eBay for loans

[rwesty]

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?

[BradleyT]

someone is doing that

[emon87]

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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!

[KUJustin]

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.

[maxtower]

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.

[PanchoVilla]

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

[KUJustin]

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.

[KUJustin]

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?

[BradleyT]

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

[PanchoVilla]

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