 12K loan instead of 25K? Maybe she'll get it filled.

Re: eBay for loans
 

[ QUOTE ]
The money is in being a group leader. In the example you gave the borrower will pay 18% interest. The lenders recieve 17% and the remaining 1% goes to the group leader.

The problem I have with Prosper is you can't sell the loans you bought. They say they are working on that. A business model I have been thinking about involves becoming a group leader. Help people get loans by vetting them. Bid a portion of thier loan if they seem to be a decent risk. Turn around and sell the loan once there 3 months of good payment history. Continue to collect the group rewards interest off the loan even though you no longer own any of it.

[/ QUOTE ]

if they were to allow that, what would stop people from a) getting a loan b) not making payments for a while c) getting their friends to buy out the loans at a cheap rate. i'm sure it would be illegal and all, but is there really anything you can do about it?

Re: eBay for loans
 

Does anyone know if you can view loans that have already been funded and check if the buyer has been making his/her payments or not? I would be interested in researching different types of listings to see what type of loans are most likely to be paid/default etc....

Any listings I look at don't seem to give any information on if the buyer is actually paying on time or not. Do you have to actually be a lender on the loan to know this info?

Re: eBay for loans
 

[ QUOTE ]

if they were to allow that, what would stop people from a) getting a loan b) not making payments for a while c) getting their friends to buy out the loans at a cheap rate. i'm sure it would be illegal and all, but is there really anything you can do about it?

[/ QUOTE ]

Well, if they don't mind ruining their credit..

Re: eBay for loans
 

[ QUOTE ]
if they were to allow that, what would stop people from a) getting a loan b) not making payments for a while c) getting their friends to buy out the loans at a cheap rate. i'm sure it would be illegal and all, but is there really anything you can do about it?

[/ QUOTE ]

This isn't the way loan re-selling works. If your mortgage gets sold, your rate stays the same. The payments just go to a different lender. Same loan, new owner. The buyer of the loan just pays some multiple of "par" value to buy the loan. For example, if you are deemed lower risk, your loan might be sold for $1.20/outstanding dollar. Your payments don't change but the new owner's rate of return is less and the previous owner made a profit.

Still though, like most things, it could be illegally taken advantage of.

Re: eBay for loans
 

[ QUOTE ]
Does anyone know if you can view loans that have already been funded and check if the buyer has been making his/her payments or not? I would be interested in researching different types of listings to see what type of loans are most likely to be paid/default etc....

[/ QUOTE ]

Yes, you can do that; in fact, some people HAVE gone through completed loans looking for correlations. (For example, one was that groups of people who know each other IRL have significantly higher repayment rates)

Re: eBay for loans
 

All of these D tier credit loans going out through this site looks like a prime market for my buisness. I gaurantee you that over 50% of these tier loans dont get paid back and 50% of those skip out on the lender.

For you financial law gurus out there.... would this type of venture still make the lender responsible for due dillagnce of collection before being able to write off the loan as a bad debt?

Do most of these members post in the "groups" sections? How could I go about marketing myself to these lenders without looking overly spammish? I dont see a whole lot of advertising or banners either.

Richard