photo credit: Куртис ПерриAs a result of the breakdown in the financial sector and the global credit crunch, families with good credit are having problems finding financing. One alternative to bank financing for borrowers in need of cash is to participate in peer to peer lending. This option allows people who require financing an opportunity to be funded through other individual lenders. It also allows these lenders to maximize their return on an investment. I participate as both a lender and borrower at Prosper.com.
I took out a Prosper Loan six months ago in an effort to increase my family’s monthly cash flow. The strategy in taking out this loan is to borrow money at a low interest rate in order to purchase higher yielding investments so they can be added to my portfolio of passive income streams. These passive income streams will allow my family to reach our long-term goal of financial freedom.
I would like to provide the monthly status on my Prosper loan that I took out earlier this year. For a history of activity, please check out the following post - Peer to Peer Loan Status. When I last posted the status of my investments using this $1,000 Prosper loan, I had accumulated the following assets -
- Stock - I purchased 46 shares of HTE (Harvest Energy Trust).
- Cash Generated - As a result of selling Covered Call Options against my HTE position, I have generated $40.20 in positive cash flow. It is important to note that selling a Covered Call Option contract requires 100 shares. I have combined my $1,000 Prosper loan with additional funds to meet the 100 share requirement.
- Remaining Cash - I had $14.55 remaining in leftover cash after making the purchase of HTE.
- Dividend Shares - I have received 1.792 shares of HTE stock through dividend DRIP payments. The total number of shares owned as of August was 47.792.
Current Status
I received the monthly dividend payment for September which was reinvested back into the stock using DRIP -
- September Dividend Payment - I received approximately .879 shares of HTE as a result of the September (2008) DRIP payment. This brings the total number of shares owned up to 48.671.
As of the close of the market yesterday (October 16, 2008), I estimate that value of the assets listed above at -
- Shares - 48.671 @ $9.27 per shares = ~$451.18
- Cash - $54.75
- GRAND TOTAL - ~$505.93
Oil and natural gas stocks have been crushed over the past month, along with the rest of the stock market. As a result, the value of these assets dropped by (42.7%) compared with last month. The total payments required over the course of the 3 year loan are $1,095.07, so I am now ($589.14) behind. I have 29 months remaining on my loan, so I will need to make up an average of ~$20 per month from here on out. Obviously I am disappointed in my return (or loss) on my investment over the course of the loan. However, I still believe natural gas and oil stocks will rebound in the next few years. As long as HTE continues to pay a monthly dividend, I will remain in this stock. The most important point to take away from the decline in the value of the loan is - I am not going to be forced into panic selling.
Do you own any oil or natural gas stocks and are thinking of bailing on them?
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